The Transition To SocialismPublished: 5 February 2016.
Author: Jonathan Clyne
(TSN Policy Coordinator).

Intro by: TSN Editor.

One of the key tasks agreed at the founding meeting of The Socialist Network in Istanbul in August 2012 was the need to discuss and develop a Socialist Manifesto. It is hoped that 2016 will be the year when we are able to deliver on this commitment.

An important contribution towards such a Manifesto is the first draft of a book currently being written by Jonathan Clyne entitled ?The Transition to Socialism?. It has been agreed that this draft form the basis for a series of discussions on the TSN?s international Coordinating Committee. For such discussions we wish to encourage the widest participation and feedback from members of the Network and the socialist movement in general.

To this end we are publishing Jonathan?s draft book section by section on our website. Here is the first section below which includes the Chapter Headings, the ?Introduction? and ?Part 1 – A New Society?.

CHAPTER HEADINGS

Intro       INTRODUCTION

Part 1     A NEW SOCIETY

Part 2     THE RULING CLASS

Part 3     THE WORKING CLASS

Part 4     THE ECONOMY

Part 5     THE MOVEMENT

 

INTRODUCTION

Historical turning points are rare. Since the end of the Second World War, only 1968 and 1989 really deserve this label. These were two crucial years when dramatic events led to deep changes. Beliefs and ideas that had set the tone for decades suddenly appeared hollow. And new ones broke through globally with surprising strength.

The victory of neo-liberalism in 1989 with the collapse of the Berlin Wall ended the left wave that began in 1968 with the Paris uprising. It also marked the beginning of the end of both communism and social democratic reformism as significant ideologies within the working class.

Sometimes it is only with hindsight that it is possible to recognise such turning points.

Now, seven years later, the collapse of the Lehman Brothers bank on September 15th, 2008, must also be deemed such a milestone, for it marked both the end of neo-liberalism as the main ideology of the ruling class, but also the end of hope for the radical left.

The radical left, which I was part of, was convinced that neo-liberalism was not the solution to the ills of society but was making them worse. For decades we saw through the speculative advance of capitalism, and predictions of a collapse were rife. And then in 2008, it was not just the radical left that talked about the sickness of capitalism. World leaders said the same in front of the television cameras. They looked panic-stricken and proclaimed that unless the state went in and saved the banks, there would indeed be a collapse of capitalism. It should have been the finest hour of the radical left. Instead, it continued its slide into insignificance. The new movement against capitalism largely passed the radical left by. Splits reached epidemic proportions and the remains continued as before, believing that their day was yet to come.

This combined crisis of capitalism and the radical left has led me to re-examine all the basic premises of the political tradition I had belonged to for the better part of four decades. These ideas clearly needed to be tested against reality as it existed today, and against Marxist theory.

In doing so, what has struck me above all is the degree of influence that the Soviet Union and the ideas connected to Joseph Stalin had on the entire left. The objective existence of a power that for decades grew faster than any capitalist country and became the only rival super-power to the USA, weighed heavily on the minds of anybody who was looking for an alternative to capitalism. Even though social democratic reformists and much of the radical left were opposed to ?Stalinism?, subconsciously they picked up many of the ideas of stalinism and made them their own.

Trying to make sense of this It has been like cracking a nut. The hard outer shell that incorporated a stalinist view of history, economics and socialism, as well as organisational methods, had to be removed in order to get at the kernel of Marxism that lay buried within. Marxism, stripped of it stalinist accessories, did not reveal the secrets of the modern world, but it provided a starting point for grasping them and investigating them. In the end it all boiled down to one all-encompassing question: What is the relevance of ?Socialism? in the present day?

This is not Socialism as some ?perfect? society that one can only strive towards, and not Socialism as a vague idea about people being nice to each other. Rather, it is Socialism as a concrete and viable alternative system.

Looking around the world it is obvious that capitalism badly needs to be replaced. However, Socialism can only be of use if it is a system that can immediately replace capitalism in many countries. As such, it must be a system where social and economic priorities are set by the majority, not by a small, rich minority. The message of this book is that the building blocks of such a future alternative can already be found in the present society, extracted from it, and made into a systemic whole.

Nuts are but the interiors of fruits. The soft sweet fruit of the old socialist ideologies was the emotion that surrounded them ? a hatred of capitalist oppression and the longing for a society based on liberty, equality, and solidarity. Such feelings are entirely justified and necessary. And yet, the reader will find little trace of them in the pages that follow. For too many and too long the emotional appeal of socialist phrases and ideologies has been used to hide the utopian content. It is necessary to remove the emotions surrounding the idea of Socialism in order to be able to focus on recreating a viable content.

Some readers may find this approach rather dry and laborious, but there is no alternative in such a context but to bend the stick in the direction of content rather than emotion. No doubt this book will not be the final word on the subject and I expect a good synthesis will be found in the future, one that can both provide a rigorous account of what is both possible and necessary in order to transform society; and be emotionally inspiring too.

A long discussion process preceded the publication of this first draft of ?The Transition to Socialism?. Many have contributed ideas to it. I hope and expect that this draft will deepen the discussion further and lead to an improved final version.

The scope of this book is not confined to outlining why a socialist society is feasible now. To achieve socialism, it is necessary to know what the forces against it are and the potential forces in favour of it. That is what Parts 2 and 3 are about. Part 4 takes up the context within which this struggle is fought ? the economy. And finally, Part 5 explains how the movement must organise to take power and implement a transition to socialism.

The methods of the ruling class and bureaucrats cannot be adopted by a movement that aims to establish socialism. Within the movement, there must be complete freedom of expression, equality and democracy. There can be no room for lies, intrigues, and ignorance. Clear analysis, meticulous attention to facts, and curiosity, underwritten by a warm heart, will arm the movement that can end the capitalist era. In this spirit, this book is published.

Part 1 – A NEW SOCIETY

The Conflict Between
PLAN AND MARKET

IN JANUARY 2015 I, THE SYRIZA GOVERNMENT WAS ELECTED IN GREECE with a strong mandate to combat austerity. Less than six months later, that mandate was confirmed in a referendum when more than 60 per cent voted No to Austerity. This decisive majority was achieved against the explicit wishes of Greece?s creditors, and despite the closure of the banks and an extraordinary media campaign in favour of a Yes vote. Yet, within days, the government bowed down to blackmail and agreed to implement a program of excruciating austerity.

