Why we need a planned economy

For most of the 20th century, socialism seemed possible, feasible, even inevitable; then came neoliberalism. Few socialists today defend a planned economy; most argue that Keynesian macroeconomic policies must temper the indispensable role of the market in any functional socialism. The resurgent 21st-century Left is now regaining ideological ground; an anti-capitalist framework will need to seriously examine a planned economy. Avery Wear examines three seminal works and argues that large scale planning is not only feasable but necessary.

 

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Through most of the 20th century, socialism appeared possible, feasible, even inevitable. Then socialists’ confidence broke under the giant wheels of neoliberalism. The capitalist West trounced the ostensibly “socialist” Eastern economies on the global competitive stage. It became “harder to imagine the end of capitalism than the end of the world” (Frederic Jameson), and it appeared “there was no alternative” to capitalism (Margaret Thatcher).

Phoenix-like, the resurgent 21st-century Left is regaining ideological ground. Electoral efforts internationally prove class politics still have mass appeal. Unionization and strikes are back. Anti-oppression politics adopt an increasingly anti-capitalist framework. Socialism is popular again.

But recovery remains uneven. Neoliberalism taught above all that market forces must organize the economy. This market fundamentalism affected the entire political spectrum. Those who continued to defend socialism increasingly followed the path of Alec Nove, whose influential 1983 The Economics of Feasible Socialism argued that large-scale coordinated economic planning must fail. Few socialists today defend a planned economy. Most, like Naomi Klein, Richard Wolff, and John Roemer, argue that Keynesian macroeconomic policies plus decentralized worker-run cooperatives must temper the indispensable role of the market in any functional socialism.

“Decommodification means making things free.” A Covid 19 vaccination. Photo by Christian Emmer.

Others pose the gradual decommodification of growing economic segments as the way to end or at least reduce the role of market forces. (Decommodification means making things free. City parks and library books are current examples of decommodified goods.) A few such as W. Paul Cockshott and Allin Cottrell argue that modern computing power and logistics software allow for a comprehensively planned economy to escape the 20th century debacles of planning carried out by inhuman, yet all too human, state bureaucracies. Decommodification and computerized planning are likely important assets to a transition from capitalism. Yet to focus solely on them is to sidestep the question of planning as a democratic social process. (Cockshott and Cottrell, whose Towards a New Socialism is worth reading, do in fact address the need for democracy, but their main emphasis is on tech-enhanced planning. Therefore while valuable, their work is outside the scope of this review.)

Early in the ascendancy of neoliberalism, a few Marxists, still possessing the needed confidence, challenged the Left’s turn to “market socialism.” Under growing ideological siege, they developed the case for the necessity and feasibility of planning to new heights of clarity. The three writers discussed below each responded directly to Alec Nove. If these writers are correct about the perils of the market socialist vision that dominates our movement today, then their cases for planning need the attention of today’s Left.

Mandel

Ernest Mandel’s 1986 piece “In defense of socialist planning” argues that an unstoppable trend toward “objective socialization of labour” accompanies economic growth. This increasing “objective” interdependence both marginalizes market mechanisms and makes them dangerously irrational. For example, large corporations coordinate their vast internal “economies” using planning, not market exchanges. Complex production chains require periods of many months to produce new products—think of the annual release of new cars or the periodic drop of new iPhone models—so that output cannot be governed by current supply and demand. Mass production creates demand for capital goods and parts that require routine and stability, rather than constant “shopping around” for cheaper prices and different suppliers. And aggregate consumer buying habits, especially regarding necessities rather than luxuries, show the same type of stable pattern. Mandel therefore argues that large and central parts of modern economic production don’t require input from market signals. They could be administered through social planning or even simply automated.

Not only planning but also “objective informal cooperation” play a larger and larger role in the real economy. Purchasing decisions by both companies and consumers rely on direct relationships and routine more than price signals. And rather than the unlimited permanent increase of consumer demand assumed by market socialist advocates like Nove, a century of data on consumer trends internationally showed that once consumer needs reached “saturation,” demand declined. This fact was at odds not only with the frantic fear that human planning can never keep up, but also with capital’s imperative of self-expansion.

