I have on many occasions written disdainfully of Paul Krugman and his fellow macroeconomists, comparing them to the shadow guessers chained to the floor of the cave in Plato’s famous allegory from The Republic. My principal complaint against them is that they never confront the central question of capitalism, which is, Why do we need capitalists? Today, I should like to give the devil his due. It seems to me, upon reflection, that a socialist government would have need of the accumulated knowledge, insight, and skill of the best of the macroeconomists, and my guess is that they, or their students, would be more than happy to oblige. Let me explain.
I begin, as I have on several occasions before, with a pregnant passage from Marx’s Contribution to the Critique of Political Economy, published in 1859, eight years before Volume One of Capital appeared:
No social order disappears before all of the productive forces for which there is room in it have been developed, and new, higher relations of production never appear before the material components of their existence have matured in the womb of the old society.
Marx was, of course, thinking of the transition from feudalism to capitalism, a subject that he studied extensively and to which he made enormously important contributions. But I think it is fair to say that he thought the proposition applied to the transition from capitalism to socialism as well. In my essay “The Future of Socialism,” written while sitting in a café in Place de la Bastille eight years ago, I undertook to examine the changes wrought within private capitalist enterprises as they grow larger and internalize, through horizontal or vertical integration, some of the interactions previously regulated by the market. I concluded that for reasons internal to the nature of the choices confronting managers, quasi-political decision-making replaces decision making regulated solely by market signals. I argued that the elements of socialist planning are indeed growing in the womb of capitalism. [Once again, I will point out that the essay is archived at box.net, accessible via the link at the top of this blog.] This argument was, in effect, microeconomic, if I may use the standard categories of modern professional economics. Today I extend my analysis to macroeconomic questions.
What would a genuine socialist economy and society emerging from the last stages of capitalism look like? The simple answer is, it would look very much like the capitalism that preceded it, with certain essential and fundamental differences. To be sure, the means of production would be collectively owned and managed by representatives of the people as a whole, for social purposes democratically chosen. But the organization of productive activities and their coordination would look very much like modern advanced capitalism.
Let us be quite clear. The society would not be a network of little collective farms and artisanal craft shops in which individuals swap their products without the intermediation of money. That is, no doubt, a happy fantasy for upper middle class professionals or aging kibbutzniks, but it has nothing to do with the way most persons would carry on their economic activities. Lest anyone still be in the grip of this sort of fantasy, let me suggest a thought experiment. Ask yourself how people would go about constructing an MRI machine capable of scanning for possible cancerous tumors in the lungs [I assume that in socialism, people would still get cancer.] Think of the various materials from which an MRI machine is constructed, and the materials from which those materials are produced, and so on and on. Think of the transistors, the printed circuits, the imaging hardware and software, the metal frame in which the MRI machine rests, and think as well of the accumulated knowledge and skill all built into the machine, as it were. Now ask yourself how a society of seven or eight billion people worldwide would manage efficiently and effectively to create and produce all of that and get it where it is needed, when it is needed, efficiently and with as little cost in labor time and materials as possible. Multiply that one selected thought experiment by all the other thought experiments required to explain how the hundreds of thousands of other goods and services would be produced efficiently in appropriate quantities and delivered efficiently where needed. Local farmers’ markets are not going to cut it!
The central planning board [call it a government if you wish, or not, if you prefer, but under some name or other it will have to exist] would be faced with a wide array of important questions. What will be the effect elsewhere in the economy of decision to divert resources to well-designed, well-constructed low cost housing? What rate of growth of the economy as a whole should be set as a target by the planning agencies? What adjustments in planning are called for by shifts in the demographic composition of the population? What would be the direct and indirect consequences of reducing the work week to thirty-five hours? How will a decision to establish generous family leave for both new fathers and new mothers alter projected growth rates?
These, and countless other questions to which the planning board would require answers are essentially macroeconomic questions, and the simple fact is that there are many very smart economists who are good at figuring out how to answer them. It is my impression that the Paul Krugmans of this world are as enchanted by the sheer intellectual challenge of these questions as they are driven by ideological biases regarding the answers. I would bet that a socialist planning board that offered employment, tenure, and prizes to those interested in economics would have no problem staffing its Theoretical Planning College with bright young things as happy to serve their socialist masters as they are now to serve their capitalist masters.
In this, as in all else, the material components of the new higher relations of production are maturing in the womb of the old society.