Political and economic thinking is currently dominated by neoliberal economic ideology and, in the mature capitalist societies, socialism as a counter ideology has weakened in the public consciousness. Market socialism, which blends public ownership with a market economy, is a practical political course involving a gradual reversion to public ownership, mutualisation and indicative planning. While market socialism has flaws, it is a step away from neoliberal policy and a movement towards social-democracy, writes David Lane.
‘We cannot rebuild this economy on the same pile of sand’. So said President Obama in surveying the effects of the global crisis in the USA on 29 April 2009. The extent of economic dislocation was overwhelming. The capital equity loss of US banks was 3.6 trillion dollars. Unemployment shot up and many people have been pushed into poverty. But Obama’s electioneering slogan: ‘Yes we can’ has yet to be realized. Under the sand was a concrete pillar of neoliberalism. None of the tenets underlying neoliberalism has been undermined. Incumbent Leftist politicians (such as Gordon Brown, Barack Obama, Ed Miliband) have sought to correct the economic mechanism rather than to challenge the economic and political basis of neoliberalism.
However, markets repeatedly create situations of financial failure (which reward financial executives and penalize tax payers) and economic breakdown (with respect to growth, equality, employment). Electoral democracy generates the same kinds of economic and political leaders.
Resistance to Change
The reason that neoliberalism has proven so resistant to change is because it infuses not only the financial sector, but also electoral politics, academia (especially economics) and media. These mould the public outlook. The globalisation of capital weakens the nation state thus limiting the electoral system as a vehicle of change.
Outside the ruling political classes, the Left has been particularly reticent to articulate an alternative. Many have recognized the public’s aversion to socialism and the weakness of the socialist movement consequent on the decline in the trade union movement and the disappearance of the traditional working class. Consequently, ideas of market socialism have been put to one side. Whereas the Right, in the form of the Front National in France, the Tea Party in USA and even UKIP, has more radical approaches and growing support and political influence. Extra political movements (‘Occupy Wall St’) vent their anger but lack a coherent alternative.
In conjunction with current austerity policies and growing unemployment, now may be the time for a revival of market socialist ideas. While such proposals have drawbacks, they also have some merits.
The Market Socialist Idea
The key idea, according to British political scientists such as Julian Le Grand and David Miller, is that market socialism retains the market mechanism while socializing the ownership of capital. The thrust of this social-democratic approach is that markets not only promote efficiency but also freedom and democracy thus giving wide political appeal.
‘Social ownership’ can take many forms. Cooperative ownership is highly favoured. Employees do not own their machines or enterprises, which would be regarded as a form of employee capitalism. In many versions, enterprises have the rights to use and draw income from their assets, whereas investment agencies own the capital and take strategic management decisions. But each enterprise has a democratic form, and employees’ control is one of them.
A consequence of a market socialist policy is that companies which fail the public and are clearly lacking in public responsibility would be socialized. Currently, the banking, energy industries and rail transport would be prime candidates. Economic policies could be carried out within the capitalist framework to restore growth and employment. It would allow forms of indicative planning to be introduced which would further enhance public control.
Preserving the Market
While socializing property, policy would preserve much of the appeal of market capitalism and diminish the perceived flaws of socialism. As the socialist ethic is thinly spread, the proposal has an advantage in maintaining the current market linkages of productive enterprises. It has the benefit of applicability in societies in which most of the media, academia and the public are hostile to socialism but positive to democracy. Such policy, when shown to be successful, could be extended to include other large corporate firms.
This line of reasoning has been developed by the American economist, James Yunker. He emphasizes the ways in which ‘pragmatic market socialism’ reduces inequality while concurrently preserving the current consumer culture. He recognizes that some capitalists, providing entrepreneurship roles in the present or the past, have a legitimate right to a profit as a reward for their effort. However, really large capital fortunes are a consequence of inheritance, as well as illegitimate rewards for speculation in financial capital markets. Such income is neither economically necessary nor is its receipt morally equitable.
His proposal is for the public ownership of all large, established business corporations. Whereas small and medium enterprises remain unchanged under private ownership. These include retail trade, family farms, professional partnership and entrepreneurial firms.