Mandel … argues that large and central parts of modern economic production don’t require input from market signals.

Mandel briefly sketches an economic model he calls “articulated workers’ self-management”—enterprises under workers’ control coordinating through democratic planning, together with organized consumers, at the governmental level. A Trotskyist, Mandel was able to see a connection between economic failures in the Stalinist state-planned countries and their authoritarianism. Production units, in his model, autonomously organize work to meet centrally but democratically determined output targets. Local and detailed knowledge of work processes, systematically lost in command-centralized planned economies, regains its necessary place in this way.

McNally

David McNally’s Against the Market (1993) revisits debates around political economy leading up to Marx. He finds the early English workers’ movement, with a left-wing take on the work of Adam Smith, espousing market socialism. In McNally’s view, Marxist economics took shape as a polemic against market socialism. And late 20th century advocates of market socialism, unaware of these continuities, were vulnerable to Marx’ critique.

Adam Smith’s Wealth of Nations (1776) assumed “that capital accumulation inevitably involved an increase in employment and wages.” The following decades of rapid growth instead saw unemployment and working class impoverishment. Smith’s influence then “underwent a marked bifurcation”: pro-capitalists like Malthus argued that these social ills were necessary correlates of the greater good of free markets. Early and proto-socialists “used Smith’s theories of growth and distribution to indict poverty and the factory system.”

Robert Owen, Thomas Hodgskin, William ThompsonJohn Gray, and John Francis Bray, closely connected to the early British workers’ movement, emphasized currency reform, producer cooperatives, labor exchanges, and anti-monopolism. These early socialists believed exploitation stemmed from floating currency, monopoly, or the role of capitalists as intermediaries between worker/producers and the market. They held differing views on whether individual or cooperative production would end exploitation. But they generally agreed that a “free market” operating closer to Smith’s principles would benefit workers.In

McNally’s view, Marxist economics took shape as a polemic against market socialism.

Founding anarchist Pierre Joseph Proudhon’s The Philosophy of Poverty argued similarly. For Proudhon, market competition would remain necessary to incentivize work in his ideal society. There, money would no longer be subject to elite manipulation and skimming; independent household producers would trade in labor-time money and organize credit through “mutualist” finance (similar in concept to credit unions).

Marx in response argued that exploitation flows from free trade itself. The market value of labor power, in conditions of formal contractual equality but real material inequality between employers and workers, would tend to be less than the value labor produced on the job. Capitalist money already measured commodities based on labor time, so currency reform would change nothing fundamental. The “anarchy” of atomized free market production led inevitably to exploitation, poverty, and economic crisis. As McNally summarizes:

“[O]nly if there is an agreement among the producers prior to production [i.e., planning—AW] about the amount of labour to be expended in various areas will there be a reasonable guarantee of equality of supply and demand.… “But,” Marx points out, “such an agreement negates individual exchange

McNally, like Mandel, sketches a picture of economic planning, showing the necessity for it based on the contradictions of market socialism. But by far the most thought-out positive case is Pat Devine’s Democracy and Economic Planning (1988).

Devine

Devine postulates the need for a “third way,” an alternative to both market-capitalist and statist command economies. He rejects market socialism as this third way, instead proposing a model of democratic planning based on “negotiated coordination” rather than command and coercion.

He begins by surveying the history of economic planning. Great Britain administratively planned its economy during the Second World War with great effectiveness. There was no central plan beyond allocating proportions of the budget between three categories: military, home, and export. Detailed planning was decentralized to different sectors, which then negotiated within and between themselves. Planning was “iterative,” involving constant adjustment. Firms, under government supervision, adjusted output of consumer goods by monitoring stocks and order books. Output increased if stocks ran low—but under wartime price controls this did not involve raising prices.

