Will a socialist society work?

December 9, 2014

Paul D’Amato has been a regular writer from the earliest issues of Socialist Worker. He has completed an expanded and updated version of his book The Meaning of Marxism. The book ends with a collection of answers to the most commonly voiced objections to socialism and Marxism. SW is serializing this section from The Meaning of Marxism--in part two, Paul dismantles some of the myths about the free market and capitalism.

Capitalism is more efficient and less bureaucratic than socialism

This is premised on the idea, of course, that the Soviet Union was socialist, which it wasn't. While Russian state-capitalism had some of its own peculiar bureaucratic inefficiencies, capitalism in the West hardly evaded similar problems.

But before we can proceed with an answer, we have to interrogate the term efficient. In a very limited sense, capitalist enterprises are devoted to efficiency, that is, saving time by figuring out ways for more work to get done at less expense. From the standpoint of human need, however, capitalism is extremely inefficient. Capitalism creates and depends on unemployment, which is a waste of human labor. Nor is it efficient by any logical measure to produce things that wear out or break down more quickly than necessary, and yet this is as common under capitalism as boosting productivity. Corporations martial batteries of consultants and engineers to discover the most efficient way to produce television ads, SUVs, the umpteenth brand of soda, or cruise missiles--never stopping to consider whether, from the standpoint of human need, they are worth producing at all.

The irony of all the talk about how competition encourages efficiency is that monopoly capitalism has, to an important degree, suppressed competition and replaced it with domination and manipulation of markets by handfuls of corporate giants in each industry--the partial suppression of the competitive mechanisms that bourgeois economists spend so much time praising.

Perhaps the most egregious example today of capitalist waste and inefficiency is the financial sector. In the United States alone, the total bank bailout was estimated to be about $29 trillion.[17] That money could have been allocated for any number of useful purposes, like providing clean drinking water to the 1.75 billion people in the world who lack it. This could be accomplished at the bargain price of $10 billion per year for ten years--"about 1.2% of the world's total annual military expenditures," reports UNESCO.[18]

Capitalism certainly doesn't mean less bureaucracy. In the Eighteenth Brumaire, Marx wrote that the rise of capitalism did not lead to the diminution of the size of the bureaucratic and military machinery of the state, but to its "perfection." It has from that time on swallowed up a greater and greater portion of society's resources. The US military budget comes to mind.

Proponents of neoliberal ideology harp on about getting the government out of business, yet their ideas fail utterly to describe current reality. Amid all the talk about the declining role of the state, state expenditure as a percentage of GDP has dramatically increased over the last quarter century. A 1997 World Bank report showed that in OECD countries, which include the United States, state spending as a percentage of GDP grew from 10 percent in 1913, to 20 percent in 1960, to 50 percent in 1995. Since then, there has been a slight shrinkage, dropping in the United States, for example, from 37 percent in 1995 to 36.4 percent in 2009.[19]

In spite of the move away from public ownership and toward private ownership, governments around the world have continued to take taxpayers' money and essentially use it to subsidize and bail out private industry, and to enhance the instruments of management, surveillance, repression, and war. Neoliberalism does not really mean "small" government; it means a restructuring of public services, the closer integration of state and business interests, and the enhancement of state power--all of which requires more, not less, bureaucracy.

What about bureaucracy in private industries? "No private enterprise," wrote economist Ludwig von Mises, an advocate of free-market capitalism at a time when Keynesianism ruled the roost, in 1944, "will ever fall prey to bureaucratic methods of management if it is operated with the sole aim of making profit."[20] According to von Mises, only government interference in this process created bureaucracy.

The truth is very different. Corporate bureaucracy is not a product of "state interference" in the free market, but of the concentration and centralization of capital, the growth of the world market, and with it, the development of monopoly control of entire industries and markets by handfuls of giant transnational corporations. These companies compete on an international market, but must also engage in large-scale internal planning that involves armies of lawyers, managers, supervisors, lobbyists, and consultants.