The Greek people re-elected them a few months later. The critical left wing of the party had formed a new party, Popular Unity, but received an insignificant vote. The re-election of SYRIZA was a recognition that the climb-down was not due to the self-interest of the government, but a genuine confusion about what else to do. The alternative ?platform of the new Popular Unity party ? taxing the rich; Keynesian policies of printing money; leaving the euro and thereby devaluing the currency; default on the loans ? was not seen as a feasible alternative. Justifiably so.

Taxing the rich can give some resources for welfare and is justified on egalitarian grounds. But, in and of itself it does not get a upward spiral of development going. On its own, it can only lead to trench warfare with the wealthy, as they try to find ways to escape taxation at a faster rate than the government can block them. On the other hand, printing money, whether it be handed to capitalists or workers, and devaluation can be a temporary stop-gap to prevent the widespread collapse of companies. However, it will not bring them to life again. They will remain as zombies, neither dead nor alive, unless some serious investment gets going.

Leaving the Euro is more problematic as many people and companies have debts in Euros to international banks. Suddenly they would have had to pay far more, as a post-Euro devaluation increases the size of their debts in a new Greek currency. Additionally, prices of imports would shoot up too. Sovereign debt default is undoubtedy the right thing to do in Greece, but debt would begin to accumulate again if the default breathing space is not used to seriously improve the functioning of the underlying economy. Something which none of the other measures would have achieved.

However, there are better policies that a single government can implement in this epoch of global capitalist instability. If a government is to avoid austerity, its central task must be to raise the level of investment in productive capacity and create more companies that were competitive on the world market. Even an individual government like the Greek one can do that. With greater investments, things can be produced with less labour, less energy, less pollution, and higher quality. Trade deficits, debt slavery and austerity can be avoided. As such, progress can be made on improving the lives of the majority.

There will always be some investment under capitalism. That was even the case during the depression in the 1930?s. However, investment levels will remain far from adequate if things are just left to capitalists. Any contribution by the government towards building more infrastructure and supporting research and development is welcome, but if the bulk of investors remain obstinate because they have more profitable places to put their money, like in speculation, that will do little more than make a dent.II

The means must be found to get investment going in the dominant part of the economy. In the present epoch, this can only be done by the state planning the most important investments, to insure that it ends up in the right places instead of being hoarded or speculated with.III Such planning is not difficult to do. It is already being done.

HALF OF THE WORLD?S ONE HUNDRED LARGEST ECONOMIES ARE CENTRALLY PLANNED today.IV They are privately owned multinational companies. They are part of the 1318 or so companies controlling 80 per cent of world revenue.V They are undoubtedly planned, but in an authoritarian manner for the benefit of a few.

The largest companies have first, second, and even third and fourth tier suppliers and distributors.VI These are all closely monitored by the planners in the head companies. They are linked via modern information technology. Wal-Mart has a computer network that rivals the Pentagon?s. Research and development, quality control, pricing, advertising, in fact all parts of the global value chain are worked out by the ?brand? company together with their suppliers and distributors. The ?brand? companies actually produce less and less themselves. Their main role is planning. Because of that they take the lion?s share of the profits.VIII

These central planners try to create a stable environment for their plans to be implemented in. To achieve this they utilize their influence over the state, and they force not only suppliers and distributors, but also the workers they employ and society as a whole to do what they wish. The alternative is not posed of planning or not planning in a developed economy. Planning is inevitable. The question is by whom and for whom.

A LAW IN PARLIAMENT BRINGING THE BANKS AND THE LARGEST COMPANIES into public ownership would begin the process of turning planning for speculative gain into planning for the public good. A central investment plan can be drawn up. It will not be complicated given the extensive planning that already takes place within companies. In most developed countries much of education, infrastructure, and research and development is already planned and paid for by society. For example, almost all of the components of an Apple iPhone were created by US state research, though Apple packaged them nicely and reaped the profit. Similarly, most new drugs are created in government-funded laboratories.IX If the profits of state companies are not sufficient to cover the costs of major investments, state banks and/or the state budget can provide finance for investments.

There would be conscious and transparent choices about where the main investment streams should go: to companies producing solar power or coal-fired power stations; high-speed trains or currency-speculation; Ferraris or ecological vegetables. There would be no state interference in how much of most things would be produced nor in prices. The market, supply and demand, would decide that. However, indirectly planned investment decisions would affect prices. Investments bring down production costs and thus prices. This is different to price controls where prices do not reflect the resources used. That produces a black market. Just like under capitalism, prices would also be affected by taxation to reflect socially beneficial goals like reducing smoking and energy consumption.

Most small and medium sized companies would continue to be privately owned. The only exception would be a few companies that despite their relatively small size are of strategic significance. There would be no hindrance for anybody to produce and sell whatever they wish. Although, as soon as state finance is involved, it has to be considered in the light of the main accountable investment plan.

A COMBINATION OF PRIVATE AND PUBLIC OWNERSHIP is the logical step to take us beyond capitalism. Capitalism does not, and never has, consisted of individuals freely competing in a market place. Transaction costs in such a system would be prohibitive. Contracts have to be made and their implementation controlled, information acquired, and trust built up. An assembly line cannot consist of a worker who negotiates the sale of a nut and bolt to a worker who puts the bumper on who negotiates with a worker who paints the bumper and so on. The existence of any firm is justified when planning production within the firm is more efficient than market transactions, otherwise it would either not be created or go bankrupt.X Within companies, of whatever size, there is always planning. Attempts to imitate a market within a firm are doomed to failure. When billionaire speculator Eddie Lampert tried to run the inside of a real company, Sears, on the basis of market principles, he led it towards ruin.XI

The balance between internal planning and external market transactions is not constant. As companies grow, they achieve greater and greater economies of scale and scope, and specialisation. Economies of scale are when more units of a good or a service can be produced on a larger scale, yet with (on average) less costs. For example, it might cost 1000 euros to produce 100 copies of a book but only 2000 to produce 1,000 copies. The average cost has declined from 10 per book to 2, because the writing, layout, and start-up costs of the printing machine remain the same. Economies of scope are achieved when the same company produces many different products, but shares the same management and other central functions. Alternatively, economies of scope can be achieved by using one product as an input for another product produced by the same company. Specialisation means that a firm becomes an expert at producing certain goods.

Economies of scale and scope, and specialisation are dependent upon investment to develop the means of production ? raw materials, technology, machines, buildings, knowledge, and organisational capability. The improvement and cheapening of the means of production shifts the balance against market transactions and in favour of internal planning. Market transactions become relatively more expensive than planning.

When firms achieve a certain size, there is not only a quantitative shift between market transactions and internal planning. There is a qualitative shift. Internal planning becomes more important for a large firm than market transactions. They have achieved market power. They are price makers rather than price takers. By their actions, they can influence the price of a commodity, instead of just having to accept a price and then try to produce it as cheaply as possible.