Profit maximization would remain the motivation of the business entrepreneur. Market competition would continue giving profits or incurring bankruptcy. The objective would be to achieve a greater degree of equality in the distribution of capital property. Capital property income is unearned, and its highly unequal distribution represents a ‘moral liability’. Such property would be ‘surrendered’ to public ownership. However, profits from genuine entrepreneurship and innovation continue and act as incentives. And income would carry on being used as people wished – luxurious and conspicuous lifestyles could continue.
The retention of many aspects of capitalism, concurrent with the introduction of socialized property and planning, is held to have more appeal to the public. Many then, such as politics lecturer Christopher Pierson, contend that market socialism’s feasibility outweighs the loss of the scope and purity of the socialist agenda. Socialization of the economy as well as public control could be introduced in a piecemeal fashion forming a hybrid system.
If seen as an end point, market socialism is open to significant criticism. Capitalist values of competition and the profit incentive are still in place and might defeat the socialist elements introduced by social ownership. Such policies, it might be conceded, are forms of democratic capitalism with socialist characteristics. Levels of inequality, even reflecting a positive contribution to the economy, would not be accepted by many on the Left.
Market socialists may be faulted for oversimplifying their proposals for a hybrid economic system. Autonomous enterprises seeking market efficiency require incentives and their success is measured in terms of profitability. This in turn, not only generates inequality but undermines socialist values. Market forces, even in the context of public ownership, would entail a level of economic anarchy and uncertainty. The rich would prosper at the cost of the poor. Competition promotes individualism which is psychologically positive for the winners but depresses the losers.
The market also has to be contextualized in the framework of a global capitalist economy which further complicates the installation of market socialism on a country basis. The nation state loses its coordinating economic powers. Transnational corporations, if confronted with nationalisation, would not meekly ‘surrender’ the ownership of their assets, even with compensation.
Market socialism has the advantage not only of strengthening democracy but also of moving in the direction of socialism within capitalist market societies. There would be positive achievements in terms of the allocation of capital and distribution of income. It has some appeal even to those skeptical of planning and state management. As a minimum programme, it would reverse financialisation and install public ownership over failing companies. Finally, it would extend the much valued social good of democracy in the form of cooperative and employees’ control.
Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.
David Lane has been Professor of Sociology at Birmingham University and is currently Emeritus Fellow of Emmanuel College, Cambridge University. His most recent work is The Capitalist Transformation of State Socialism: The making and breaking of state socialist society and what followed (Routledge 2013). He has written widely on socialism and post socialism, as well as on elites and classes. (photo of David Lane © Roeland Verhallen – www.roelandverhallen.com)
Neoliberalism today is as much a political as it is an economic ideology in the corridors of influential intelligentsia and polity. Given its internal contradictions and fatal flaws, an alternative to this deeply entrenched ideology, cannot, in my view, be predicated on its “appeal value” or credible resonance with the powers that be. We run the risk of reproducing the underlying philosophy with even worse consequences, both for the economy and any future possibilities of feasible socialism. The author’s motivation in attempting to provide a detailed sketch of a workable alternative is laudable. He does acknowledge the key shortcoming of moving to socialism within a capitalist framework i.e. potential sabotage, which is an Achilles heel.
More fundamentally, market socialism does not in my opinion alter the underlying nature of society i.e. society remains a market society and continues to subject nature (land), man (labour) and money to the perils of the marketplace, albeit with some restrictions. The key question remains unanswered – how can an alternative be evolved that does not require society to subject its organization to the economic motives of “fear of hunger” and “greed of gain”?. How can communities in their modern configuration take greater charge of their local destinies in a model in which harmonious “habitation” is restored in clear preference to destructive “progress”? Religion is passe. Can enlightened education take over?
What foundational texts would you recommend to understanding the history and basis of neolibralism?
Ayn Rand created objetivism ( the unknown ideal so to speak 🙂 and many neolibrals reference her works as some sort of confirmation ideology. To me her stuff reaks of conformity to some unnamed order she has concocted in her mind filled with metaphors as support.
The limits of prescriptive speculation around implementing new socioeconomic formations such as socialism( in any form ) will require a social revolution beyond ‘social networking’ or whatever these communication protocols over the internet are intended to produce beside profits. ( hello big brother!)
