Market socialism
Market socialism is a type of economic system involving social ownership of the means of production within the framework of a market economy. Various models for such a system exist, usually involving cooperative enterprises and sometimes a mix that includes public or private enterprises.[1][2] In contrast to the majority of historic socialist economies, which have substituted the market mechanism for some form of economic planning, market socialists wish to retain the use of supply and demand signals to guide the allocation of capital goods and the means of production.[3][4][5] Under such a system, depending on whether socially owned firms are state-owned or operated as worker cooperatives, profits may variously be used to directly remunerate employees, accrue to society at large as the source of public finance, or be distributed amongst the population in a social dividend.[6]
Not to be confused with Social market economy.
Market socialism can be distinguished from the concept of the mixed economy because most models of market socialism propose complete and self-regulating systems, unlike the mixed economy.[7] While social democracy aims to achieve greater economic stability and equality through policy measures such as taxes, subsidies, and social welfare programs, market socialism aims to achieve similar goals through changing patterns of enterprise ownership and management.[8]
Though the term "market socialism" only emerged in the 1920s during the socialist calculation debate,[9] a number of pre-Marx socialists, including the Ricardian socialist economists and mutualist philosophers, conceived of socialism as a natural development of the market principles of classical economics, and proposed the creation of co-operative enterprises to compete in a free-market economy. The aim of such proposals was to eliminate exploitation by allowing individuals to receive the full product of their labor, while removing the market-distorting effects of concentrating ownership and wealth in the hands of a small class of private property owners.[10]
Although sometimes described as "market socialism",[11] the Lange model is a form of market simulated planning where a central planning board allocates investment and capital goods by simulating factor market transactions, while markets allocate labor and consumer goods. The system was devised by socialist economists who believed that a socialist economy could neither function on the basis of calculation in natural units nor through solving a system of simultaneous equations for economic coordination.[12][9]
Real-world attempts to create market socialist economies have only partially implemented the measures envisioned by its theorists, but the term has sometimes been used to describe the results of various attempts at liberalization in the Eastern Bloc including Hungary's New Economic Mechanism, the economy of Yugoslavia, Perestroika, and the economic reforms of China as well as Lenin's New Economic Policy.[13]
Theoretical history[edit]
Classical economics[edit]
The key theoretical basis for market socialism is the negation of the underlying expropriation of surplus value present in other modes of production. Socialist theories that favored the market date back to the Ricardian socialists and anarchist economists, who advocated a free market combined with public ownership or mutual ownership of the means of production.
Proponents of early market socialism include the Ricardian socialist economists, the classical liberal philosopher John Stuart Mill and the anarchist philosopher Pierre-Joseph Proudhon. These models of socialism entailed perfecting or improving the market mechanism and free price system by removing distortions caused by exploitation, private property and alienated labor.
This form of market socialism has been termed free-market socialism because it does not involve planners.[14][15]
In practice[edit]
A number of market socialist elements have existed in various economies. The economy of the former Socialist Federal Republic of Yugoslavia is widely considered to have been a form of market-based socialism, based on socially-owned cooperatives, workers' self-management, and market allocation of capital.[52] Some of the economic reforms introduced during the Prague Spring by Alexander Dubček, the leader of Czechoslovakia, included elements of market socialism.[53]
Likewise, Vietnam's socialist-oriented market economy is self-described as market socialist. It has an extremely high prevalence of cooperatives, especially in agriculture and retail, with the continued state ownership of the commanding heights of the economy.[54] Cooperative businesses in Vietnam are also incentivized and supported by the government, receiving many benefits that private companies do not.[55]
Peter Drucker described the United States system of regulated pension funds providing capital to financial markets as "pension fund socialism".[56] William H. Simon characterized pension fund socialism as "a form of market socialism", concluding that it was promising but perhaps with prospects more limited than those envisioned by its enthusiasts.[57]
The economy of Cuba under the rule of Raúl Castro has been described as attempting market socialist reforms.[58] Similarly, the economy of Libya under Muammar Gaddafi could be described as a form of market socialism as Muammar Gaddafi's Third International Theory shared many similarities with Yugoslav self-management.[59][60]
Policies similar to the market socialist proposal of a social dividend and basic income scheme have been implemented on the basis of public ownership of natural resources in Alaska (Alaska Permanent Fund) and in Norway (the Government Pension Fund of Norway).[48]
Criticism[edit]
Market abolitionists such as David McNally argue in the Marxist tradition that the logic of the market inherently produces inequitable outcomes and leads to unequal exchanges, arguing that Adam Smith's moral intent and moral philosophy espousing equal exchange was undermined by the practice of the free market he championed—the development of the market economy involved coercion, exploitation and violence that Smith's moral philosophy could not countenance. McNally criticizes market socialists for believing in the possibility of fair markets based on equal exchanges to be achieved by purging parasitical elements from the market economy such as private ownership of the means of production, arguing that market socialism is an oxymoron when socialism is defined as an end to wage labour.[120]