Devine draws positive lessons from this wartime experience. First, without yet abolishing market exchange, a transitional socialist economy can abolish market forces—supply and demand can provide information about how much to produce without dictating prices. These can instead be set on the basis of social priorities. Second, planning at the national level should be limited to choosing the proportions of investment between broad categories. Detailed planning should be decentralized to sectoral, regional, and local levels, which then negotiate their coordination from below. Third, this system worked to win the war, Devine argues, because motivation to win was high across social classes. Where Soviet-style planning generally foundered because individual production units, seeking to maximize their narrow self-interests, refused to share accurate information with the planning agencies, British firms “bought-in” to the war effort enough to be willing to provide sufficiently accurate (though not necessarily unbiased) information. Thus, even in what Devine acknowledges remained an instance of capitalist planning, the information problem and the motivation problem were adequately addressed. Of course, this planning occurred through elite government and corporate bodies with no voice for workers. And administrative planning for the brief war years did not have to face the more complicated issues in planning long-range transformative investment.

“Great Britain administratively planned its economy during the Second World War with great effectiveness.” Workers at Gleniffer Laundry in Catford, UK, remove sheets from a six-roller drying and ironing machine in 1944. Photo by Imperial War Museums.

Other positive and negative lessons are drawn from planning East and West: France’s 5-year plans of the 1950s, Britain’s half-hearted turn back to planning in the 1970s, “indicative planning” models, industrial policy, macroeconomic management through fiscal and central bank activities, East-bloc command planning and its various market-based reform phases. All of these added up to more failure than success. But overall they tend to show that large-scale economic planning can work when flexible and “iterative” enough. Twentieth century political philosophy often naively failed to recognize how profoundly uncertain our knowledge of an infinitely complex reality must be. Devine calls this “primary uncertainty.” He says that when flexible enough to adapt to primary uncertainty, planners achieved focused results impossible for market forces by reducing “secondary uncertainty.” Secondary uncertainty refers to lack of knowledge about what other actors will do in an interdependent economy. Lastly, the most successful planning incorporated some, usually de facto, version of “negotiated coordination”. This allowed productive units, regions, and localities the autonomy to use their local knowledge to shape their mutual coordination. Such was the case of postwar Japanese industrial policy through the Ministry of International Trade and Industry.

The unique case of Yugoslavia deserves special attention. Leading the successful struggle for independence against Nazi occupation, the Yugoslav League of Communists came to power with overwhelming popular support. Following the Russian model, they instituted an absolute political monopoly. Yet they needed considerably less repression to secure their totalitarian rule. So, within the limits of dictatorship, they attempted to create a self-governing society. This centered on workers’ control of production. Especially in the 1950s, workers participated in factory assemblies in high percentages, though decreasingly so at lesser skill levels. Moreover, for a time the worker-run assemblies increasingly focused on how to organize production, rather than issues of pay and benefits. Devine argues that self-management thus began to overcome alienation. More precisely, in the language of East German dissident communist Rudolf Bahro, workers began to exhibit less of the “compensatory consciousness” characteristic of people seeking material goods in exchange for service under exploitative conditions. They instead showed more of the “emancipatory consciousness” of people seeking an active role in shaping their shared reality.Self-governing workplaces [in Yugoslavia] had to work themselves harder for less pay to undersell the competition, just as in capitalist-owned firms.

Yugoslavia, despite state ownership of production facilities, did not use central planning like the rest of the Eastern bloc. Worker-run production units instead competed in the market to sell their goods. The state used taxation, regulation, and spending to shape the overall economy. In other words, market socialism. Market competition entailed pressure for self-exploitation: self-governing workplaces had to work themselves harder for less pay to undersell the competition, just as in capitalist-owned firms. The focus on competition put a premium on non-productive accounting and marketing skills, leading to the return of managerial privileges and authority. This also meant increased income inequality. In this demoralizing and disempowering situation, worker involvement in factory assemblies dropped away. Furthermore, market forces created mass unemployment, inflation, and recessionary cycles much worse than those seen in the Eastern neighbors. And the free market widened the gap between wealthy western and poorer eastern regions, fueling the eventual civil war and breakup of the country. So while Yugoslavia for a significant period proved in practice the viability of a democratic economy at the micro-level, over time it also showed the incompatibility of workers’ control with market forces.

Market forces in Yugoslavia created chronic unemployment compared to socialist planning. Photo by Tezwoo.