At any given time, in different sectors of the economy, and even within sectors, conditions will not be there for only, or even any large, companies to develop. For personal service, like hairdressing and restaurants, it is not even desirable to have large companies. These sectors are better run privately. There, market transactions and personal relationships dominate over planning.

Even some of the largest companies will have to be scaled down. They have not achieved their size because they have outcompeted others by producing better quality goods more efficiently than their rivals. They have had more financial muscle and therefore they have bought up rivals in order to reduce the competition. More often than not, mergers and acquisitions have only led to greater control over markets, facilitating monopoly prices. Promised improvements in production and distribution do not happen until many years later.XII

Once those companies for which internal planning is more important than market transactions are collectively the dominant part of the economy, the economy is ripe for socialism. Clearly, if 1318 companies control 80 per cent of world revenue that has already happened in the developed world, the home of most of these companies. Therefore it is only a small step to take them into public ownership and create a central investment plan. Everything has already been prepared for this. This would not mean that these now publically owned companies have freed themselves from the market. On the contrary, the market is still needed, but its role has changed. It plays a secondary role to planning in the economy as a whole. This is dynamic planning.

COMPETITION BETWEEN THE STATE SECTOR AND THE PRIVATE SECTOR IS NEEDED not only nationally, but internationally. Participation in the world market by the planned state-owned sector of the economy provides the necessary scale for state-owned industries to produce things efficiently. It is also a means of controlling the viability of individual state-owned firms, and it makes available the foreign exchange necessary to import the technology, intermediate goods, and raw materials that a country cannot produce efficiently itself.

An autarchic economy would lead to a long and deep economic crisis in developed countries. All industries need not participate in the world market, but it must be a sufficient number to avoid a balance of payments deficit. It does not have to be many. For Greece, two ? shipping and tourism ? was not enough. Expropriation of the oligarchs and debt default would have provided the resources for state planning to create another two or so. That would have ensured that Greece could get out of serial trade deficits and import what was necessary to develop the rest of economy, without going into debt again.

Dynamic planning will include several different ways of organizing production: Public ownership pushes large companies? investments in socially beneficial directions. Market pricing and selling on the world market, puts pressure on any tendencies towards bureaucratic complacency and provides a measure of their performance. Cooperatives and small private companies produce in those areas where they are most efficient.

COOPERATIVES CAN TRANSFORM PRIVATELY-OWNED COMPANIES INTO DEMOCRATIC ORGANISATIONS. Cooperatives are private companies owned by the people employed there, and run by people appointed by the owners collectively. There are plenty of cooperatives, and the number is growing. They score better in the Trust Index (the principal measure of credibility), respect, fairness, pride, and camaraderie. They also have a lower turnover of personnel and, surprisingly, a higher share-value. Cooperatives have a much greater survival rate than other private companies.

Cooperatives are not confined to small-scale operations. In the USA, employees own a majority of shares in about 1500 companies. This includes companies such Publix Super Markets with 152 000 people employed and the engineering/construction company CH2M Hill with over 28 000 employed. All in all, some 14 million workers (10 per cent of the workforce) in the USA completely or partially own the companies they work for.XIV

Britain?s largest department store chain, John Lewis, is a cooperative.XV In Pakistan in the 1960s, Esso established a plant to convert natural gas to the fertilizer urea. In the early 90s, they decided to sell their fertilizer business. 200 of the 300 people employed bought out the plant. Engro, as they call themselves, grew into a huge business with investments in many different fields. In the Basque country, the workers cooperative Mondragon has been going strong since 1956.XVI It has over 80,000 people working in 256 companies in four areas ? finance, industry, retail, and knowledge.XVII

Cooperatives have proven to be the best way of running many small and medium sized businesses. With the deepening crisis of capitalism, cooperatives have increased in importance. They offer workers more control over their work and a share of the proceeds.

Cooperative and other small and medium sized private companies are not plannable centrally. However, to be successful, private companies will have to study the central plan to see what way the dominant part of the economy is going and what opportunities open up for private companies. Private companies will also be suppliers to and buyers from the planned sector. The planned sector will ensure economic stability and development. This is the best support that small and medium enterprises can get. They would be encouraged to reinvest their profits because they would know that in a steadily expanding economy they would get their money back, and more. Instead of attempting to follow in the footsteps of the speculation of large companies, and failing because they lacked the knowledge and resources of the large companies, they would follow the state owned enterprises? investments.

Under capitalism, the private sector is dominant and dictates the pace and direction of investment and growth. In a mainly publicly-owned economy the state should help to serve the private sector and to counteract its excesses. With a dominant state planned sector, the private sector will adjust to the state sector through the workings of the market.

THE PROCESS OF GROWTH FROM START-UPS TO LARGE GLOBALLY COMPETITIVE COMPANIES can schematically be described as consisting of three phases. Companies begin their lives as privately owned companies. As they grow, they need more finance. Legislation and subsidies encourage them to borrow money from their workers in exchange for giving workers shares in the business. These shares would not be marketable and would have to be returned, if a worker leaves the company. Thus, firms retain their private character, but ownership is broadened.

In the next stage, the state banks start to provide finance for some small and medium-sized enterprises to make the leap to being large companies. In exchange, they would have to give shares to the state. It is standard procedure under capitalism that fast growing small companies give shares to venture capitalists in exchange for finance, often losing control in the process. As firms become large, the state would become the dominant owner. Workers would have a significant share while a residual share would remain with the original owner. This reflects the input of each as the company becomes more and more socialised.

TODAY?S CHINESE PLANNING IS A CRUDE AND UNDEMOCRATIC VARIETY OF DYNAMIC PLANNING. Initially, Chinese planning was similar to Soviet planning. However, from the late seventies, China underwent a process of growing out of it. Under bureaucratic control, but with the Communist Party gradually losing part of its control over society, China stumbled towards dynamic planning. This is why during almost four decades China grew faster than any other economy in history.

At the centre of China?s planning system lies a Five Year Plan.XVIII The overall plan is the product of a network of thousands of sub-plans. Plans reach right down to individual production units if they play a significant role in the economy. The central and sub-plans are translated into detailed instructions for all levels of government. Feedback is built into the planning process so that it can be continuously fine-tuned as it proceeds. Much of the input that goes back to the top comes from interacting with the market, which has a sort of ?objectivity?, unlike reports from bureaucrats.

No investment project is approved unless it is part of a multiyear program. The plan contains policy prescriptions with both binding and non-binding targets and it directs finance towards the decided investment.

