The question of socialism is once more in the air. Paradoxical though it may seem, the setbacks suffered by various Socialist, Social Democratic and Communist parties in Western Europe have brought up the question of the feasibility of socialism in advanced capitalist countries. At the same time, the radical rethinking in contemporary socialist (centrally planned) economies—Hungary, China, Soviet Union—has given a boost to debate about the role of markets as against planning in running these economies. The resurgence of market-oriented/libertarian economic philosophy in Western countries and indeed worldwide has put many socialists on their analytical mettle. After lying dormant for nearly fifty years, market socialism has again become the object of analysis. In his famous book The Economics of Feasible Socialism, Alec Nove has tackled this issue in a vigorous way and not surprisingly it has generated controversy.footnote1 Our concern here is with Ernest Mandel’s response to Nove, particularly with his starting point (or maintained hypothesis, as it were) that ‘the laws of motion and inner contradictions of the capitalist mode
The reference to late capitalism notwithstanding, it is easy to show that Mandel is here repeating the assertion—commonplace ever since Engels’s Anti-Dühring—that the supersession of the market is prepared in the very womb of capitalism through the growth of the large production unit. At the limits of capitalist development, the economy resembles the single large factory and thus allocation by (indirect) exchange is suspended in favour of direct allocation within the economy/factory. While primarily held by Marxists, this view has recently also won favour among non-Marxist political economists. Not only can it be shown to have a continuous history in Marxist literature for the last hundred years and more, it can also be seen as a counterpart of another strand of Marxist socialist thinking since the days of the Second International. This is the idea that the economic working of precapitalist societies is transparent while that of capitalist ones is opaque. Political economy/economics is required to penetrate this opacity and to unmask the true nature of capitalist society. By projection, postcapitalist/socialist societies will regain transparency and economics will then become redundant.
In this essay we would like to argue that this perception of the tendencies within the capitalist economy has been harmful as a guide to thought and action by the socialist movement. The reason why it is harmful is that it is false. The view that as capitalist development proceeds, markets are bypassed in favour of direct conscious coordination is a misreading of economic history. It is a mechanical, linear view rather than a complex, dialectical one, and it relies upon the same naive dichotomization of plan and market that was exploited in the debate of the 1920s and 1930s. When seen in their proper relationship, these two concepts are not simply opposed to each other in a static way but interact in a dynamic dialectical fashion. By grasping this dialectical relationship, we improve our understanding both of capitalist development and of the possibility of viable transitions to socialism.
Some definitions and clarifications are in order at the outset if we are to avoid tedious debates. Planning is possible at various levels: within the household, within a private or a public corporation, in armies or bureaucracies, etc. In taking up the issue of planning versus the market, we are not dealing exclusively with macroeconomic planning at the level of the entire economy, and indeed we shall pay some critical attention to the tendency to blur the borders between corporate and macroeconomic planning.
Planning even in a macroeconomic sense is not synonymous with
Mandel appositely roots his doctrine in the writings of Engels, for whom socialism is ‘one big factory’ in which conscious co-ordination—‘planning’ as it exists in the factory—replaces the law of value and the rule of the marketplace: ‘Production has [now] become a social act. Exchange and appropriation continue to be individual acts . . . [We see the] partial recognition of the social character of the productive forces forced upon the capitalists themselves [with the] taking over of the great institutions for production and communication, first by the jointstock companies, later by trusts, then by the State. The bourgeoisie demonstrates itself to be a superfluous class. All its social functions are now performed by salaried employees . . . The proletariat seizes the public power . . . By means of this act, the proletariat frees the means of production from the character of capital they have thus far borne, and gives their socialized character complete freedom to work itself out. Socialized production upon a predetermined plan becomes henceforth possible.’footnote4 We thus find in Engels the elements of the doctrine: the emergence of giant firms under capitalism has already replaced market coordination with a form of planning, albeit with the contradictions of its association with private ownership of the means of production. The transition to socialism ‘out of the womb’ of this advanced form of capitalism would therefore be unproblematic, and indeed a logical development.
It may be worthwhile to mention, if only for doctrinal completeness, that Engels’s view was not necessarily the same as Marx’s. In one way the analogy between the economy and the factory could be said to have begun with Adam Smith, who extended the intra-firm division of labour (the pin factory) to an inter-firm division throughout the economy. The difference between the two is taken to be a matter of degree and scale. Marx, on the other hand, made a qualitative distinction between intra-firm and economy-wide divisions of labour, his criterion being the absence or presence of commodity exchange. Under capitalism the social division of labour is mediated by commodities, while the technical division of labour within the factory is not so mediated.footnote5 This sharp