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Wednesday, May 18, 2016


We have arrived in Paris, exhausted and jet lagged but safe and happy.  The Parisians appear to be wrapped up in their own concerns [a local police strike, for example] and it is lovely not to see or hear the name “Trump” everywhere.  I am unable to report on the whereabouts of Jean Gabin and Yves Montand, the two little batobuses, because my walk this morning did not take me past their usual nighttime resting place.  Stay tuned.

After reading the most recent comments, it has occurred to me that I ought to write a blog post about Marx’s conception of the way in which socialism would come to replace capitalism – what is usually referred to as the “transition problem.”  I have in fact written an entire essay about this subject and archived it on, but Box informs me that only 680 visits have been paid to that essay, from which I infer that there are a good many readers of this blog who have not read it.  My apologies to those who have for repeating myself.

Just to be clear, by “socialism” I mean “collective ownership of the major means of production, democratically managed.”  I am not talking about state-run lottery stores or state run small businesses.  I am talking about major accumulations of capital, collectively owned by the population of a nation as a whole and managed democratically by a managerial staff selected by, and responsible to, the elected representatives of the citizenry.  Thus I am not talking about an advanced stage of welfare state capitalism, nor am I talking about a flourishing of cooperatives and collectives running farms or urban transit systems or clothing outlets.  I am all for cooperatives and collectives.  I am just not talking about them here.  What sorts of major accumulations of capital am I talking about?  Well, General Motors, or Google, or Microsoft, or Walmart, or U. S. Steel, for example.

The standard objection to socialism, set forth almost a century ago by Ludwig von Mises and Friedrich Hayek, among others, is that at its very best, socialism would necessarily be inferior in efficiency and rationality to market-drive capitalism.  Socialist planners and managers [Hayek and von Mises were looking at the early stages of the Soviet Union], it was said, would like any economic decision makers have to make a series of choices about what to produce, how, and in what quantities, and what prices [for purposes of calculation, if nothing else] to assign to both the inputs into production and the outputs of production.  In a capitalist economy, the managers of capital rely on markets to guide these choices by an endless series of rapidly fluctuating signals in the form of prices and effective demands for goods.  Socialist planners would have to substitute their own best estimates for these market signals.  Generally speaking, their efforts would be inferior to those of the market both because they would have much less information than that provided to the market in the form of offers to buy and offers to sell by countless millions of economic agents, and because their means of processing the information they were able to assemble would be primitive relative to the processing automatically carried out by the market.  Since the market’s information processing, Hayek and others argued, is perfect, the very best socialist planners could do would be to mimic the market, and in reality, they would always fall somewhat, if not a great deal, short of that perfection.  The evidence of this inadequacy would be in bottlenecks in production [because of a shortage of the required inputs] or gluts [because of excesses in the production of goods for which there was not adequate demand.]  Both these forms of economic inefficiency were widespread, they believed, in the Soviet economy.

The first thing to say about this argument is that, despite it somewhat overenthusiastic estimate of the efficiency of the market, it was quite correct when it was advanced.  But correct though the argument was, it rested on a fundamental misunderstanding of what Marx thought [no not, perhaps, on a misunderstanding of what Stalin thought.]  The key to understanding what Marx really thought about the transition from capitalism to socialism is a famous and pregnant passage in the Preface to a book that Marx published several years before the appearance of Volume I of Capital, a little work called A Contribution to the Critique of Political Economy.  Here is what Marx wrote:

“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 thinking principally about the transition from feudalism to capitalism, about which he knew a good deal, but what he said clearly applies to the transition to socialism as well.  One of Marx’s greatest theoretical contributions to Political Economy was his deep and detailed understanding of the restless and unending way in which capitalism develops new social relations of production in response to the pressures of competition.  We see a good deal of this understanding in Capital Volume I, where Marx writes in great detail about the transition from the early putting out system of nascent capitalist production to the incorporation of hand-work [“manufacture”] into the factories, and the transition from hand-work, or manufacture, to machine production.

Now, the capitalism at which Marx was looking was a rather early version, so he was unable to see directly how the necessary material relations of a socialist economy might evolve and develop within capitalism.  Even Hayek and von Mises, writing more than half a century later, were looking at an early stage of capitalism in England and Germany, and a really primitive form of capitalism in Russia, but we have the benefit of another three quarters of a century or more of experience, and I believe that we can actually see the objective conditions for socialism developing within the advance sector of capitalism.  That is what my essay, “The Future of Socialism,” is about.