This type of planning is possible because the Chinese state owns the dominant part of the economy.XIX The key criteria for promotion of the state-appointed heads of state-owned enterprises is that they fulfil the plans. At the same time, they have to do so by confronting the global market. This means that, unlike in the Soviet Union, or China under Mao, production in modern China cannot be a bureaucratic end in itself, but must successfully sell its output on the national and international market.

Some claim that it is the dictatorship that makes the Chinese economy comparably efficient, and draw an analogy to the dictatorships under which the South Korean and Taiwanese economies flourished.XX That confuses form and content. South Korea and Taiwan developed rapidly because (among other reasons) the state was autonomous vis-?-vis the capitalist class.XXI Yet, Western Europe after the Second World War up until the 1980s also developed rapidly because the state was autonomous.XXII A state that is autonomous in relation to the capitalist class is decisive for development under capitalism. An autonomous state can compel capitalists to invest more efficiently.XXIII

In South Korea and Taiwan, state autonomy manifested itself as a dictatorship and in Western Europe as a democracy. In both cases state autonomy arose because the balance between classes was even. No class could impose its agenda exclusively. This balance was the result of very different processes in Western Europe and South Korea/Taiwan. Therefore the form of state autonomy was also very different.

In South Korea and Taiwan, all classes were weak and for exogenous reasons the state was relatively strong. Normally weak classes lead to a weak state. In these countries the landlord class was destroyed by land reform induced by the US occupation to undermine support for communism. The working class and the capitalist class were weak because industry was very limited, and the capitalists were tainted with collaborating with the Japanese occupiers. In South Korea during the fifties, the USA created an army that was one of the largest in the world and therefore the state was disproportionately strong. In Taiwan, a large part of the mainland state had fled and imposed itself on the native Taiwanese, also creating a disproportionately strong state. State autonomy took the form of dictatorship. In Western Europe, state autonomy developed because the working class and the capitalist class were both strong. Autonomy took a democratic form.

Neither of these types apply in China. During Maoism, the state was autonomous because its ownership of the economy made it strong, while the only classes in existence, the peasantry and the working class, were weak. State autonomy took the form of dictatorship. The Chinese state remains strong because it still owns the dominant part of the economy. However, the massive rise of the working class during the last three decades has loosened up the regime considerably. The freedom to move around and express oneself has increased exponentially, although restrictions remain in place. In this situation, the lack of democratic participation in the planning process and economic decision-making in China is not efficient, but rather results in bureaucratic wastage and corruption on a wide scale. It has also led to the growth of inequality and highly exploitative practices especially in the private sector. The continued growth of the working class will increase the pressure for democracy. Half of China?s population are still living off agriculture.XXV

TOWARDS THE END OF THE NEGOTIATIONS WITH THE TROIKA ABOUT GREECE?S DEBT, Finance Minister Varoufakis revealed that a new path for Greece was being investigated. On a limited scale, it bears a resemblance to dynamic planning.

?The Greek government proposes to bundle public assets (excluding those pertinent to the country?s security, public amenities, and cultural heritage) into a central holding company to be separated from the government administration and to be managed as a private entity, under the aegis of the Greek Parliament, with the goal of maximizing the value of its underlying assets and creating a home-grown investment stream. The Greek state will be the sole shareholder, but will not guarantee its liabilities or debt.?XXVI

The holding company would ?issue a fully collateralized bond on the international capital markets? to raise ?30-40 billion, which would ?be invested in modernizing and restructuring the assets under its management.? The plan envisaged an investment program of 3-4 years.

Varoufakis seems to be saying that private investors cannot be relied on to get investment, and thereby growth, going. The initiative falls to the state to use and develop the only means it can have a clear control over ? the state owned sector. By coordinating the whole state sector through the creation of a central state holding company, the state sectors strength can be maximized to prepare it for competing on the world market. Varoufakis reckoned this would boost growth to above 5 per cent, which is conservative by Chinese standards. Solid growth would lead to an ample increase in tax revenues and remove government deficits. State investment led growth would encourage the ?crowding in? of private investment in the Greek economy as private capital always has greater opportunities in a rapidly growing economy. Unfortunately, the Greek government decided to cave in to the Troika before the plan could be tried. Varoufakis resigned from the government.

DYNAMIC PLANNING IS VERY DIFFERENT FROM SOVIET PLANNING, which meant deciding all prices and exactly what should be produced centrally. This type of planning was called quantitative planning. The Soviet Union was highly successful in mobilising resources for investment, but it failed at investing them well. Labour productivity was very low.XXVII By the 1980?s, the Soviet Union was investing on a grand scale, but barely growing at all. A large black and grey market developed in the gaps left by quantitative planning.XXVIII The grey market consisted of a sort of bartering, outside of the plan, between state companies in a desperate bid to try and fulfil the plan. The black market was the breeding ground for the mafia that took over the Russian economy after the collapse of the Soviet Union. The absence of a market and a private sector doomed its investments to inefficiency, never mind the absence of democracy.

IN THE PAST, PUBLIC OWNERSHIP AND STATE PLANNING IN THE WEST was fairly extensive, but it was very different from both quantitative planning and dynamic planning. Because the privately-owned market driven sector was dominant in the West, state companies were the servants of the private sector. Their role was to provide cheap transport, energy, and intermediate goods such as steel to the private sector, as well as an educated and healthy labour force. Publically owned companies were often forbidden to compete with the private sector.XXIX In dynamic planning, public ownership dominates the economy, because the public sector encompasses the largest companies. Not only would public companies be allowed to, they would be expected to compete, and win, on their own merits against the private sector.

DYNAMIC PLANNING PROVIDES AN ECONOMIC ENGINE FOR SOCIALISM. Like Soviet planning, and unlike capitalism, it is good at directing investments. Unlike Soviet planning, and like capitalism, it can produce plenty of consumer goods. Dynamic planning will direct investment in socially necessary directions, without bureaucratic inertia. By directing investment, consistent economic development can be achieved.

Dynamic planning is rooted in what already exists. All that is needed are a few laws in parliament to implement it. As more countries go over to dynamic planning, international coordination can begin, overcoming the long-term crisis of the economy. Over time, reforms can ensure that inequalities are reduced in society and that a good living standard is guaranteed for all.

Dynamic planning in and by itself is not socialism. For that dynamic planning has to be combined with a series of decisions that fundamentally shift the balance of power in society in favour of the working class.

