Which way the Economic Revolution?

The Cybersyn Control Room

The Cybersyn Control Room

All socialists hold that capitalism is not the best of all possible worlds in terms of organising production and consumption when viewed from the position of the vast majority of society. However, socialists have often been pretty vague about what exactly would be substituted in its place. This is especially true of those who don’t want to cozy up to the USSR, Yugoslavia, Hungary or Cuba as models of a functioning socialist society.

If these do not constitute viable and desirable economic systems, then what does? An attempt to settle this question through a perusal of the political programmes of virtually any socialist party would lead one to be just as confused as when one started. Specific models are very rarely put forward. Instead the programmes usually contain some references to nationalisation and a great many of them don’t go much beyond Keynesianism and tax based redistributive policies. (Pension Fund Socialism has a fairly good review of the problems and limitations of redistributive and Keynesian policies).

However, there have been quite a few proposals put forward, despite the failure of any of these proposals to find a backing with socialist organisations as a component of a platform. It is a fairly extensive task to go into each of these proposals in detail so I intend at a later stage to write a series of articles reviewing each proposal and its strengths and weaknesses as I see them. However, I think it is useful to just lay out which proposals I have encountered such that others can read up on them.

Cockshott & Cottrell’s Towards a New Socialism
Devine’s Democracy and Economic Planning
GIK’s Fundamental Principles of communist production and distribution
Hahnel & Albert’s PARECON
Otto Neurath’s Central Planning
Branko Horvat’s Towards a Theory of Economic Planning
David Schweikert’s After Capitalism
Takis Fotopoulos’ Towards An Inclusive Democracy
Leonid Kantorovich’s Mathematical Methods of Organizing and Planning

Briefly, I give an outline of the major idea of the books and the strengths and weaknesses of the proposals as I see it.

Cockshott & Cottrell’s Towards a New Socialism

Cockshott & Cottrell’s new socialism attempts to use labour time as a basis for optimisation of the economy. The idea is to use sophisticated computers, which are now widely available, to determine the most rational allocation of productive capacity, given social spending power based itself on labour time. That is, the consumer gets to choose from amongst the various products with a purchasing power based on the amount of labour expended towards fulfilment of the plan.

The work is particularly notable in dealing with many issues known to be difficult in planned economies such as dealing with innovation. the proposal is both very thorough and concrete, giving little doubt to those who might want to begin its implementation how one should be guided. It is therefore one of the strongest planning proposals which we have, and seems a useful template. Further useful developments might look at a partial implementation which would be suitable for a cooperative, with a notion of a planned inside/capitalist outside as a transitional model.

Its great fault, however, is that it does not deal systematically with many of the fundamental quality control concerns that led to cascading failure in the USSR, and the rise of a parallel illegal but wholly necessary therefore tolerated bartering system. That is, because parts are sourced by the plan, and not by the individual producers, quality control has to be additionally imposed. Whereas in a market system, substandard parts would simply never sell, in a planned system the fulfilment of the plan is not deemed by the customer of the parts but either by the supplier or some third party.

Further there is no mention of the rushing effects caused by the periodicity of planning (shturmovshchina) or the need for flexibility in changing subsections of the plan or any other issues which are always difficult in global optimisation problems. The first problem of periodicity led to big fluctuations in output near the beginning and end of the planning periods. It is likely that computational power will reduce the size and therefore the damage done by these, but the problem needs to be addressed. Further, there is little discussion on overcoming the tautness of Soviet plans, which was a continual problem that we need to deal with seriously. We need to build in fault tolerance and looseness such that failures do not cascade.”

Devine’s Democracy and Economic Planning

Devine’s negotiated coordination is an attempt to meet both consumer and producer demands through democratic stake-holding bodies which compromise between production and consumption targets to produce a plan. The book is useful as an introduction to British wartime planning and various theories about the nature of the USSR. The British wartime examples are both instructive and encouraging and make the first half of the book well worth the read.