Very briefly [for I really would like anyone who is interested to go to and read what I wrote], as capitalism develops in the very largest corporations, it eventually becomes impossible for the corporate managers to guide their central managerial decisions solely by market signals.  I am not saying that it becomes tedious for them to be guided by the market, or that it is preferable for them to make decisions in some other way, or that these mangers have been seduced by tenured radicals at effete Eastern colleges who have filled their heads with socialist nonsense.  I am saying that it becomes impossible for them to base their managerial decisions on market signals in the manner that Hayek et al. wish them to.  Whether they like it or not, the corporate managers have no choice but to adopt decision making procedures that are, in their logical structure, political rather than purely market driven in nature.  In effect, they become quasi-socialists whether they like it or not.  But of course they serve not as embodiments of the will of the people but ether as embodiments of the will of the shareholders or, more likely, as autonomous agents merely advancing their own interests.

If the fundamental structural conditions for socialism are right now developing within the womb of capitalism, why is there little or no sign of the political mobilization that would be required to seize upon those developments and use them to carry out a transition to socialism?  My answer to that pressing question is contained in the section of the paper entitled “Why aren’t we having fun yet?”

What exactly are the changes internal to capitalism that are preparing the way for socialism?  My answer to that is also contained in the paper.  Consider this blog post an internet advertisement for the essay.


Matt said...

A few quick thoughts before rushing off to work:

I've never read Mises, and am not eager to, but I think you're giving a bit unfair characterization of Hayek here. I've certainly not read all of his work on the subject, but I've never seen him say that the information processing of the market is "perfect" - he makes use of the fact that people in markets over and under shoot all the time, and this feed-back is what allows them to adapt, on his account. Maybe I don't understand what you mean here, but it seems like an odd way to characterize his view.

For people who are interested in such things, I cannot ever tire of recommending Alec Nove's _The Economics of Feasible Socialism_ for some careful discussion of the problems face, from someone who is a supporter of socialism. It is less "theoretical" and more based on close examination of various systems than many other accounts.

On the functioning of large firms - there is a very big literature on this, how they are or are not like socialist planing, what it entails, the role of markets in them and in relation to them, etc. I know _of_ this literature, but can't say much at all about whether it's good, whom within it should be looked at, or even (right now, while running off) give citations, but this is a very much discussed and considered topic, for people who are interested in it. Maybe someone else reading the blog knows it better than I do.

Tom Cathcart said...

Bob, I have read your paper, and I have a probably ignorant but sincere question. I follow the analysis as long as we're talking about cars or steel or corn. An increasing driver of our economy, though, is innovation, Apple being the paradigm case, but one can think of hundreds of others. I've worked for a number of non-profits and a number of government agencies, and I've never seen anything there like Apple. Steve Jobs and his disciples were apparently driven by a number is self-serving passions: competitiveness, intense desire to create, neurotic personalities. In the agencies I've worked for, Steve Jobs would have been side-lined and frustrated to the point where he resigned. Well, we got along for centuries without iPhones. So what? In this century, though, we live in a world economy, so some other country would become the leading innovator. [Cp. China/US 50 years ago and now.] (Is this why Marx warned against socialism in one country?) Danny and I gave a talk at Google headquarters, where the excitement of the employees was palpable. Those at the Department of Motor Vehicles, not so much. So there's my ignorant/sincere question: how do we keep the economic engine of the country from looking like the DMV?

Enjoy Paris! (As if one couldn't.)

s. wallerstein said...

Tom Cathcart,

I've never been at Google headquarters, but I did teach English as a foreign language to the smart kids in the Servicio de Impuestos Internos (Internal Revenue Service) in Chile, the kids who took a bureaucratic, slow, old-fashioned government service and modernized it, making it fast, online and efficient. They were mostly fresh out of the university, engineers, high-tech people, of both genders and there was excitement there. It depends on the people, it depends on the team-leaders, it depends on the social context.

Tom Cathcart said...

S wallerstein, True enough, although I wonder how many IT engineers the universities would have turned out if the crazy, driven people hadn't more or less invented the field. (Frank Land and Bill Gates dropped out of my alma mater in frustration in order to invent the Polaroid camera and Microsoft.)

s. wallerstein said...

According to Chomsky (who was there), most of the basic IT research was done at MIT and other similar universities, funded by government, often Pentagon, grants.

Unknown said...

With relation to Tom's question, I think it's also possible that those with high levels of creativity, competitiveness, and drive may find various other outlets for those traits outside of their job. Furthermore, we might find that our work hours are cut substantially in this socialist world, thus freeing us up to pursue and nurture any personality traits that we like. People like Jobs or Larry Page could still find ways to compete and interact with each other. They would likely start groups or clubs that do such things and I bet much of their work would still produce new and potentially exciting ideas.