The Political Economy of
DEMOCRACY

THE WAY PRODUCTION AND DISTRIBUTION IS ORGANIZED REFLECTS THE EXISTING CLASS STRUCTURE. The separation between work and control over work was the essence of Taylorism developed at the end of the 19th century.XXX Before, the owner of the factory and machines could extend the work time spent at the machines and control the number of breaks, but the worker knew more than the owner how to do the work. Henry Ford?s assembly line was the definitive breakthrough for Taylorism. Workers became replaceable and the pace of work could be jacked up by pulling a lever. This was its great advantage for capitalists. There is nothing intrinsically more productive about an assembly line. A division of labour and specialisation can take place without reducing work to complete monotony. Experiments with car production at Volvo, where groups of workers put together a car from beginning to end, proved just as efficient. However, in an economic crisis the pace of those workers could not be raised to breaking point.

An assembly line labour process means that knowledge about production is removed from the workers performing it; instead it resides in white collar workers. As white collar work grew, it itself became subject to being broken up into its component parts in order to control the work of the white collar workers. Likewise in the service sector, in hospitals and schools. Monitoring and being monitored takes up an ever greater amount of the time of people employed as office workers, teachers, doctors and so on. Laptops, smart phones and the internet have all been pressed into controlling employees.

Thus, class structure has determined how technology, machines, and buildings have developed. Class structure is locked into the physical, as well as the organisational, environment at work. Large Investments, a transformed education sector and a great deal of everybody?s time is needed to discover, develop, and implement technology and labour processes that are adapted to the needs of human beings and their environment, instead of private profits.

A simple change can create dynamic planning, but until profound changes have taken place in the productive apparatus, inequalities will remain. Dynamic planning can break the power of the oligarchs and nudge society on to a new trajectory, one that gradually can deal with the long term problems that the present class structure has created. However, there are also a few immediate tasks that can be undertaken to democratize work and society. They cost little or nothing, in most cases they will improve how the economy functions.

DEMOCRATISATION OF STATE-OWNED ENTERPRISES is within easy grasp. Hierarchical structures are inherently inefficient, therefore workers develop strategies to bypass them and find ways to cooperate. Apart from a wage, the interaction with workmates and the satisfaction of having achieved something together becomes the mainstay of how to make work meaningful.

Already one hundred years ago, this was confirmed by the Harvard Business School. Over a period of eight years they analysed a group of workers and their responses to attempts at increasing productivity:

?Essentially the studies progressed through a succession of hypotheses, dismantling each one. Neither changes in physical conditions (better illumination), nor in work schedules (more rest breaks), nor even in incentive systems could fully explain why productivity steadily improved among a set of young women?always labelled ?the girls??assembling parts in a test room. After years of experiments, it began to dawn on Mayo, an Australian psychologist who had joined the HBS faculty, that at least two factors were driving the results. First, the women had forged themselves into a group, and group dynamics?members encouraging one another?were proving a strong determinant of output. Second, ?the girls? had been consulted by the researchers at every step of the way: The intention of the experiment had been explained to them, and their suggestions had been solicited. From such heady stuff were distilled the basic insights of the human relations school?that workers were not mere automatons to be measured and goosed with a stopwatch; that it was probably helpful to inquire after what they knew and felt; and that a group had substantial control over how much it was prepared to produce.? XXXI

These ideas of the Human Relations School of Management have been confirmed many times since then. If it were not that workers organise collaboration at workplaces, why is work-to-rule a form of industrial action? If following the rules laid down by bosses actually made things work better, a work-to-rule would be loved by bosses. A union, Communication Workers of America, instructed its members how to go about a work-to-rule: ?Never use your judgement ? ask!? XXII That really says it all. If workers do not work independently of their bosses, things get into a mess. A really incompetent management can even cause the normal tendency for workers to cooperate to break down. Workers are pitted against workers. It can mean the collapse of a whole company.

The example of Toyota is one of many that confirm the other basic conclusion drawn by academic experiment ? things work better if workers can contribute ideas to their work. Toyota turned itself into the world?s biggest car producer by developing a production system that involves workers in controlling the quality of production and suggesting improvements in production techniques. Every year, Toyota introduces more than a million new ideas into their production; most of which come from its workers.XXIII

That puts the management in a vulnerable position. What if workers start to get the idea that an unelected management is not needed, that private ownership of the company is a drain on resources? Therefore there is a flipside to the worker?s involvement in production at Toyota. An American engineer, otherwise much impressed by Toyota, describes work on the shop floor:

A large group of company employees were lined up, military style, shouting company slogans. They were all dressed in Toyota company uniforms of one-piece jumpers and soft-brimmed hats. The hat was the same style used by Japanese soldiers during the Second World War, and it was standard issue for all employees at the company. One employee stood at the front directing the drill. He would shout one slogan and the group would shout back in unison. This display of group obedience reminded me of old films of the Japanese military. ?But why here?? I wondered. ?Why would a company engage in military drills?? XXXIV

These drills counter-act ideas workers might get about not needing a management imposed on them.XXXV Instead of military discipline and layers of controlling managers, workers should elect their supervisors and immediate management. Middle management can be either appointed from the top or elected from below or a combination of both, depending upon the workplace.

In countries such as Sweden or Germany, trade union representatives are elected to the boards of major companies. It would be easy for a decisive proportion of the board to be elected by workers employed there and in other parts of the value chain. At the same time as the owners, the state, continue to appoint representatives. Consumer organisations, where those have been formed (like for example at Starbucks), could have a voice on the board. Even if there at times are conflicts of interests on the boards with this system, this is hardly something new. Competing capitalists often have vicious feuds on company boards. The tendency would rather be for board conflicts to be reduced.

Salaries for the uppermost managers should be radically reduced. Once most people reach a reasonable standing of living, more money does not increase happiness. XXXVI Nor is it an incentive for harder work or greater creativity. In fact, quite the opposite. Greater incomes led to greater selfishness and a struggle to try to further increase one?s income, at the same time as one?s focus is on spending one?s income rather than on the job. The salaries of well-paid white-collar workers would remain unchanged. For low-paid workers, wages would be raised over a period of time as productivity and skills increase, narrowing wage differentials. This will create a greater sense of common purpose.

