Are there lessons to be learned? - the future of socialism

Monthly Review, Feb, 1991 by Harry Magdoff

It may seem strange, if not outrageous, to place so much emphasis on the need to think of limits on growth in light of the desperate need for an enormous expansion of production forces in the third world. And yet, wittingly or unwittingly, long-term growth considerations enter into policymaking early on. The question of what kind of growth a socialist-minded society needs to consider is very much interconnected with what was said above about morality, consciousness, new class formations, and meaningful democracy. From the very outset, the decisions made on how and for what purpose to transform the society will have a major effect on the direction of economic development for many years to come.

Thus, a social policy directed towards the ultimate elimination of differences among the people would have a decisive influence on the infrastructure to be built, the choice of technology, location of industry, etc. Ideally, the production forces created would then be consonant with social relations and policies which, for example, would and could respond to ecological imperatives. On the other hand, if the goal, implicit or explicit, is to reach for the consumption standards of the advanced capitalist countries (including, for example, the mass use of private automobiles), then another sort of infrastructure, technology, and industrialization would be needed. Once a society takes off this way, the resulting social relations and production forces impel staying on the same path. Barring a crisis resulting from inner contradictions, the bias towards unending, rapid growth would most likely persist.

6. Plan or Market?

Against this background, the issue of plan vs. market-so popular these days-assumes a special meaning. About one aspect of this question there should be little if any dispute. A market is needed at the very least to distribute goods and services to consumers. Wholesale markets for consumer goods and industrial supplies might also contribute to a smoother operation of the economy.

The crucial issue is not market or no market, but what kind of market? To what extent will the market guide the flow of investment? If the market is let loose as the guide for investment decisions, it must then pursue its own logic. For example, markets lose whatever rationality they have if the sellers are monopolies or near-monopolies. If markets are to serve as guides on investment decisions, competition is essential. But competitive firms risk becoming bankrupt. To avoid the shoals of bankruptcy, they need to secure a solid base for profit-making. This entails, among other things: keeping a tight rein on labor and other costs, an impetus for self-expansion to get a stronger hold on a share of the market as a defense against predatory competitors, a growing reliance on export markets to absorb the excess products flowing from the expanded capacity. To keep such a system going, capital markets are needed, and to be effective they need liquidity: in other words, a class of speculators always ready to buy or sell instruments of ownership or debt. The wheels of enterprises and capital markets need to be greased by a strong banking system. These institutions in turn must for the sake of self-defense be assured that the firms to whom they supply funds have good profit prospects; furthermore, the banks themselves need to keep an eye on their own profits and growth, if only as protection against competitive threats in the financial area. The inevitable result is that profit-making guides capital accumulation and thereby the destiny of the economy, determining the allocation of resources and the distribution of income.