On the other hand the actual details of how planning would be conducted are relatively sparse. The idea given really focuses much more on managing democracy and much less on managing efficient production. As such it seems like it would be a better adjunct to another theory of planning which could give insight into what a baseline plan aught to look like.

GIK’s Fundamental Principles of Communist Production and Distribution

This is a rather old, but still interesting exploration of non-circulating labour notes. The most important contribution of this piece is in describing how a system which mixes production for general public consumption with one using labour time can be implemented in a distributed fashion. The introduction presents a thesis which has had multiple proponents but which I sometimes refer to as the Djilas thesis (as it is presented by him in his book, the New Class). The idea is that the change in the mode of production has to proceed the political revolution. Further, the blame for the failure of state communisms to attain a satisfactory conclusion to the problem of economics is deemed to be related to their incorrect understanding of Marx, who was attempting to promote non-circulating labour notes in something which would otherwise look fairly similar to mutualism.

I remain unconvinced that the proposal squares the circle with respect to production for general use-value in a non-centralised way, though I’d be curious whether others think this is a failure on my part or whether they also found it problematic.

On the other hand I’m very interested in taking this proposal and marrying it with some of the ideas from Schweikert’s proposal to deal with public expenditure and some attention should be paid to assessment of externalities. In addition, there is a big opening for making use of modern cryptographic democracy techniques to rework the GIK proposal into a transparent and open labour time payment system. I’ll go into more details on this idea later.

Hahnel & Albert’s PARECON

As far as negotiated coordination proposals, PARECON is probably the pinnacle. The proposal improves most negotiated coordination systems by demonstrating where algorithmic approaches could be employed to more quickly obtain convergence of plans. It is both complete and well described and one could imagine implementing it, something which always makes me inclined to give points (I give nuclear bomb size demerits to people who go on about “full communism” without giving the slightest idea of how we’re actually going to manage production).

I have to say I wasn’t particularly impressed by the format of the book, in that I thought it was confusingly presented, and unlike most of the other proposals here, it had very little interesting context to its development other than some value positions that are taken out of thin air. Specifically the idea of “balanced work complexes”, that work types should be spread amongst the workers in a firm, seems unreasonable, unworkable and poorly thought out. What sense is there in balancing the work varieties in an ice cream truck when others work in a sewerage treatment plant. The differences in the type of labour are often vastly greater between work places than within them.

Further, there are assertions that things will happen with no structural reasons that they ought. For instance, the claim is made that people will be remunerated according to how arduous a task is, which is certainly a laudable goal, but how can we be assured that it’s true? Very little effort is put into actually determining how these normative goals would actually be reached.

Neurath’s Central Planning

Neurath is perhaps the greatest historical proponent of central rational planning without money. He wrote for decades on the necessity of abolishing money, and about the methodology one would use, by using input/output matrices for the calculation of the goods which we would like to produce. He assumed that these goods would be decided in kind, without ever mediating through some currency (as in contrast with Cockshott’s proposal, or even Kantorovich’s which contains “shadow prices” for instance).

While the goal of destroying the root of all evil is laudable, the proposal appears lacking in that it can not decide how to truncate from all possible wants described by participants in society, down to those that we would like to fulfil given the amount of labour which would be diverted towards their production. For this reason Neurath’s proposal is not tenable unless it is somehow reworked to include at least a concept of a demand schedule, and probably some partial order on those schedules which would allow them to be truncated. Further it would probably have a process which was iterated such that the truncated items did not include your grocery list while you were only able to acquire a plasma screen telly. Further some way of deciding how we would like to allocate our labour is missing. Do we volunteer for that which we’d most enjoy? How do the crap jobs get filled in society. I’m not yet convinced that some theory in this orbit is impossible to work out, but unfortunately, Neurath has not done it for us.

Branko Horvat’s Towards a Theory of Economic Planning

Branko Horvat’s book has an impressive sounding title for anyone interested in planning (Yes, I can hear you yawning). The beginning of the book is a rather comprehensive survey of the sorts of important questions that someone looking at a market economy from a dirigisme type state perspective might need to know. It goes into very realistic sorts of problems of diminishing versus increasing returns to scale, rents and questions of firm composition. For this reason the book is well worth reading, especially if you find yourself the tinpot dictator of some backwater country badly in need of modernising (I’m looking at you Enda Kenny). It is not however much of a theory of economic planning if we’re talking about moving to a truly post-capitalist society.

