Socialist Planning or “Market Socialism”?

Part 2: What’s Wrong with the Market?

by Raymond Lotta

Revolutionary Worker #1167, September 22, 2002, posted at

There are five major problems built in to the market. These are:

1). Anarchy vs. Conscious Planning.

There is no plan for social production in the capitalist market economy. Society as a whole is not figuring what its requirements are: its social needs, the equipment and technology to carry out production, the housing requirements of the population, the resources called for to deal with an AIDS epidemic.

Instead, this is left to the market to work out (of course, the government plays a role, but the market reigns supreme). What happens is that capitalists enter different fields and product lines. Each capitalist producer decides what and how much to produce, whether to expand or cut back, whether to hire new workers and build new facilities. These decisions are guided by the capitalists’ ability to sell products at profitable prices, and by the expectation of finding profitable markets in the future.

The capitalist produces and then sees what happens. As I said in my article, it’s a hit-and-miss, shoot-and-overshoot, trial-and-error process. In boom times, investment is expanded too much. In periods of economic slowdown, there is too little investment. Great numbers of people can no longer work, resources lie idle, and urgent social needs go unmet. All this is tremendously wasteful and destructive.

BRL used a discussion of AIDS research as an example, writing:

“It seems that a socialist market would be more in touch with the diverse needs of people in a way that central planning isn’t. There may always need to be a bit of centralism, especially with reguards to AIDS research, etc.. But, these kinds of BIG projects are only a fraction of what working people want. Just because, as Lotta correctly says, central planning works good for BIG projects, doesn’t mean that it works for consumer goods, etc.”

In other words, he suggests that “a bit of centralism” could function like “state intervention” in a society where the market is allowed a wide scope of control for large parts of the economy.

But can you really solve the AIDS problem with a “little bit” of state intervention? Doesn’t solving the AIDS problem require unified direction and orientation of pharmaceuticals and medical equipment production? Doesn’t it require a revamped medical training and health care delivery system? And, most of all, doesn’t it require that you mobilize people to deal with this problem in a multidimensional way (workplace, community, schools, etc.)?

How can you accomplish this without planning and society-wide coordination (not that it’s all done from the top planning levels on down—I’ll have more to say about that).

2). The “bottom line” vs. the social good.

The market rewards the minimization of cost in pursuit of the maximization of profit. This is the “bottom line,” what it all comes down to in the market.

The capitalists equate the “bottom line” with efficiency. But efficiency has definite class content under capitalism. It is the efficient exploitation of wage labor. It is the calculation of what is cost-efficient and profitable in a narrow and short-term sense.

A factory might belch out pollution, but that cost to society is not a worry for the factory owner—you see, air is not within his boundary of ownership, not part of the cost structure that the market rewards and penalizes.

Or take agriculture: Recently I went to visit some folks in Kansas who have this institute devoted to sustainable agriculture. They are researching, developing, and demonstrating feasible alternatives to the high-input and ecologically damaging system of agriculture that we now have. They’re proving that is possible to grow food-grains in an ecologically sound way.

But they pointed out to me that in narrow market terms, this approach would not win out over agribusiness. It’s actually cost-effective for agribusiness to grow annual grain crops that require huge amounts of herbicides and pesticides. You manage these crops in a certain way, you get huge, standardized output, and on the cost and profit side, it works—for agribusiness, not for the farmer who does the actual growing. But once you start considering the effects on ground water, soil erosion, and public health, than the social costs go way up.

The problem—and this is built in to the market mechanism—is that the market doesn’t register the long-term and social effects of economic activity. Health and pollution don’t show up in the supply-demand and profit maximization framework of price and profit.

That’s what happens when profit is the starting and end-point.

Going back to pharmaceuticals: It is not profitable for the pharmaceutical industry to develop cheap drugs for diseases that affect the vast majority of humanity. The market returns are too low. So people go untreated and die of curable diseases. But it is profitable to develop “life-style” drugs and to slightly modify existing drugs to get new patents.

Housing as an example: In the U.S., there is an obvious and felt need for affordable and decent housing. But the market doesn’t respond to social need or social demand. It only recognizes monetary demand—“show me the money.” So you have the problem of homelessness; you have a public housing crisis; you have a situation, and I just found these incredible statistics, where the average worker in retail in the U.S. can afford the rent for a one-bedroom apartment in only 3 of the largest 20 housing markets in the country.

Globalization is all about the “bottom line.” In the anti-globalization movement, they call it the “race to the bottom.” The global investor scans the global market in search of low costs, high productivity, and big returns. Sweatshops, lax environmental regulations, few worker benefits—all this makes “good market sense.” It’s the Nike success story.

3). Competition vs. Cooperation.

Each capitalist seeks to outmaneuver and out-position others. They keep technical and scientific knowledge from one another through trade secrets and patents and intellectual property rights. Ideas can become private property, and the “rights to these ideas” are bought and sold—just like everything else.

To win in the market is to maximize competitive advantage and gain. And this totally infiltrates our lives and psyches. We can’t eat, put a roof over our heads, or work without going through the market. But when you relate to the market for a house or for a job, you are relating to other people in very definite ways. You are competing for jobs, for housing, etc.

The market breeds a mind-set of “me-first,” of “look out for number one.” The market is cold and cruel. It’s about “winners and losers.” And in such a world, our world, it’s just not “cost-effective” to show concern for others.

Of course, we do try to care about others (today, even in this world dominated by the capitalist market), and we organize on the job and in the community. But the fact remains: capitalism and market exchange pit us against each other; the system of private ownership and the market fragment and atomize people.

4). Distorting and Mystifying Reality.

What do most urban consumers know about how food is grown and processed? We know to find it on grocery shelves. But we don’t know about the actual social process of production—that’s not listed on the ingredients. We know price. That’s the essential market information.

I buy a chocolate bar. But do I know that the Ivory Coast is the world’s leading cocoa exporter and supplies most of the chocolate I crave? Do I know that Nestle and Hershey’s work through a web of cocoa exporters, purchasing agents, and labor contractors linked to plantations that rely on child labor? The market doesn’t convey this crucial information.

Not only do commodity production and market relations hide exploitation and oppressive class relations rooted in the system of production. They also distort and obscure the real social relations that bind individuals to one another. We are not free-floating consumers but are in fact part of an economic and social “matrix.”

5). Alienation and Powerlessness.

The situation of exploitation and market relations alienates workers from the means of production, from the goals of production, and from work itself. Work is an alienating and oppressive activity. We work for an impersonal market and we work to obtain life’s rewards in the market. There’s nothing intrinsically rewarding about work, nor is work about serving meaningful social purposes.

We “market ourselves” for jobs, for education…even for relationships.

Happiness in the market society is measured by wealth and by the acquisition of things. Okay, there is the cornucopia of products. This however is not a market response to consumer want. Logos and brands are not about satisfying real material and social needs, and advertising is not a public service announcement. It’s all about manipulating wants, stimulating and steering demand, and fighting for market share.

Yes, “we get to choose things.” But three points have to be said about that. First, it’s a “sliding scale of choice” based on class position and income. Second, as I have emphasized, the market does not respond to social need. And, third, like the ritual of elections, the “illusion of choice” masks and reinforces the basic powerlessness of the great majority of society. The ideology of consumerism is part of the psychology of control exercised in the capitalist market economy.