According to Lane in “The Socialist Industrial State : Towards a political sociology of state socialism” he defines society as ” a behavioural system having three components: A distinct set of central or dominant value and beliefs, a number of social institutions, and patterns of interactions between individuals and institutions.”
” Every society is held together more or less by a system of values. Such values define what is ‘sacred’ in the society : They define the allegiances which man *should have, they legitimize the distribution of power and justify the unequal division of wealth and status. The political rulers and the mass of the population are bound together by allegiances to these values, for no society is held together solely by force.
A society’s ideology or belief system attempts to legitimate its political system and routinise values into obedience by the population.
The value system also acts as a constraint on the political elites : It defines the terms within which the rulers operate and plays a part in formulating policy.”
Here of course Lane is discussing the Marxist approach to the legitimating ideology of state-socialist societies specifically China, Yugoslavia, and the former USSR.
I point this out as beliefs informing action create the build environment and social relationships we all share together.
That said, there will need to be a Great Abandoning of the Dominant ideological manufacturing centers ( take over ?) which requires a critical and creative basis in understanding how we got here and where we are going.
Organizing ourselves and forming alliances beyond ideas but into collective productive effort, from my experience has and can provide workers in the movement for a better Earth with the insights necessary for transcending outmoded thought forms into organizing an equitable world.
It will require that we each Slow Down, think, respond, and act on the plans we have made with greater discipline in our growing awareness.
the socialist calculation debate only matters with command economies, since this is describing market socialism then it will be controlled by the same means capitalism is controlled by, markets.
I am happy that David Lane has tried to reexamine the existing popular neo liberal ideas as well as Marxist so called left ideas to the present global markets phenomena and project some new ideas to befit liberty with equality in the national socio economic order.
You ideas on markets and ownership,management and control of public and private ownership assets and the role of state and individual requires critical analysis as to their feasibility and expediency with reference to the set goals of liberty and equality assured to the individual from state and society.
Your idea of market socialism as a combination of individual ownership with market competitive meritocracy as well as social ownership of àssets of irresponsible corporate entities along with public ownership public utilities like railways etc is as old an idea as the present welfare state in a mixed economy is being practised in many West European and other parts even including now the once communist Russia and China.
Your idea of market socialism perhaps mean the golden mean between individualism and socialism in their economic and political context.
But market by meaning right to free contract and duty of state to strictly enforce the contractual obligations with none of its social objectives interfering and also mean the Adam Smith invisible hand social benefits.
market socialism should mean public management of individual ownership equitably distributed in corporate assets?
does it mean reversion of Marx and Adamsmith upside down?
Take Adam Smith. He believed on an analysis of up to that economic and rising political phenomena in the natural right and liberties of an individual including ownership and management with minimal role to state to maintain certain essential services to realise the natural liberties of individual in societies.
Marx by his time came to understand that free markets produce monopoly or oligopoly and it’s reflection in social and political powers controlling the state and society to the suppression and exploitation of dispossessed wage labor or prolitarian sections and this produce contradiction between market supply of goods and demand for consumption resulting economic crisis situations and that to overcome such eventualities the social revolutions will happen and he built his edifice on that premise to build his idealist structure public ownership and management to re establish the balanced growth with supply and demand.
It means he advocated public ownership as well as management in production and even consumption Under social planning ignoring the natural person and his proclivities.
We see the ideas of the contemporary times
Now we have arrived at different time period and the phenomena of technology driven globalised society of instatanous communication and transport networks obliteration in national boundaries.The once substantial national context is now to predominant global context in ideas and actions.
what are activities of individual,corporate and state governments roles inter se in relative terms?
Whether individual ownership and management in AdamSmith context or public ownership and management of Marx of 19/early 20th century in opposite directions and the basic ideas underlying such economic propositions needs review in the context of 21 St century political and economic reality.
It is in that context I welcome your search for ideas that that fits with and promotes the health legal order on global scale that protects individual liberty equality and property.
I came to conclusion that the globalisation with liberty equality and security to property to natural person could be secured with recognition as of right to separation of individual ownership from public management and appropriate global legal structures could be devised under Sovereign federal secular democratic UN with preserving individual and national/tribal identities and liberties.
The market socialism is an appropriate term for describing the conceptual idea of combination of invidual ownership with public management a golden mean of Adamsmith and Marx in this economic globalisation context.