THE CREATIVE CAPACITIES OF SOCIETY can be rapidly widened. Creativity flourishes best in a non-hierarchical cooperative environment, where everybody is free to contribute what and when they want to. The development of peer-to-peer, P2P, production via the internet has proved this. People cooperating, because they enjoy it, have created a pool of knowledge. They have not been paid, and what they create is available for free for anybody. This area of production is known as the ?Commons?. Wikipedia, Linux, and YouTube are famous examples but are just the tip of the iceberg.XXXVII

By latching onto peer-to-peer production, in fact even paying people to participate in it, companies become more successful. IBM was a giant firm based upon a declining mainframe (giant computers) market and with a failed venture into PC?s under its belt. It managed to transform itself into a successful computer service company by using the Commons.XXXVIII

One approximate way of measuring the extent of peer-to-peer production is to look at the so-called ?fair use industries?. These are companies that, for at least some of their products, do not use copyrights and patents. Instead, they develop them via P2P. In 2009, fair use industries accounted for one sixth of total U.S. GDP, and employed more than 17 million workers. The productivity of workers in these industries exceeded others by an average of 28 per cent.XXXIX

It is not surprising that companies are prepared to use what is provided for free by P2P production in the internet ?Commons?. That does not prevent them from being the staunchest defenders of intellectual property rights, IP, despite the stifling effect that this has on creativity. Apart, from the 300 people employed to work with Linux, IBM employs 400 000 to build one of the world’s largest IP portfolios. With a few exceptions, companies that benefit from P2P production have not been vocal in stopping the enclosure of the Commons, i.e. turning it into a source of profit.XL There have been two battlegrounds for enclosure.

Communication takes places within enclosed private spaces such as Facebook, YouTube, Google and cloud computing, enabling the sale of a captive audience to advertisers. This has also given companies such as Facebook and YouTube legal ownership of what is published there.

There has also been an avalanche of legal restrictions. Patent laws have been tightened. Research about changes in international property laws in sixty countries over a period of 150 years show that inventions decrease when patent laws are strengthened. This is not surprising, as almost all innovations build on previous innovations. Copyright has gradually been extended from 15 years during the lifetime of the author to 70 years, after the author?s death.XLI Sentences for breaking these and other laws that protect IP are stiff. When the American activist Aaron Swartz hanged himself, he was facing $1 million in fines plus 50 years in prison for downloading academic journals with the intent of making them available on the internet.XLII

By reversing the moves towards enclosing the Commons, a leap forward in both productive and artistic productivity can be achieved.

SOCIAL SERVICES SHOULD BE ORGANISED FOR NEED NOT PROFIT. One of the results of the rising strength of the labour movement in many countries during the last century was the removal of certain essential human needs from the market. Education, health care, nurseries and care of the aged was distributed on the basis of need, not according to what one could pay. It was a basic democratic reform and a remarkably successful system. Not only was it more efficient than private alternatives, it also played an important role in the drive towards providing equal opportunities for all. That in turn improved health, created greater trust between people, reduced criminality and made people generally happier. The failure of the USA to create a national health service has meant that 17 per cent of GDP is spent on health,XLIII but it only ranks 33rd on a heath index.XLIV By comparison, almost all of those ranking among the top ten, spend only 9-10 per cent. They have national health services.

The system was not without failings. Fundamental class inequalities remained in place. These inequalities penetrated into what were formally egalitarian services. Furthermore, the state sector was run with a top down hierarchical system similar to companies. This created bureaucracy, unnecessary centralisation, arrogance and avoidable inefficiencies. With the onset of the crisis, both economic and ideological, an offensive was launched against the welfare state. Using the problems that existed as an excuse, marketisation and privatisation was pushed through. All in the name of freedom. The cure was worse than the disease. Not only did it begin to tear apart the fabric of society, but the layers of bureaucracy have multiplied.XLV Profits are extracted to tax havens, and things have become less efficient. Both people employed in these services and the users have found their freedom reduced. A well-functioning social service provides the necessary security that enable people to become involved in running society. It can also give access to knowledge that is needed to do so.

A SHORTER WORKING DAY is a pre-condition for a democratic society. Nobody can devote time towards participation in decision-making at work and in society as a whole if exhausted by excessive working hours. In the past, shortening the working day has also been one of the most successful ways to improves peoples? lives. Health, safety at work, education, childcare, and gender equality are all affected by the length of the working day. So important was the shortening of the working day, that the Labour Movement decided in 1886 to have an annual protest internationally to push for it. That is the origin of the First of May.

During the seventies, the long-term trend of a declining working week was broken. In almost all developing countries, the working week has edged upwards since then. The amount of time that a family works has changed greatly. In the USA from 1979 to 2000, the typical middle income family with children has added 25 per cent to its working year. This is not just a cause of stress and anxiety, but it is an absurdity when millions of people are unemployed.

A reduction of the normal working day to six hours would result in the need to employ somebody for on average one extra hour per day to do the work that was previously done in the last two hours. The other hour would be saved because people work more efficiently if they only work six hours a day. They are off sick less, and there are fewer work accidents. Disproportionate amounts of accidents occur in the last two hours of work.

The cost of employing somebody for the other hour can be saved elsewhere. By reducing unemployment, the cost of benefits, work schemes, and retraining would decline. At the same time, tax income would increase. A six-hour working day would therefore be more or less self-financing and would mop up a large proportion of those that are unemployed today. In the long term, the benefits of working less would be even greater to society. Unemployment leads to demoralisation, sickness, drug abuse and criminality. A shorter working day would also result in people spending more time on educating themselves.

A six-hour working day with no loss of pay would be an important step towards creating equality. Today many women have low incomes because they have reduced their working day to take care of their homes and children. Men work longer hours and earn more. This creates an imbalance in families. If women continued to work six hours a day, their wage would be raised to the equivalent of eight hours. Men?s wage would not decline, but their working day would. The result would be both men and women working six hours a day and both receiving eight hours wage.

A better society without a shorter working day is inconceivable. Apart from employment, health, and equality benefits, it is a pre-condition for people having time to participate in voluntary activity and democratic decision-making, both at work and in society generally.

The Bare Bones of
SOCIALISM

The working class is powerful today. It is the majority and produces almost everything. However much the ruling class has tried to find methods to remove the working class from control over the production process, it is continuously forced to give it back. The more rapid technological progress, the more dependant the capitalists becomes upon the workers absorbing the new techniques. The more machinery per worker, the more industrial robots, the less replaceable each individual worker becomes. The more the countries and the world are integrated economically, the more depended transportation and distribution become upon the workers that run them. Large companies bring together massive amounts of workers in almost every field.

The breakthrough of welfare ? education, health, care of the aged, unemployment benefits, social security ? are all the reflection of the influence of the working class. That is why they are attacked, even though the capitalist system as a whole benefits from them. They have been eroded. What is surprising is how little has disappeared after four decades of consistent attempts to cut back, particularly considering how the leadership of the labour movement has done next to nothing to defend welfare systems. The working class plays an important and influential role in society. Even after trade unions became weaker and worker?s parties disintegrated, no elections can be won without the support, or at least passive acceptance, of the working class.

