Essay: Social circumstance economics

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  • Social circumstance economics
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Living after the End of History, in which there is “no alternative” to neoliberal capitalism, defending any form of planned economic relations is seen as harmlessly anachronistic at best or outright malevolent at worst. After all, the decay and final implosion of the Eastern Bloc regimes seemed to confirm once and for all the moral and economic superiority of the market. The failure of Stalinist-style planning forced many of those remaining on the Left to reconsider whether market economics might in fact have a place in their visions of a post-capitalist world. Emerging from this ideological scuffle is G.A. Cohen’s “Why Not Socialism?” a text adamantly asserting the necessity of a specifically market socialist economy. While Cohen himself admits that “market socialism does not fully satisfy socialist standards of distributive justice,” he believes that, for the foreseeable future, it is the most feasible and desirable form of socialist government (Cohen 429). This is because an alternative, planned form of economic relations would lead to failures reminiscent of the Soviet Union’s. In the following work, having given an account of the socialist conception of distributive justice, I will confirm Cohen’s assertion that any market-based system of economic relations is necessarily unjust. I will go on to propose that, since there are shortcomings in the theory of market socialism that he does not consider, it may not be as easy to dismiss planning as Cohen makes it seem.
Cohen identifies two principles that must be realized in any socialist society—the egalitarian principle, and the principle of community.
The egalitarian principle rises from a foundation of socialist equality of opportunity. This Cohen defines as the removal of “obstacles to opportunity from which some people suffer and others don’t.” (Cohen 418) So, what socialists demand is not equality of resources, but equality of access to resources. The superficial similarity to what Cohen terms bourgeois equality of opportunity is deceiving. Even imagining all discrimination (sexual, racial, etc.) abolished in some hypothetical bourgeois democracy, there would remain innate differences and social circumstances that would impede their owners’ access to resources. A timely example of the latter is the unfair advantage A, the child of an investment banker, has over B, the child of a farm laborer, in financing their higher education. A, by grace of their heritage, has access to wealth B does not, which they can use to finance their education. For B to finance their education, they must work in addition to studying, dividing their time and attention in such a way as to practically guarantee worse academic performance. Thus, B is impeded in the pursuit of knowledge in a way A is not.
Social circumstances such as these can be surmounted under a welfare state, in conditions of what Cohen calls left-liberal equality of opportunity. Perhaps in this more humane state B has access to social programs which help them to finance their education, thereby surmounting this particular disparity in opportunity between themselves and A. We can perhaps even conceive of a more radical welfare state where all such social circumstances are corrected for.
Even then, though, there would remain innate differences between A and B that would guarantee that between them, there could be no genuine equality of opportunity. This final obstacle can only be overcome under socialist equality of opportunity, which “seeks to correct for all unchosen disadvantages, disadvantages, that is, for which the agent cannot herself reasonably be held responsible, whether they be disadvantages that reflect social misfortune or disadvantages that reflect nothing but difference of taste and choice, not differences in natural and social capacities and powers.” (Cohen 419)

Under socialist equality of opportunity, any difference in the outcome A’s and B’s academic careers would have resulted only from their choices. Any unchosen difference, here or elsewhere in life, is unjust, as there is no reasonable metric according to which one might be held accountable for it.
In principle, a society upholding the egalitarian principle alone would nevertheless be susceptible to significant inequalities. By virtue of their choices alone, someone might accumulate a great deal more wealth than others. Those people who did not choose to accumulate a similar amount of wealth may have done so out of a conscious desire not to have as much, but also may have done so out of ill-informed or “regrettable” choices. The person with less wealth may have also made a decision meant to bring some degree of wealth, but, due to bad luck, may have not reaped the expected benefits. These outcomes are examples of what Cohen calls the inequality of aggregate benefit.