Corporations rely on a large number of management and supervisory personnel beyond simply the task of coordination. Supervisory personnel aren't really necessary for the work to be done right--after all, workers know how to do their jobs better than anyone else--but in order to have eyes on the labor process and impose discipline on workers. The larger the workforce, the more bloated becomes management, and the more layered the hierarchy. The number of private nonfarm supervisory employees in the United States grew from 4.7 million in 1948 to 17 million in 1994, and the percentage of administrative and managerial employees in the country grew from 6.6 percent in 1960 to 13 percent in 1989. And though "corporate downsizing" became the watchword in the 1990s, the percentage of private nonfarm "executive, administrative, and managerial" personnel grew from 12.6 percent in 1989 to 13.2 percent in 1994.[21]

According to author David Gordon, "The larger the number of employees working under an individual executive, especially in direct staff positions, the greater his or her clout." These self-perpetuating management structures tend to create an ever-increasing number of hierarchical rungs on the corporate ladder in order to keep rewarding managers with advancement.

If anything, free-market neoliberalism, with its open nod toward the goodness of rampant unregulated greed, breeds corporate bureaucratism. The profit motive creates a culture of corruption and cronyism in which various players are constantly seeking ways to get their hands on a share of the wealth drawn from the sweat of the workers employed by the particular firm and from state funds. Wherever profits are overflowing, there are hangers-on, crony friends, and "consultants" feeding at the trough. The history of US business is full of stories of big businesses, and even entire industries, that, drunk with the success of a certain organizational and business model, develop bloated, complacent bureaucracies that are then jolted by new competition from unexpected quarters to revise and restructure.

A look at the health care system in the United States completely destroys the argument that private is less bureaucratic than public. The private, for-profit health care industry in the United States generates a massive bureaucracy whose sole purpose is to perform the paperwork involved in ensuring that revenues and profits flow to the "right" people.

A 2004 study by Harvard Medical School researchers and Public Citizen found that the health care bureaucracy cost the United States $399.4 billion, and that a national health insurance system could save at least $286 billion annually on paperwork alone. That would be enough money to provide all of the forty-three million uninsured in the United States, plus provide full prescription drug coverage for everyone in the nation.[22]

The study found that bureaucracy accounts for 31 percent of US health care spending, whereas in Canada, whose national health care system still hangs on, bureaucracy accounts for only 16.7 percent of health care spending and manages to provide more health services per dollar spent.

The health care business is probably the most distressing example of what happens when we "let the market decide" what is efficient and inefficient. Health care for profit means delivering the least amount of health care service possible and selling the service for as much as possible. HMOs deny people access to important medical procedures because they want to maximize their profits or, alternatively, prescribe billable procedures that are unnecessary. Insurance companies refuse coverage to those who need it the most--the chronically ill--because it isn't profitable. Richard Scott, president of the now notorious Columbia/HCA hospital chain, compares health care to fast food: "Do we have an obligation to provide health care for everybody? Where do we draw the line? Is any fast-food restaurant obligated to feed everybody who shows up?"[23]

A nationally funded and planned health care system in the United States would deliver more service for less cost. But then again, health care in the United States isn't about helping people, but about a tiny number of capitalists making a large amount of money. Obama's health care plan mandating that people buy private insurance, sadly, does not change this reality.


17. Gjohnsit, "The Total Cost of the Bank Bailout," Daily Kos, February 20, 2013.
18. "Eliminating Unhealthy Water/Providing Clean Water for All," UNESCO's World Game Institute.
19. World Bank, The State in a Changing World, World Development Report (London: Oxford University Press, 1997), 2; "Government at a Glance 2009," OECDiLibrary, "General Government Expenditure as a Percentage of GDP (2006)."
20. Ludwig von Mises, "Bureaucracy," 1944, Ludwig von Mises Institute
21. David Gordon, Fat and Mean: The Corporate Squeeze of Working Americans and the Myth of Managerial Downsizing (New York: The Free Press, 1996), 46–52.
22. David U. Himmelstein et al., "The Cost to the Nation, the States and the District of Columbia, with State-Specific Estimates of Potential Savings," Public Citizen.
23. Quoted in Jamie Court and Francis Smith, Making a Killing: HMOs and the Threat to Your Health (Monroe, ME: Common Courage Press, 1999), chapter 3.

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