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Towards a New Socialism

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One hundred years after the death of Marx, Jon Elster's survey article, "What is Living and What is Dead in Marxism?" placed the labor theory of value unambiguously in the "dead" column. By 1991 world events and the trend among left-leaning economists toward "market socialism" signaled that the idea of centralized economic planning was moribund as well.

In this context it is surprising that in 1993 a serious book advocating both economic planning and the substitution of time and labor vouchers for prices and money could have appeared at all. But Towards a New Socialism, which was co-written by an economist and a computer scientist, contains many novel arguments that together constitute an original and serious contribution towards the solution of the economic calculation problem.

The core of Cockshott and Cottrell's argument runs as follows:

a) That it is possible to accurately calculate the amount of labor time it takes to produce goods and services (pp. 52-54 and 40-47)

b) That measurement in labor time can accurately reflect relative scarcities of inputs (raw materials, intermediate goods, etc.), eliminating the need for factor markets (pp. 48-53, 124-125 and 132-134), and

c) That it is now possible to use a combination of computers and modern mathematical techniques to work backwards from demand for consumer goods to a detailed central plan for the allocation of factors of production (pp. 55-60, 84-101 and 127-136).

In effect they argue that the "economic calculation" problem became tractable by the mid-1980s (explicitly on pp. 58 and 90).

In response to the old and obvious objection that the value of a thing is how much people want it and are willing to pay for it, not how much time you spent making it, they propose an ingenious system of selling consumer goods at market clearing "prices" (measured in state issued labor-time vouchers) and then using the ratio of the selling price to the cost of production (measured in labor-time) as a guide to whether to increase or decrease production (pp.118-126).

The rest of the book is an attempt to flesh out their main argument with a picture of how such an economy would work: how it would handle long-term macroeconomic planning, saving and investment, taxation, foreign trade, property rights, democratic participation, etc. The chapters on foreign trade and property rights are especially clever.

Though by and large an intellectually honest effort, C & C sometimes treat crucial, difficult issues in a perfunctory and overly optimistic manner. E.g.:

Pre-occupied as they are with the flow of economic information, they are comparatively uninterested in and dismissive of problems associated with the absence of incentives in a non-market, egalitarian society (explicitly so on pp. 134-136).

They also seem to not apprehend any great difficulties relating to innovation or entrepreneurship in a planned economy, despite historical precedent, and do not devote a chapter to it, though they do treat it tangentially on pp. 71-72 and 200-206.

They are similarly sanguine about the prospects for democracy in a planned economy. Though they acknowledge that, "Utopian experiments are strongly associated in the public mind with brutal dictatorships and suppression of civil liberties," (p.177), they do not address the possibility that economic centralization and political centralization go hand in hand. They seem to consider it a simple matter for planners to be kept responsible to the public through regular referendums on national economic policy (p. 186) and for bureaucracies to be held accountable by randomly selected oversight committees (188-190).

We are many who critizies capitalism, but what is the altewrnative? If socialism failed in the USSR why even try it? These are the questions answered by Cockshott/Cotrell. Their theory is not without flaws, but it certainly is something like this that we are all envision. Else, if capitalism rules another century we will all perish.

Cockshott and Cottrell's book, Towards a New Socialism, presents excellent analysis of the current problems associated with socialism and a socialist state, while simultaneously providing readers with a number of ideas on how to implement reforms or create a socialist state.

Cockshott and Cottrell's book is the sort of fantasy which could have been produced only inside a university department - or in this case, two universities, one in Scotland, the other in North Carolina. Are they perhaps C.I.A. operatives seeking to discredit Socialism? There may be workable planned Socialist economies, but the society described in this book isn't one of them.

What is new in this "New Socialism" are

i) the mathematical calculations for determing the cost of products in "labour hours" as opposed to dollars or euros

ii) the audacious proposal for a participative democracy via TV-linked voting boxes in each home

and

iii) some proposals for alleviating the environmental impact of economic developments.

They resurrect the old Socialist idea of abolishing money and replacing dollars, euros, etc by "labour vouchers" exchangeable only for products at state shops.

Sadly, any of the old restrictions and defects of existing Socialist societies are included, with more added, such as the very limited ability to accumulate even this Socialist currency and hence inciting even more extra-legal activity than the old Soviet Union saw.

The most startling novelty was C and C daring to contradict Marx on the issue of labour vouchers. Any heretical disagreement on the smallest point with Marx or Lenin in earlier decades would have been inconceivable. That is a measure of how much rethinking has been forced on Marxists by the visible failure of "actually existing Socialism", but the rethinking is still too limited and too hag-ridden by the patterns of earlier Socialisms.

One basic flaw is the obsession with EQUALITY. C and C go to extraordinary lengths to quantify every economic contribution in "hours of labour" because they regard that as a more natural method of measuring the value of goods and services, as opposed to visibly artificial money units such as dollars or francs. ALL workers should in principle receive one labour voucher for one hours work. Yet they are progressively forced into conceding unequal rewards to make the planned economy function at all. Though these rewards are less unequal than those in capitalist countries, the general impoverishment in Socialist countries might make any difference in wealth more visible and resented.

The forced and wholly phoney equality and the frustration of healthy entrepreneurial instincts will naturally encourage development of private economic activity and parallel trading systems, some overlapping with the planned economy, some separate. Some will be prosecuted by the state, some work in official or unofficial co-operation with state regulators who will doubtless take a slice of the action.

Also ignoring hugely unequal contributions which defy conventional measurement (such as innovating and leadership ability) and placing them on a par with mundane work forces more unreality onto this egalitarian reward until a "labour voucher" is as artificial as a pound or a euro.

A second basic flaw is permitting any interaction with external economies. If labour rewards and prices of goods are more favourable in countries to which the socialist country's citizens have access, you will immediately get flight of key workers and smuggling of imports, thus distorting economic planning out of recognition.

I suspect that few people will honestly understand C and C's mathematics (I certainly don't) and many will therefore hesitate to raise objections to their proposals. But in fact C and C's claim to have solved Hayek's "calculation objection", even if true, is largely irrelevant to supporting the plausibility or desirability of a planned economy. Their mathematical sophistication serves mainly to divert attention from the much more fundamental problems of their suggestions.

I suppose we should be grateful that C and C do not yet propose compulsory family planning - either one child per family, as per China, or the incentives for "Mother Heroines of the Soviet Union" to deliver 10 kids. In view of the long-standing Communist project of abolition of the family, they suggest only the official encouragement of communes, not their compulsory formation. But that sort of draconian coercion is not far away, however futile it might be. The very logic of planning production suggests the inevitability of planning the output of the most fundamental product, the human being and how the growing child is nurtured. The size and age distribution of the population directly affects all other planning from housing to clothes to hospitals to jobs. As with other aspects of their book (such as the references to "policing" of extra-legal economic activity and "direction of labour") you get the feeling that the Stalinist fist is just beneath the skin of the New Socialist glove.

This leads us to the most important flaw of all in any planned economy: YOU CAN PLAN ONLY WHAT YOU CONTROL and a planned society has, it seems, to be a strictly controlled society. No plausible model allowing a tolerable amount of freedom has ever been described and I will be surprised if C and C's book convinces anyone outside the surviving hard-core of Marxists.