Devine synthesizes the lessons of national economic planning East and West, and he goes well beyond them to an elaborated model based on his concept of negotiated coordination. Negotiated coordination allows decentralized decision-making to the level where production units, localities, and regions can bring their richly detailed local knowledge directly to bear. Statist command systems suffered from “information overload”—central planners could not use the overwhelming amount of information they received. And they lacked the localized knowledge to sift out the biases and distortions in that information. Devine therefore recommends “maximum decentralization subject to the participation of all affected parties.”

Applying this last principle also allows his model to remedy the “information problem” as it exists in competitive market systems. In part this is the inherent “secondary uncertainty” of market competition, in which firms’ business secrets mean that actors in the same markets and industries don’t know what the others will do. But it is more than this. Capitalist firms rely primarily on “market signals”—how much their product is selling—to guide short-term changes to output and long-term changes to the product itself. With negotiated coordination, production units would still use these types of signals rather than prices to adjust output day to day. They would also have access to far more information from other production units, from consumer representatives, neighborhood organizations, ecological and other social cause activists, and worker unions. (Unions would continue to exist, with the right to strike, alongside workers’ assemblies exercising control of production). All of these would have a voice on the boards of production units, and in the negotiated coordination bodies spanning multiple production units responsible for the detailed elaboration of general plan priorities. Those priorities would be worked out centrally but democratically. The model thus envisions comprehensive economic democracy, going beyond workers’ control at the point of production.

Devine emphasizes here that self-government is the relevant principle in organizations in socialist society generally, but that self-management applies to the workplace. Workers would collectively manage their own work. But governing boards in workplaces would include representatives not only of workers, but of consumers, social cause groups, and of coordinating bodies. (This would not apply to small workplaces, which would have greater autonomy.) In this way, production would be subject to “all affected parties” and to democratically constructed planning. Self-governing workplaces, by contrast, imply atomized production decisions and economic regulation by market forces, as in Yugoslavia.

[Pat Devine’s] model … envisions comprehensive economic democracy, going beyond workers’ control at the point of production.

All-sided democracy, full transparency of production statistics (instead of the business secrets prevailing in capitalism), and reduction of “secondary uncertainty” through coordinated planning across industries, would remove investment decisions from the dictation of market forces. The society as a whole would choose by vote between various options to allocate resources among the main social priorities, such as health, education, recreation, arts, housing, transportation, science, innovation, etc. Within this framework, incorporating a particular vision of socio-technological transformation, planning bodies for each of these sectors would work out detailed budgets fleshing out patterns of investment. Disengagement from market forces thus happens on two levels: (1) as mentioned before, prices would not be determined by short-term supply and demand fluctuations; and (2) long-term changes in the types of and balance between industrial sectors, including regional dispersion, would be decided by all those affected rather through market-induced events such as bankruptcies.

Devine argues that his system of negotiated coordination contains a “transformatory dynamic.” Having to confront the self-articulated interests of all affected sectors, and mesh those interests with their own, workers would progressively overcome our sectional and narrow self-interests based on our particular jobs, localities, and identities. If not, our plans would founder, with social pressure building for resolution. And having both a say in the overall priorities framing our collective work, and a direct role in the detailed implementation of those priorities at the local level, Devine says we can be expected to feel committed to doing our parts. Thus the “motivation problem” that notoriously wracked the Stalinist economies, but that in different ways also plagues market systems, is taken seriously into account by Devine. Devine does more than offer a technically feasible model of planning. He develops his model around a specific agenda of socio-psychological transformation. Though apparently not a revolutionary, referencing instead reformist “Eurocommunist” thinkers, Devine’s objectives encompass the most visionary historic aspirations of communists.

The objectives of the “socialization of the means of production” and “democracy,” both already discussed, promote above all the development of “self-activating, self-governing people.” (Devine’s rich discussion of democracy, it should be noted, gains from his substantial incorporation of insights from feminist theory.) So too with Devine’s third and most radical objective: “abolition of the social division of labor.”