To surmount inequality of aggregate benefit, a socialist society must subscribe to the principle of community. Orwell, during the height of the Blitz, wrote that “the lady in the Rolls-Royce car is more damaging to morale than a fleet of [Luftwaffe chief Hermann] Göring’s bombing planes.” (Orwell 90) More damaging to solidarity than material destitution itself is when a small group of people are permitted to have far more wealth than others. If I struggle to find something to eat, then it is difficult for me to feel solidarity with a fellow human being who has a great surplus of wealth that allows them to surmount the problem of hunger. If the communal spirit that is essential to socialism is to be maintained, then corrective measures must be in place to ensure mitigation of the inequality of aggregate benefit.
Cohen has two substantive objections to the market economy, which, owing to the brevity of the text, he does not fully develop. He notes that a market economy must be necessarily be possessed of the “moral shabbiness” of the profit motive itself. I think the substance of this thesis is clear and inarguable, even for supporters of laissez faire capitalism. So, I shall direct my attention to Cohen’s other assertion, that any market economy must contain some degree of distributive injustice. I will show with a level of detail absent in Cohen’s text that inequality of aggregate benefit, though it might be corrected for by state policy, cannot necessarily be avoided under market relations.
Let us first give a very brief sketch of what Cohen’s market socialism looks like in practice. We can best imagine it as a set of capitalist relations, plus an extensive welfare state, minus the capitalist class itself. Workers, rather than capitalists, own firms, which “confront one another, and consumers, in market-competitive fashion.” (Cohen 428) In this way, Cohen claims, the efficiency of the market is retained, while its most grotesque inequalities are ironed out, because there are no longer any capitalist exploiters. Surplus value is instead directed toward public good. The egalitarian principle may very well be maintained organically in such a society. However, the principle of community must be continually enforced from above, as its violation is endemic to a market, even one as humane as the one Cohen describes.
Inequality of aggregate benefit comes about as a result of ill-informed decisions or bad luck. Say, under market socialist relations, a worker-owned whiskey distillery, based on inaccurate data showing higher-than-actual market demand for fine Kentucky bourbon, democratically decides to produce 2,000 barrels of spirit rather than their normal 1,500 this year. When the time comes to put this whiskey on the market, the firm finds that, in fact, demand was such that they only sell 500 barrels’ worth. Unable to make good their lost profits, the firm goes out of business. They are victims of their ill-informed choice, in such a way that is an affront to the principle of community (to say nothing of the wasted whiskey).
Continuing along with our unfortunate distillery—say, unbeknownst to the workers, the glass used for bottling contains radioactive uranium. Their whiskey, naturally, is quickly pulled from the market. Unable to make good their lost profits, the firm goes out of business. Here, they are victims of bad luck, and have been penalized in such a way that is also inconsistent with the principle of community.
In both instances, factors other than the informed choices of the workers led to unjust results. These injustices are conceivable under any set of market relations. Under market socialism, at least, the firm’s damages in both instances will presumably be covered by the state. However, the state must be prepared also to do this for all firms victimized by ill-informed choice or bad luck, which seems quite wasteful for such a supposedly efficient set of relations.
Cohen acknowledges the inherent injustice of the market. Why, then, does he nonetheless advocate for it? Why does he dismiss out of hand the alternative, namely, a planned economy, in which the principle of community might be organically preserved? He does not give a substantial critique of planned economic relations, but it is a simple matter to infer the substance of his concerns about the “infirmities of comprehensive planning.” (Cohen 427) All one need do is examine the results of all experiments in planning hitherto. Every planned economy has suffered serious problems of efficiency and distribution. Every planned economy—including, as of 2017, North Korea (!)—has seen fit to institute market reforms upon sufficient development of the forces of production. Every planned economy has generated a bloated and corrupt bureaucracy of planners and administrators. Every planned economy has suffered a crippling lack of innovation in its products and methods of production. The disastrous record of planned economic relations seems to condemn the idea to the dustbin of history.
