Our alternative to the madness of the market

Eric Ruder makes the case for the socialist vision of a planned economy.

Advertising overload in New York City's Times SquareAdvertising overload in New York City's Times Square

THE WORLD economy is still suffering from the worst crisis since the Great Depression of the 1930s. Around the world, the consequences have been devastating--jobs wiped out, exploitation intensified for those who remain employed, social services eliminated or privatized.

At the same time, U.S. banks and corporations are sitting on a record $2 trillion in cash. In most sectors, profits have returned, often to record levels--and tax rates for corporations and wealthy individuals have remained at historic lows during the administration of a Democrat who promised to make the rich pay their fair share.

Welcome to 21st-century capitalism, a topsy-turvy world in which poverty for many and unimaginable wealth for a tiny few stand side by side. But unlike in earlier times, when slave and feudal societies weren't efficient enough to adequately feed, clothe and house everyone in society, today's crisis is the result of an overabundance of material goods, not the lack of them.

In the U.S., for example, hundreds of millions of square feet of commercial, industrial and manufacturing space are idle. As of July, industrial capacity utilization stood at 79.3 percent--low by historical standards, though better than the low point of 66.8 percent in 2009, during the trough of the financial crisis.

In the rising economic powerhouse of China, overcapacity is an even worse problem. As the New York Times reported:

After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses. The glut of everything from steel and household appliances to cars and apartments is hampering China's efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

The technological innovations that made capitalism's incredible productivity possible--assembly lines, the use of robots--could permanently free humanity from the scourge of poverty, want and hunger.

But in a capitalist society, the question of what and how much gets produced isn't decided on the basis of what people need to survive. It's based on what will turn a profit for the owners of offices, factories and construction sites.

If there's already too much to be sold profitably, the greater efficiency of new production techniques has the effect of leading to layoffs and misery--instead of a lighter workload and a higher standard of living for everyone.

Yet this glut of too many products to be sold at a profit exists alongside vast unmet needs for hundreds of millions of people. The fact that capitalism is many thousands of times more productive than the hunter-gatherer societies of past millenniums, yet 925 million people--about 13 percent of the world's population--don't have enough to eat each day, is the most powerful indictment of the capitalist priority of profit over human need.

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A SOCIALIST society would eliminate these social ills by eliminating the profit motive and making human need society's first priority.

In place of the destructive dynamic of free market competition, a socialist economy would be planned to make sure there were surpluses of food, clothing, health care and shelter before turning to the production of luxury goods that only a minority of people can afford.

Apologists for capitalism insist, however, that socialist planning can't work. They say that any attempt to plan such a complex and large economy would be horribly inefficient.

In so doing, they conveniently forget about the incredible waste and inefficiency of capitalism. There's the waste of advertising, of health insurance, of military spending, of goods designed to break so they have to be replaced. There's the waste of unplanned production for the market, which compels every individual capitalist to produce at breakneck speeds--to make goods at a lower cost than their rivals and grab market share--even as the pace of work debases the quality of life of workers.

The fact that there's no guarantee that goods produced today can be sold for a profit tomorrow forces each individual capitalist to pursue ruthless measures to cut costs--or risk being forced out of business.

Defenders of the status quo celebrate this as the "dynamism" of the market, which operates according to the laws of supply and demand to send "price signals" to capitalists about what needs to be produced.

But there are far better ways to determine demand than market prices. In fact, the first sign that demand is changing is not a change in prices, but a change in the amount of a good being sold at the existing price.

That's why capitalist firms such as Toyota, Amazon and Wal-Mart spend huge sums on inventory-control systems--to get a more sensitive measure of supply and demand than the market's price signals can provide. Large industrial firms are also compelled to plan their investments over the course of years in order to outfit massive production chains that sometimes span the entire world.

Considering that each of these mega-corporations constitutes a big and complex chunk of the whole economy, it stands to reason that the technical means to carry out planning and coordination on an economy-wide scale exist.

The problem isn't that the economy is too complex to plan. It's that each capitalist firm is planning at the level of the firm in order to go out and smash its rivals' plans on the open market.

In this way, the shortage of automobiles, steel or airline flights can suddenly become its opposite--overproduction--when rival firms spend years planning to expand production and then find that they've created more supply than can be consumed. In other words, capitalism obstructs attempts by capitalists to act rationally.

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BUT WON'T economic planning also undermine democracy? This objection focuses on what happened in the former Soviet Union, where "command economies" there and in the Eastern bloc depended on a top-down, authoritarian regime to impose production targets and compel labor discipline.

But the rise of Stalinism in Russia in the late 1920s was the result of the failure of socialist revolution to spread internationally, not the inevitable consequence of planning. The isolation of the Russian Revolution meant that the relatively backward economy of the USSR had to ruthlessly exploit its working class in order to carry out industrialization and compete militarily with Western capitalism.

In other words, the early Soviet Union lacked what Frederick Engels described as a prerequisite for a socialist society:

It is precisely this industrial revolution which has raised the productive power of human labor to such a high level that--for the first time in the history of humanity--the possibility exists, given a rational division of labor among all, to produce not only enough for the plentiful consumption of all members of society and for an abundant reserve fund, but also to leave each individual sufficient leisure so that what is really worth preserving in historically inherited culture--science, art, human relations is not only preserved, but converted from a monopoly of the ruling class into the common property of the whole of society, and further developed.

And here is the decisive point: as soon as the productive power of human labor has developed to this height, every excuse disappears for the existence of a ruling class. Was not the final reason with which class differences were defended always: there must be a class which need not plague itself with the production of its daily subsistence, in order that it may have time to look after the intellectual work of society?

This talk, which up to now had its great historical justification, has been cut off at the root once and for all by the industrial revolution of the last hundred years. The existence of a ruling class is becoming daily more and more a hindrance to the development of industrial productive power, and equally so to science, art and especially cultural human relations.

Of course, simply posing the desirability of a democratically planned socialist society isn't sufficient to take society from here to there. The capitalist class won't hand over control of the economy just because a socialist economy is far more rational than our present-day society.

Workers must take control of the economy's productive resources, and this will require a massive struggle, animated by a vision of a different kind of society. This means that the project of building a socialist organization in the here and now is essential because such organization is the means by which workers as a class can shape history.

In the words of Karl Marx:

Both for the production on a mass scale of this communist consciousness, and for the success of the cause itself, the alteration of men on a mass scale is necessary, an alteration which can only take place in a practical movement, a revolution; the revolution is necessary, therefore, not only because the ruling class cannot be overthrown in any other way, but also because the class overthrowing it can only in a revolution succeed in ridding itself of all the old crap and become fitted to found society anew.