David Miller A VISION OF MARKET SOCIALISM How It Might Work—And Its Problems he collapse of communist regimes in activities toward common purposes: socialists Eastern Europe reopens the question whether have opposed the anarchy, so-called, of market there is any form of socialism that might be capitalism, in which overall outcomes are adopted, with popular support, in the advanced simply a by-product of the pursuit of private societies. The experience of communism sug- interests by uncoordinated actors. Second, gests, fairly unequivocally, that such a system there is democracy, understood not simply as must rely mainly on market mechanisms. formal, parliamentary democracy but also as Mikhail Gorbachev has gone on record as social democracy, democratic control of a saying that markets and capitalism are not to be much wider area of social and economic life. confused, that one predates the other by many Third, there is material equality in the millennia and, by implication, may postdate it conditions of life. For a few socialists this has too. But proposals for a socialist market meant absolute equality; for rather more, it economy, aiming to combine the efficiency means a limit to inequality, with some advantages of markets with the humane and disparities in living standards acceptable on egalitarian goals of socialism, still meet with grounds of justice. All, however, oppose what fierce resistance on both sides. Defenders of are seen as the excessive inequalities of a orthodox capitalism claim that you cannot reap capitalist society. Fourth, there is freedom, the economic benefits of markets without understood as the opportunity for each person private property in the means of production, to develop his or her latent potential, and often whereas some socialists continue to argue that contrasted with the narrow "negative" freedom market socialism represents a capitulation to of liberal society. Fifth, there is community, the enemy. My main purpose here is to show the idea that social relations should be that market socialism remains true to basic characterized by cooperation and a sense of socialist aims, but I shall also try to dispel collective belonging rather than by conflict and some frequently expressed doubts about its competition. practical viability. It is worth noticing that there are possible If we are rethinking socialism in the light of tensions among these values. The aspiration to twentieth-century experience, we must begin consciously direct social activities suggests the by identifying clearly the basic goals that need for a single directing center, and this animate the socialist tradition. There are might well conflict with the socialist commit- several such goals, whose relationship to one ment to a widening of democracy. Again, the another is neither obvious nor straightforward. socialist belief in personal freedom is not First, there is the conscious direction of social self-evidently compatible with the idea of community, which might require that society impose upon itself a common set of moral As part of the reconsideration of political and economic values. But rather than speculating on these ideas that is now going, Dissent is scheduling a series of essays on market socialism. This article continues our problems in the abstract, I should like to sketch exploration of the issue. a model of market socialism and then ask to 406 • DISSENT Market Socialism—A Vision what extent it realizes the goals I have pros and cons of these options). In either case, identified. the banks' job is to provide capital to both existing and newly formed cooperatives. In- Why Have Market Socialism? vestment decisions should take into account not only the commercial viability of each enterprise Consider an economy in which each enterprise but also wider considerations—in particular the is formally constituted as a workers' coopera- need to keep the economy competitive, avoid- tive, leasing its capital from an outside ing concentrations of market power, and the investment agency. Cooperatives make their need to maintain a regional balance in own decisions about products, methods of employment. The investment agencies also production, prices, and so on, and compete have a large role to play in providing with one another in a free market. Net profits information to enterprises about prices, market form a pool out of which incomes are paid. trends, and so on, and in sponsoring the Each enterprise is democratically controlled by formation of new cooperatives in industries and all who work for it, and among the issues to be areas where the need is greatest. Finally, the decided is the distribution of income within the state is responsible for establishing a minimum cooperative. level of income and for supporting members of Let us look a little more closely at what the cooperatives that are unable, in the short term, ground rules of such an economy might be. to generate this income, so that new product Enterprises borrow capital from an investment lines can be developed or restructuring take agency at a fixed rate of interest and subject to place. certain restrictions. They have rights of use in the capital they borrow but not full rights of ownership. This means that the value of their Besides these functions, the state would, of fixed assets must be maintained: capital cannot course, continue to carry out many of the tasks be treated as income nor loaned to other it currently performs, for instance, in the area enterprises. There must also be bankruptcy of welfare provision. To advocate market rules: enterprises that cannot provide their socialism is not to make a fetish of the market. members with at least subsistence income must Markets are an effective device for providing a eventually be wound up, with the workers wide range of familiar goods and services, but transferring to other cooperatives. Each enter- where the boundaries should be drawn—which prise must maintain its democratic form. If it goods and services are best provided through wishes to expand, it must take in additional the market and which through public agen- workers as full members with equal voting cies—is a matter of practical experience, not of rights. Subject to that condition, however, it principle. On the other hand, it is a serious can adopt whatever internal management struc- error to confuse some possible instrument of ture it chooses. Small cooperatives might want socialism, such as the nationalization of basic to decide most issues by general meeting, industries, with the ends of socialism them- larger ones might want to have a more selves. elaborate system of decision making, with The system just outlined is a pure model of executive committees, and so on. market socialism intended to stimulate debate, In this model of market socialism, the state not a blueprint for a real-world economy. In would have a significant economic role to play, particular, as we shall shortly see, cooperatives but it would not attempt to plan the outputs of will not always be the best organizational form the economy directly. Its function would rather for every industry. But before considering be to set the parameters of the market in such a some practical problems, I want to consider the way that the economy served broadly egalitar- model in the light of the five basic goals of ian ends. One important aspect of this function socialism listed above. is regulation of investment, which is to be Market socialism sharply retrenches on the undertaken either by private banks or by public first of these goals: the direction of social investment agencies (I shall consider later the activities toward conscious purposes. The SUMMER • 1991 • 407 Market Socialism—A Vision general framework of the market—the form will inevitably reduce the scope for direct that enterprises take, investment policy, and so democracy by preempting major policy deci- on—is established by deliberate decision; but sions. Under full-scale planning, decisions concrete economic outcomes—what is pro- about the nature and volume of production, the duced, in what quantities, by whom—are left pricing of inputs and outputs, and so on, are all to the free play of market forces. What is made by the central authority, leaving little achieved is economic efficiency, in the familiar room for meaningful industrial democracy. sense of meeting consumers' needs with the Embracing market socialism also means least possible expenditure of resources and qualifying, in certain respects, the socialist labor. Like other market economies, market commitment to community. I do not mean that socialism provides incentives for producers to the commitment should be abandoned—indeed respond efficiently to consumer demand, but I have argued elsewhere that what continues to unlike capitalism, it places all workers in this distinguish socialists from radical or egalitarian position by linking incomes directly to the net liberals (such as Ronald Dworkin) is their receipts of each enterprise. The macroeconom- recognition of the importance of communal ties ics of a system of this kind have been studied in underpinning collective provision and the quite extensively now by economists, who can redistribution of material resources. What specify the conditions under which it will be needs to be given up is the vision of an efficient in the technical sense. I shall consider all-embracing monolithic community that some alleged inefficiencies below. leaves no room for social relationships of other We are forced to abandon, or at least kinds. Instead, the market socialist picture is severely curtail, conscious social direction as one of a complex society in which elements of an aim by our experience of central planning in community exist at different levels—in neigh- practice. Economically, it has proved increas- borhoods, in workplaces, and, above all, in the ingly difficult to coordinate activities through arenas of politics, where people can act to centrally issued directives the more technolog- express their common identity as citizens—but ically advanced a society becomes, for al- also alongside competitive and other relations.