Yet, while we must condemn in the strongest possible terms the horrendous human toll of Stalinism (the only “actually existing” school of planned economic relations), we must also acknowledge its undeniable achievements, and question whether one is necessarily connected to the other. Let us limit ourselves to the Soviet Union. Here are some facts—at the time of the Bolshevik seizure of power, Russia was the most backward state in Europe, in the midst of a massively destructive war with Germany and Austria-Hungary. After fervently hoped-for material and moral support in the form of a general European revolution failed to materialize, the newborn Soviet Union faced a vicious military incursion by the combined forces of the White counterrevolutionaries and capitalist powers. This it only barely survived, and at the cost of decimated political democracy, famine, and the collapse of what industry existed in Russia. From hereafter, the Soviet Union would face unrelenting hostility from the rest of the world, as well as from its own leadership, being subjected to vicious repression from above. Eventually, it would bear the brunt of fascist aggression during the Second World War. In the face of all this, the Soviet Union, an enormous, initially semi-feudal country, not only built an economy which fed, clothed, housed, and educated its citizenry, but produced a first-class military-technological bastion that would rival that of the United States in a struggle for world mastery.
Obviously, none of this stopped the Soviet Union from succumbing to every one of the shortcomings mentioned earlier. In illustrating what was achieved in such unfavorable conditions, all I hope to do is to question our instinctive total condemnation of planned economies, and in the process, instill a consideration in the reader’s mind of what might have been. What if the German Revolution had been a success and the Bolsheviks had a vast industrial base upon which to draw? What if the ferocity of the capitalist military-economic siege had not compelled police state measures? With a question of this scale it is impossible to say with certainty. But while Stalinism might well have developed anyway due to the arguably latent authoritarianism of Leninist organizational principles (another question entirely), the failure of a planned economy seems a much less likely prospect given more favorable conditions. These tentative assertions doubtlessly do not constitute a serious case, and it is far beyond the scope of this work to make one. But I would like to suggest that an attempt at resurrecting planned relations along these lines may be desirable, given some serious flaws in the theory market socialism that go beyond questions of distributive justice.
It may be argued that I have overlooked the nature of Cohen’s qualified support for market socialism. At the end of his piece, he writes that “Every market, even a socialist market, is a system of predation. Our attempt to get beyond predation has thus far failed. I do not think the right conclusion is to give up.” (Cohen 430) Cohen advocates market socialism as a kind of stopgap measure for the transitional period from capitalism to a market-less socialism. It is thus conceivable that he would share every concern I have thus far raised about market socialism. But, in the remaining portion of this work, I will show that, even in this role as a sort of bridge between one mode of production to another, market socialism is deeply flawed, perhaps terminally so. The marriage of the market and “socialism” is meant to bring about the best of both worlds. Yet, like perhaps most marriages, it rests upon illusions.
If capitalism is seen ahistorically, that is, as an accidental collection of qualities—a market, a capitalist class, an exploited proletariat—then it seems a simple matter to graft that which is desirable from it onto socialism. Market socialists seek to extract the market from capitalism, insert it into their hypothetical society, and in so doing humanize it. If capitalism is seen for what it is—a cohesive system which developed organically as a result of definite historical forces—it becomes more problematic to think of it as a sort of buffet of options for socialists. Let us work out some likely consequences of this sort of thinking.
Under market socialism, there would exist both private firms competing in a market setting and a public, interventionist state. It is a simple matter to imagine such arrangements producing the worst aspects of both market and planned economies. The state, constantly interfering with the market to fulfill the principle of community, becomes bloated and corrupt, intervening more or less strongly on the basis of which firm is able to shell out the biggest bribes. The private sector, being guaranteed reimbursement by the state in the event of failure, lacks any incentive for competition or innovation. We might imagine independent watchdog agencies or communal decision-making councils mitigating these failures. But these agencies and councils would reintroduce to market socialism the very inefficiency and tedium it intended to leave out. (“The problem with socialism,” Oscar Wilde supposedly said, “is that it takes too many evenings.”)