The purpose of all the measures outlined in Part 1 of this book is to increase the power of the working class so that it becomes the dominant power in society. Not only in a head count during an election, but also in the rest of what constitutes society, including the economy. That does not mean it will be the only power, but the working class will be decisive. Class relations have shifted essentially. That is socialism.

None of the above ideas are outlandish suggestions. They are all firmly based upon what exists, and experiences that stretch back a long way. They will free resources, and provide the time, health, education, security, creative channels, and structures for the majority to decide what to do with these resources. In each field there are just small shifts, but together the balance of class forces is fundamentally changed. A new social and economic dynamic, a new mode of production, is created.

Capitalists will continue to exist. People opposed to a socialist system will continue to argue for capitalism, but the economic and social levers that made it possible for a tiny minority to override the majority will be gone.

There are many other things which need to be fought for, in addition to the policies above. The struggle against discrimination is not over by any means. There are no prescriptions as to what to do with the resources that are freed once the majority gains control over resources. Climate change has to be dealt with, and many other problems. There are other books that provide a better grasp of individual problems and their solutions. The purpose of this book is something different. It wants to show how the majority can use the material pre-requisites that already exist to give itself control over the direction of society.

In every serious struggle for improvement, individuals and groups show great heroism. They are prepared to spend every hour of the day fighting and make great sacrifices for the common goal. That is necessary on occasion in order to achieve changes. But it is not the basis of a sustainable mode of production. It is not humanely possible to continue like that. After a while, it is necessary to return to daily activities ? looking after one?s children, tending one?s garden, repairing one?s car. Any system that relies on heroism for its survival, like in Russia after the revolution, will inevitably be taken over by a bureaucracy or return to its old ways. That is why socialism can only begin in a developed country, where all the building blocks of a new society are already present.

One or the other measure described can be introduced under capitalism or in developing countries that are trying to catch up. However, that does create a fundamental shift in class relationships and therefore it does not create the dynamic that can provide a good life for all. Only the introduction of the whole packet of socialism can do that.

Developing Countries and the
TRANSITION TO THE TRANSITION

SOCIALISM PRESUPPOSES A LEVEL OF PRODUCTION that does not exists in less developed countries. The resources do not exist to take the steps out-lined above, unless a developed country has already become socialist and provides substantial help. The path of developing countries must therefore be different; they must first struggle to reach a higher level of economic development. But they will not follow the same path that the developed countries took to get there. History is not one inevitable line of development. As soon as some societies have pioneered one road, their existence will influence the road of others. Only the original economic starting point for human beings – hunting and gathering – looked the same throughout the world. Depending upon geography, fauna and flora, some hunters and gatherers became sedentary farmers and some pastoral nomads. They had different social structures. One was peaceful, egalitarian and surplus producing; the other violent, patriarchal, and living on the margins of survival.

From that point on, social and economic development was highly influenced by the collision of different social structures. Slavery arose not as a natural development out of agriculture, but out of the clash between sedentary farmers and pastoral nomads. Feudalism was the result of a new wave of invasion of pastoral nomads breaking up the Roman Empire. There have been no ?pure? types of social structures since hunter and gatherer societies.

With the exception of South Korea, Taiwan, and Israel, no country in the 20th century has joined the group of most developed countries by following a capitalist path. These three countries could only do so because they had a unique concatenation of circumstances: a state disproportionately strong compared to the rest of society; land reform imposed by others or not needed because of new settlements; substantial aid for a crucial period of time; and highly favourable export conditions to the USA. For others countries, the pressure from established capitalist powers was too stiff. They continued to limp along, unless they took a non-capitalist route. The first to do so was Russia.

The working class of Russia in 1917 was less than ten per cent of the population, but it was influenced and inspired by the development of the labour movement in Western Europe. That led it to seize power, but it could not maintain power. It destroyed the old system, but it could not replace it with socialism. The quantitative planning model grew out of this dilemma. Its main drive consisted of using simple and brutal methods to extract resources from peasants and workers. These were directed into investments. These investments consisted of buying whole factories from the West, for example from Ford, or copying Western technology. This industrialized the Soviet Union at a rapid rate, but it had clear limits. It was excellent at extracting resources, but terrible at investing them well. There were neither market forces nor democracy that could control that investments went to the right places. Instead, they accumulated in traditional bureaucratic strongholds, especially military industries, hindering the development of new industries. Therefore, the Soviet Union could never compete with capitalism.

During its period of rapid growth, the Soviet Union inspired the Chinese Communist Party to superimpose quantitative planning on a peasant?s revolt that it led to victory in 1949. At the time, China was one of the poorest countries in the world; the working class was minuscule. The clash between a peasant revolution to redistribute the land and quantitative planning imported from the Soviet Union, meant that quantitative planning was always limited. In the Soviet Union at its height, the production and prices of 60 000 commodities were planned centrally. In China, it was never more than 600. The peasants were not violently crushed like in the Soviet Union. Many welcomed collectivisations into communes. As a consequence, industrialisation partly developed within the confines of the communes, to a large extent independently of the central planners. After the dissolution of the communes, this rural industrialisation evolved into Town and Village Enterprises. Later, many of these constituted the capitalist private sector of the economy. This led to the present day duality in the Chinese economy ? a planned state owned sector and a market-based private sector.

SUBSTANTIAL CHANGES HAVE TAKEN PLACE IN DEVELOPING COUNTRIES during the second half of the 20th century. Pre-capitalist modes of production were by the anti-colonial struggle and due to integration in the world economy.

Long-time US ally Saudi Arabia and the United Arab Emirates abolished legal slavery in 1962. One of the most pro-western Arab nations, Mauritania, was the last country to do so in 2007. However, slavery and bonded labour, especially in the sex trade, building industry and in domestic services, has continued. It is estimated at about 20 million people worldwide, and exists in both developed and under-developed countries. It is not a historical remnant, but integrated into capitalism. It is intimately connected to capitalist markets and is a product of deep-seated poverty caused by capitalism.

Agricultural feudalism, in so far as it existed outside of Europe, has disappeared. Even in the least developed countries, farming is for subsistence or is connected to markets via money transactions. Sometimes the expression ?semi-feudal? is used to describe relationships of patronage and dependency in farming, but the prefix semi creates little clarity. The idea that capitalism consists merely of free individuals buying and selling on a market is an illusion. Patron-client relationships are part of capitalism, just like networks are central to how the ruling class rules.

The transition to the transition to socialism will be different in different parts of the developing world. A range of the most developed countries can take most of the same steps as developed countries ? planned investment via democratized state owned industries, encouragement of cooperatives, social services, and a shorter working day. They will not be able to be as democratic as, for example, the working day cannot be shortened to 6 hours, and education levels are too low to enable the same amount of participation in decision-making. However, there are a number of additional steps that developing countries have to take. Steps that were taken long ago in developed countries. Thus developing countries combine steps that can be taken by developed countries today and steps that were taken by developed countries long ago.