Furthermore, I'd like to point out that cars, steel and corn (yes, even corn) were once 'innovative' products even if we find them very commonplace now. The product is not now and never has been ‘innovation’ itself. Nobody stands in line to buy innovation. They stand in line to buy products. All the smaller ‘innovations’ that had to occur in technology to make the iPhone get almost entirely ignored but I promise there was a longstanding, generational and iterative process that incrementally brought about the components that go into the iPhone. With the tools we have at hand and are now developing to greater levels of sophistication (3D printing, I’m looking at you), we have the potential to unleash vast amounts of creativity within our society. Innovation by definition is not something that one can make happen. It takes a lot of people doing work in various fields building upon the work of their predecessors. If one looks at apple today, we can see how the sun is sort setting on them as innovators. They can make a phone a little bigger or a little smaller. They can make a watch. But their innovative capacity seems to have plateaued for the time being.

Will there be a dull bureaucracy in the socialist future? I would be shocked if there wasn’t but it may- and probably will- take a much different shape than governmental bureaucracy as it appears under capitalism. We may find that even bureaucrats have incredible capacities for creativity if society is organized towards the goals of human flourishing and taking care of those who need it.

What may not happen is the

YourPalGarrett said...

This is ‘Unknown’ from above. I forgot to use a name.

I'd also like to briefly add that it seems plausible that the innovative phases in both Apple and Microsoft have waned largely because they found their market. Their initial innovations and their success in the marketplace have essentially telegraphed to them what products they into perpetuate and attempt to improve. The market no longer says to them, ‘Make something new, interesting and useful’ but, rather, it says, ‘Hey! Keep making that thing that we find useful.’ I’m willing to bet fifty bucks that the same thing happens to Google within the next twenty years.

If the affiliation of people now organized under the name of Apple Co. were allowed to invent an iPad and then move on to the next thing without market pressures, I wonder what they could produce.

David Palmeter said...

What I wonder about government ownership of the means of production is very close to what Tom Cathcart wonders, though I’m more cynical about it. If government owns the means of production, then the decisions concerning them will be made by politicians, whose primary interest is their own re-election and whose secondary interest, therefore, is in protecting their constituents and their jobs from any threat.

As an example, upstate New York, when I was growing up in mid-century, was peppered with typewriter manufacturers—Remington Rand, Royal, Underwood, L.C. Smith-Corona as well as IBM. After World War II, when production of typewriters resumed, IBM immediately jumped in with an electric and the others struggled to compete. They never caught up to IBM, but the personal computer did. Now typewriters are a thing of the past, including IBM’s.

This has caused a lot of pain in the communities (including my home town) where typewriters were made. But today we have computers—and are able to enjoy such things as this blog. Would anyone want to go back to typewriters?

I don’t see how this could happen with government ownership of the means of production. Government would have to OK the development of products that threaten the livelihoods of many people and many communities. I don’t think that would happen. The politicians would never allow it any more than they allow doing away with farm price supports that were enacted in the 1930s to aid small impoverished farmers.

The phenomenon occurs in the private sector as well. You may remember that, in the days before flat screen TV, the Sony Trinitron was the highest rated cathode ray tube. But Sony isn’t much, if it’s anything, in the flat screen TV industry today. I was told that this is because, within the company, the division that produced the Trinitron was powerful enough to block efforts of others in the company to develop a flat screen product. What they couldn’t do was prevent others from doing so. That kind of competition doesn’t seem possible to me with government ownership.

Andrew Lionel Blais said...

Who invented the cell phone?

s. wallerstein said...

How much of the high tech innovation really is innovation which contributes to human flourishing and how much is marketing?

Do we need a new even smarter, more rebellious, more creative, more authentically-you smart phone every 6 months, which means the old less authentically-you smart phones go to pollute the planet with more plastics?

Wouldn't that money, high IQ and creative energy be better utilized to find a cure for cancer, to find effective treatments for depression, to make sure that everyone in Africa gets vaccinated and has clean drinking water?

That is, a socialist society may be less fascinated with innovation for the sake of innovation, but it would have, I hope, a set of priorities which contribute more to human flourishing. If not, humanity is irremediably fucked, which may be the case.

Helen Bogda said...
This comment has been removed by the author.
DML said...

I just recently read your essay, and I have to say I found the first half (in which you discuss accounting) very intriguing and even hopeful. The second half (the "why aren't we having fun yet?" part) ended the essay on a very depressing note. You seem to be saying that the mechanisms for a socialist future have indeed been born though the structure of the capitalist corporation, but people are unable to shed their nationalism (and other -isms) to an extent Marx could not anticipate, therefore the class based solidarity to do something with these techniques is very unlikely. An initially hopeful read that took a quick depressing turn! Am I missing something? Do you still hold this view?

Robert Paul Wolff said...

I agree that it was a depressing conclusion. It is hard to look at the world today as it is and feel hopeful that real working class solidarity will develop. But my aim was to answer the question, Why have things not turned out as Marx anticipated? I am a naturally optimistic person, and I would be delighted to be shown wrong.

Anonymous said...

In the interview linked below, Chomsky claims that most of the consumer technologies claimed by capitalist 'innovators' were made possible through government funded research.