The malignant growth of bureaucracy is not restrained to the public sector, for market economies also necessitate their creation in the private sphere. With the possible exception of early peasant agriculture, there has never for long existed a market consisting of a large number of small competing firms. The tendency toward monopolies, toward the absence of competition, toward massive, unaccountable corporate bureaucracies, has been universal in market economies. Far from maintaining a set of small, lithe firms responsible to consumers, markets tend to generate huge corporations severed from all semblance of accountability. The notion that only a planned economy will generate bureaucracy, while a market keeps bureaucracy to a minimum, is simply ahistorical. The market socialist might respond that public intervention would keep up competition in the private sphere. But this overlooks the point made in the previous paragraph, where I argued that a continually interventionist public sector would generate bureaucracy there. It seems that a market socialist must choose between a more or less regulated market based on the strength of their communal principles, but either route must lead to swollen bureaucratic machinery somewhere, be it in the private or public sector.
These faults hobble market socialism, but do not necessarily mean it is completely unworkable as a model. I will conclude with a case study of sorts, through which I will advance a stronger claim—that markets and socialism are ultimately incompatible, and that the former must consume the latter, or else both must face ruin in the form of economic destitution. Given my limited space, I shall be limited to broad strokes. But the picture I paint ought to be clear enough. Of late, there has been much talk on the left wing of the Democratic Party—most prominently by Senator Bernie Sanders—about the example set by the Scandinavian social democracies. There is good reason for this. Scandinavia has relatively high income equality, robust welfare states, powerful unions, and low unemployment rates. Its states have come the closest to realizing market socialism in practice. While there remains a capitalist class, albeit one limited in power, the innovation and (relative) efficiency of the free market has here been tied to robust, democratic institutions of government, all for the benefit of common people. What is too often overlooked, though, is that much of what made these states humane places to live is being consciously and systematically dismantled for the sake of market interests. Emulating Blair’s New Labour and Clinton’s New Democrats, every single one of the Scandinavian Social Democratic parties (particularly that of Finland) are lurching ever rightward, acquiescing to, and sometimes actively implementing, austerity measures and privatization (Honkapohja). These policies have been successful in raising GDP growth rates since the stagnation of the late 1980s and early 1990s (see Figure 1). However, since 1990, income inequality in these countries has been growing, albeit erratically (see Figure 2). While austerity measures and their ruinous social consequences are hardly unique to Scandinavia, it is ominously notable that their implementation was successful even in the face of the relative humanity and egalitarianism of the vaunted Nordic Model.
Scandinavia is a case study in how market needs win out over those of people, even in the highly developed and democratic conditions of European social democracy. These countries tried valiantly to tame the market and bring it to heel for the interests of their people. Now, the forces of the market are exacting their revenge. Markets are driven by parties whose interest lies not necessarily in the fulfillment of human needs, but in the accumulation of capital. If the driving force of economic relations is not human need, but increasing economic growth, then it is perfectly sensible to sacrifice social programs and worker protection for increased profit. Indeed, it is actively harmful to economic development not to do so. A market, however well regulated, stagnates without growth. It must inevitably run up against those sectors of the economy that are yet to be privatized, and exert its full power to open those sectors to its incursion. Where a market is not allowed to grow, there stagnation and eventual crisis must follow. Eventually, to ensure continued growth, what public services that do exist must be rolled back. The “socialism” of market socialism must be consumed by its “market,” or else both must face common ruin under economic crisis. It is irrelevant that there would be no capitalist class to directly demand further capital accumulation under market socialism, for the entire edifice would implode if the driving force of the market were not satiated. Where an economic base driven by continued growth is in conflict with social-political accoutrements professing commitment to human needs, we ought not to be surprised when the drives of the former trump those of the latter. Likewise, we ought not to be deceived by the claims of any economic system driven by markets to “socialism,” regardless of its intentions.
It appears that, beyond the questions of distributive justice addressed by Cohen, market socialism contains within it tensions that would, at minimum, lead to economic stagnation and suffocation of political democracy by bureaucracy. In the worst case, the natural demand of the market for continued growth might well lead to the disassembly of socialism. For this reason, it is advisable that the left reconsider its increasing acceptance of the market in its political programs.

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