LAND REFORM IS OF DECISIVE IMPORTANCE IN DEVELOPING COUNTRIES. The gap in farming between developed and developing countries has accelerated exponentially. During the inter-war period, the difference between the most productive and the least productive farming was 1 to 10. By the end of the millennium it was 1 to 2000. Without a solution to the enormous backwardness of farming, industry cannot become competitive. It is the development of agriculture that can provide the food, the economic surplus, the consumers, and in some cases the labour needed for industrialisation.

Until the year 2000, farming was the main form of work globally. Since then it has been passed by services. It maintains a crucial role, especially for the poorest. Farming has a class structure that is different to industry and service. Farming does not only nurture two classes – capitalists and workers. Farming must also pay a third class ? landlords. Although there is nothing non-capitalist about a class of landowners, it does mean that capitalism develops differently in farming than in industry and services.

Landlords can and do raise rents beyond the point where an average rate of profit can be earned in farming. Because the landlords (or de facto landlords, the banks) get their share first, capitalist investments are turned away. Farming is left languishing in backwardness. Only the cheapest possible labour can work there, which is family labour. Farming families survive because they get the non-market benefits of growing their own food and often cheap housing too. They can use the whole family?s labour flexibly. Family farms are economic units of production, consumption, and mutual aid. Family farming is therefore an integral part of capitalism in both developed and developing countries, as common in Burundi as in the US.

In the UK, 69 per cent of the work done on farms is still carried out by family labour. Figures for Spain, Germany, and the Netherlands are similar. In other countries like Belgium, Italy, and Portugal the percentage is considerably higher. Only in a few of the developed countries is it lower. These are the agriculturally most developed countries. In France only 49 per cent of the work is done by family labour and the USA 56 per cent. In the USA large farms up to 566 hectares have a majority family labour. The secret is machinery and child labour. In the USA a farmworker uses a greater level of investment in machinery than a factory worker, and farming is the only workplace where children are allowed to work. Farming in the USA is the most dangerous workplace of all for young workers, accounting for 42 per cent of all work-related fatalities of young workers in the US between 1992 and 2000, although the farming labour force is only a couple of per cent of the whole labour force. And unlike other industries, half the young victims in agriculture were under the age of 15. In the USA, only those categorized as very large farms have less than a majority family labour. The development of capitalist farming in England, via the creation of a class of agricultural labourers and rural capitalists, was unique. In the United States farming developed rapidly, because there were no landlords that could extract rent. The Homestead Act of 1862 granted any US citizen 160 acres. Similar acts were passed in other European off-shoots. Millions left poverty in Europe. This reduced land rents in Europe and encouraged investment in farming. However, it was not until the development of substantial subsidies that European farming really took off. In the USA, the end of homesteading meant a transition to subsidies there too, as farmers became indebted to banks.

There is no way developing states are going to be able to subsidize farmers like the states of developed countries did. Informal work and life in urban slums appears as a somewhat more attractive life to many farmers, but a large proportion prefer to desperately hang on to their land. Farms are fragmented into smaller and smaller plots as inheritance divides the land. The technical level is low. Most live close to subsistence level.

Apart from family farming, there is also large-scale agribusiness in some developing countries. Most often it is run by large multi-national companies. Using advanced technology, they create huge farms with little employment producing a few products that are sold on the world market. It deprives people of land and does little to develop the country.

The solution lies out there, but with a combination of socialist and capitalist measures. The landlord class must be abolished by nationalising land. Then it can be leased to farmers in exchange for a reduced rent to the state. The rent can be used both to industrialize, producing tractors and other tools for farmers, and to subsidize irrigation, fertilisers and other inputs for farmers.

The fragmentation of farms must be overcome. This can be done by allowing the contracting out of leases. That means that the farmer who has the leasehold can let somebody else use the land in exchange for rent. The contracting out of leases will give farmers an income even when they no longer are farming; giving them an incentive to give up untenable farms and seek work elsewhere. A capitalist process of accumulation can be set in motion that will consolidate larger farms. Distribution cooperatives and purchasing cooperatives can also play a role in rationalising agriculture.

It is illusionary to imagine that socialism can be established in farming. Capitalist accumulation together with collective elements and protection in the form of leaseholds for farmers is the only way of developing farming.

INFANT INDUSTRIES IN DEVELOPING COUNTRIES CANNOT COMPETE with multinational corporations. They need tariffs to protect them until they can become large enough to compete on the world market. They also need capital controls to ensure that wealth does not leave the country. Every developed country, from England to the USA to Germany and Japan, built up tariff walls until they built up sufficient strength to compete

World trade plays a decisive role in developing the world economy, but excluding China and a few other countries, the role of developing countries in the world trade of manufactured goods is marginal. Tariffs will not affect the world economy substantially. Instead, the world economy can benefit when a developing country becomes wealthy enough to open up again after a period of tariffs.

The problem for most developing countries is that even if they invest and produce commodities for which there is a demand for on the world market, they are not part of one of the world?s three main trading blocks. And unlike Taiwan, South Korea, Brazil and Israel during the height of the Cold War, they are unlikely to get privileged access to these blocks. This is going to hamper their development, even if they are not subject to retaliation for their own tariffs. This is not an impossible obstacle to overcome in some areas if the necessary investment is made, but it is going to be a drag on growth, until either other blocks are developed, such as Mercosur in Latin America, or the developed countries open up.

IN THE POOREST OF COUNTRIES, often with failed states or bordering on failed states, all that can be hoped for is that a sufficiently strong military force emerges that decides that it wants to develop the country. This could be a guerrilla army like in Mao?s in China or Castro?s in Cuba. It might be a section of lower ranking officers taking over like in Syria in 1963. Using support from peasants, students, workers and the poorer urban middle class, they took complete control. Almost the entire industrial and service sectors of the economy were nationalised and farming was collectivised. The Soviet model of quantitative planning was used to extract resources, mainly from the peasants, in order to develop the economy.

It was a crude but effective model. When Mao seized power in Peking, China was the poorest country on the planet, having been torn by decades of civil war and foreign occupation. Quantitative planning hauled China out of poverty and laid the basis for it to become the largest economy on earth. Cuba created a health and education system that was the envy of most developing countries and better than some developed countries. For countries such as Congo Kinshasa or Somalia, such achievements would be the realisation of a dream.

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EndNotes
These will be available along with Part 5.

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