Planning should center on giving everyone a role in their lifetime in each of the psychologically productive job categories: “planning and running,” “creative,” “nurturing,” and “skilled.” This helps break down … gendered and racialized class inequalities.

Devine distinguishes between a necessary technical and an unnecessary social division. A complex society must have a technical division of labor: To say the least, not everyone can know how to do everything. On the other hand, Devine contends that everyone can and should spend at least part of their life doing the work of planning and organizing, work today that is monopolized by the educated and wealthy. Further, he adopts Bahro’s distinction between psychologically productive and psychologically unproductive labor. Nobody should spend all or most of their working life in repetitive, exhausting, boring work. It should be the goal of society to reduce the need for this kind of psychologically unproductive work through technology, and to share equally the part that remains. More than this, economic planning should center on giving everyone a role in their lifetime in each of the psychologically productive job categories: “planning and running,” “creative,” “nurturing,” and “skilled.” This helps break down the gendered and racialized class inequalities in the social division of labor. Devine believes that economic planning over time can increasingly focus on creating the overall social conditions, especially working conditions, fostering personal development—rather than on increasing output.

Bahro argues that oppressed people develop “subaltern consciousness”—an adaptation to oppressive conditions characterized by passivity and narrowness. This narrowness comes not only from the need to consider one’s own needs and interests exclusively in order to survive. It also comes from the fact that most workers are stuck in only one (often psychologically unproductive) type of job for most of their lives. Thus they never get the opportunity to have the broader perspectives required of self-governing people. By working to abolish the social division of labor, workers can progressively transform our subaltern consciousness to “emancipated consciousness.” Emancipated consciousness entails the breadth of experience, confidence, knowledge, and psychological predisposition for successful cooperative participation in collective life as “self-activating and self-determining” people.

Devine thus not only makes a case for the feasibility of a planned economy. He shows how much the socialist/communist vision loses without it. Market socialism continues to rely upon and reinforce narrow sectional and self-interest. Markets reproduce inequality and so form a barrier to overcoming the social division of labor. Devine’s thoroughly democratic planning model recognizes the existence of personal inequality and subaltern consciousness while incorporating a transformative dynamic leading beyond them. To a large degree that transformative dynamic is precisely, participation in democratic planning.

Devine believes that economic planning … can increasingly focus on creating the overall social conditions, especially working conditions, fostering personal development—rather than on increasing output.

While Devine doesn’t mention decommodification or computerized planning, his model is perfectly consistent with both. But as commonly discussed today, both of these imply changes brought to the (hopefully) grateful masses without their direct participation. Alienation and subaltern consciousness can survive the social conditions that birthed them. There is no substitute for people taking power into our own hands, or for this power manifesting itself at all levels of society.

Is Devine’s model consistent with revolutionary socialism? I think so. Indeed, the notion of self-organized workers’ councils as insurgent bodies reinforces Devine’s main emphases. Devine stands unique as a reformist, not a revolutionary, who nevertheless maintained the full socialist/communist vision of social transformation that is inseparable from planning. Devine might argue that the stormy prospect of revolution conflicts with the patient and methodical process he soberly outlines for us, the oppressed and under-educated working class, to gradually learn to run production and society. That may be true. But in many revolutionary working-class uprisings, from the Paris Commune to Poland in 1980, to Bolivia, Sudan, and Kazakhstan this century, massive workers’ councils or like bodies formed organically. These showed our class organizing ourselves in giant first steps toward coordinated and democratic social control of government and production. Whether or not this is the best way to begin, it at least gains in spontaneous creativity what it lacks in system and care. In any case, revolution may prove the only way to wrest the means of production from the capitalists.

Today’s tacit acceptance of market socialism stores up many problems for our desired future. Non-revolutionaries like Naomi Klein, Richard Wolf, and John Roemer re-hash market socialist ideas, assume large scale planning is unworkable and oppressive, and fail to credibly suggest remedies to market dynamics. But opposing them and advocating for a planned socialist/communist economy in our post-Soviet world demands deep engagement with thorny issues. For exceptionally well-thought out answers, today’s socialists need to read Devine. For best comprehension, I recommend doing so twice.


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