Originally published at: » The Case Against Markets
Originally published on 22 Sept 2012. Robin Hahnel speaking at University of Helsinki (11th September, 2012) about some of the structural problems of market systems. The talk was organized by Parecon Finland.
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Nothing has divided socialists more over the past three decades than what role we believe there is for markets in a truly desirable or “socialist” economy.
The debate did not start in 1990 with the demise of the centrally planned economies, first in Eastern Europe and soon after in the Soviet Union as well. Oskar Lange and Abba Lerner advocated for a version of market socialism as early as the 1930s. And in 1950 Tito broke with Stalin, and Yugoslavia dismantled the system of central planning it had copied from the Soviet Union to launch the first real world experiment in a version of what they called “worker self-managed” market socialism,… which in truth functioned remarkably well in some ways for over two decades. In several other Eastern European countries attempts at “market reforms” were launched during the 1950s, 1960s, 1970s, and 1980s, only to be abandoned at the insistence of Moscow. And in the Soviet Union the “Lieberman” reforms which were shut down by Brezhnev, were followed by a last ditch effort called “Glasnost” under Gorbachev.
But since 1990 the overwhelming sentiment among self-described socialists everywhere has favored some role for markets in a post-capitalist economy, and a number of different variants of “market socialism” are now part of the literature.
Advocates for “a participatory economy” have long spoken out against this trend. We argued instead that early socialists had been correct to champion not only replacing private ownership with social ownership of the means of production, but also replacing markets with democratic economic planning by the “associated producers.” In an attempt to sharpen the debate I even took to labeling myself a “market abolitionist.” And the “model” of a participatory economy was initially proposed as a better way than marketization to breathe democracy and self-management into socialist economies.
That debate over markets continues among socialists today. As we all fight to ameliorate the various ills and crises caused by neoliberal capitalism, as we all assure the victims of capitalism that a better economic system is possible; we continue to debate among ourselves what that better system looks like. Is it a market system? Or is it a qualitatively different, and far better system of participatory, democratic, economic planning than the authoritarian planning systems used by a number of countries during the twentieth century?
This talk I gave in Helsinki almost a decade ago outlines all the reasons socialists should hope there is a way to make economic planning democratic, participatory, efficient, and practical, because the truth is that markets are incompatible with socialist goals. This talk outlines all the reasons socialists should resist the temptation to minimize and underestimate the problems markets create, and why socialists should not succumb to the temptation to pretend that markets are harmless when “tamed,” and embrace markets as a practical necessity.
Unfortunately, the debate among socialists about markets is far from resolved, and therefore must continue. Hopefully this forum can contribute to a healthy debate about markets and socialism. No doubt many such healthy debates will be needed before socialists can present a more united front, and better answer to those who ask us: If not capitalism, what do you propose to put in its place?
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This is a great talk. In the talk there’s some research cited that shows how badly the market misprices things like coal energy. I’m curious if there’s been any research that looks into how many markets have uncompetitive structures?
Most people seem concerned with monopolies, but I can think of a ton of industries that look oligopolistic. I wouldn’t be surprised if most markets are dominated by a handful of people.
In what ways did the Yugoslavian market Socialism experiment function well and in what ways did it not? I can’t find much info about it online.
Back when there WAS a Yugoslavia there was actually a large literature examining economic performance in what was the world’s first… and to date only… experiment in a market socialist economic system.
Because in many ways economic performance was rather impressive, anti-socialist governments, politicians, and economists mostly ignored the literature. But from 1950 through the mid-1960s the only country where GDP per capita rose faster than it did in Japan during Japan’s “economic miracle” after WWII, was Yugoslavia. After the mid-1960s growth of GDP per capita slowed. The major problem areas were:
- Income inequality between regions increased dramatically.
- Pay differentials between skilled an unskilled workers increased dramatically.
- Participation in enterprise management declined as ordinary workers participated less and less leaving managers to make more and more decisions.
- Unemployment was high, and as a result many Yugoslavian workers migrated temporarily to become “guest” workers in capitalist economies in Western Europe, earning a nest egg working abroad for 5 years or so, to bring back home with them to use to create small businesses back in Yugoslavia where any business with fewer than 5 non-family member employees was exempt from the law of worker self-management giving every worker an equal vote and share in profits.
- Together with Nasser (Egypt) and Nehru (India), Tito (Yugoslavia) founded an alliance of non-aligned nations who refused to ally with either the US or the USSR in the Cold War, This didn’t work very well, and Yugoslavia in particular was the object of political and economic discrimination by both the US and the “West,” and the Soviet Union and the “east.” The international isolation and discrimination from both “camps” had a negative effect on the economy and quality of life in Yugoslavia.
The break up of Yugoslavia in the 1980s and 1990s had little to do with its economic system. Traditional regional and ethnic conflicts reemerged leading to civil war and ethnic cleansing. After which none of the regions which became independent countries retained the market socialist system of “worker self-management.”
Two who contributed to the literature on Yugoslavian market socialism and its performance are Branko Horvat (Croatian) and Howard Wachtel (an American radical economist who wrote his thesis on the Yugoslavian economy in the 1950s and 1960s, and was also a dissertation advisor of mine when I was a graduate student at American University in the early 1970s.) Both Horvat and Wachtel published books discussing the virtues as well as the weaknesses of the Yugoslavian market socialist system and its early performance.