David Schweikert’s After Capitalism

After Capitalism is probably the most useful and concrete proposal amongst the books which propose some form of market socialism. While many books have been published on the subject, few have the level of prescriptive detail, together with justifications that exists in this book. Further, in its favour, the proposal is nearly “scale free”. One can imagine immediately beginning its implementation starting with only one cooperative. The organs of finance could grow organically as a constellation of cooperatives came into being.

A number of my comrades are very much averse to market socialism in all its forms. I share the distrust of market forces taken out of the control of conscious human direction and think there are dangers of “capture” of important organs in such a scheme, especially the organs of finance. I think Yugoslavia has demonstrated well the dangers of relaxation of wage differential controls and the conscious redistribution of surplus in market socialism, which, after they were liberalised, eventually led to powerful centrifugal forces.

However, Schweikert presents his proposal as a “successor system”, that is, a means from which we can get from here, to something else progressive and workable. Whether this system is a cul de sac which will stifle further progress or not is a question that requires more debate. I’m of the opinion that such a system could in fact be a stepping stone, as once capital is in the hands of the public, the question of what would be an even better model of production and distribution is posed.

Takis Fotopoulos’ Towards An Inclusive Democracy

Inclusive democracy is a proposal which is essentially anarchist in character. The original premise is that neither the state, nor the economy is democratic, and that the major issue at stake is the democratisation of politics, which Fotopoulos views as anti (or at least non) statist. He includes a critique of state socialism as similar in ways to capitalism as being based on a growth paradigm. This anti-growth angle is very popular with certain sections of the ecological movement which views volume of production as a fundamentally negative feature of our economic system.

The proposal involves a rather extensive reconstruction of society, making the polity more democratic, and fusing the economic with the political.

There are a number of rather odd features in the proposal, including the designation of basic versus non-basic employment and consumption. This divide carries over into remuneration as well, giving the two areas an odd duality that includes different currencies and which seems fairly artificial. The question is immediately posed, how many of the blue tokens for the red?

I’m not particularly happy myself with the anti-growth angle. I think we need massive development in the global south, big increases in power consumption and mechanisation of agriculture to further the spread of the green revolution. Those who are more keen on this approach are likely to find the proposal more appealing.

Leonid Kantorovich’s Mathematical Methods of Organizing and Planning

Kantorovich was a phenomenal Russian mathematician who discovered a novel approach for solving a class of optimisation problems useful in the planning of production. Specifically, Kantorovich’s method is able to determine the most efficient allocation of productive capacity and inputs for a given output maximisation.

The proposal is immanently useful, but it is not fully an alternative economic system. Instead, goals have to be somehow socially determined, as with the exchange relation, it is mediated through capitalist investment and consumer prices. I wait with baited breath for someone to marry Kantorovich’s method with a more full conception of how to apply it to an economy.


If you’re interested in alternative-economics, I think all of these books are worth a read, but perhaps by looking at the descriptions I have given, you might find yourself more likely to succeed. If readers find any proposals which appear to be missing, tell me in the comments and I will read and review them as well.

It is impossible a priori to work out all of the implications of choosing a scheme for the social relations of production. There really is no substitute for experimentation. However, in order to get to the stage of experimentation it is worthwhile to form hypotheses. Hopefully by studying what’s out there, we can get closer to collectively forming positions in the socialist movement on which proposals appear most viable. Further, I think it’s worth keeping in mind that even if some of these proposals might be more desirable in their implementation, they may be harder to arrive at. Keeping the transformative goal in mind is also important, as the perfect system is useless if we can’t get it.

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About Gavin Mendel-Gleason

An ex-patriate American living in Ireland. Former anarchist, present mass partyist, but always committed socialist. Has been accused of menshevik centrism and even *gasp* Bernsteinism.
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