Draft Topic for our ‘Transformation, a Manifesto for Democratic Socialism‘ … Published: 5 July 2021
Today, it is clear from the profound vacuum that exists in politics, that working people cannot yet see how to solve the pressing problems facing themselves and the planet as a whole. Contributing to this is the lack of any serious ideology on the Left. In this Manifesto, we seek to help fill this vacuum with a new and positive programme for the transition to a democratic socialist society. Not a vague set of abstract slogans, but a series of practical steps that working people could carry out if they were to come to power in any particular country.
Revolution and Transformation
Clearly, the deep and growing problems facing the world demand a huge change in the way that human society is organised. Nothing short of a social revolution is called for in the way that we produce and distribute wealth. And in how we relate to each other and to nature as a whole. But, past revolutions of the historical wheel have all too often veered off track. As a result of their weaknesses in resources, form or execution; and their isolation in a capitalist world, such revolutions have ended up in a gross and damaging distortion of their original aim. In the process, the children of the revolution have usually been crushed. Above all, such social revolutions have shown their potential to be reversed. To be defeated by counter-revolution.
What conclusion can we draw from this? That more than a Revolution, we need a complete Transformation. Like the transformation of the caterpillar into the butterfly, we need to advance beyond capitalism in such a way that it can’t be reversed. Establishing a new democratic socialist society that is so successful and so embedded in people’s consciousness, that there will be no going back to the greed and destructiveness of the old system.
And while beginning in individual countries, this Democratic Socialist Transformation must be international. Not restricted to a few nations but spread across the globe.
Not a Utopian Dream or a Blueprint
To achieve such a transformation, we are not looking for a utopian dream where ‘everything will be fine after the revolution’. Some kind of ‘promised land’ where all of humanity’s problems have been solved. And where we live in perfect harmony with nature. Rather, we fully recognise that there will always be change and conflict. And choices to be made. Even in an age of abundance there will be priorities still to be decided.
Nor are we proposing some kind of highly specific scheme, some kind of blueprint that attempts to go into minute detail. On the contrary, we need an overall plan that provides the general principles and direction of travel. Not an elitist programme that springs from our own minds. But one that will need to be supported and fleshed out by working people and their organisations. Not an artificial project divorced from reality, but one that utilises the existing resources and ideas of today and takes them in a new, progressive direction.
After all, a precise and intricate approach would be pointless as we don’t know where and when a decisive change in power will first occur. Each country is at a different level and has different potential. This will obviously affect what can be done and how quickly. Rather, what we need is a workable outline for transforming society. An outline that lays down a set of principles which can be used to form the basis of detailed action programmes at a national level; and that will form the core of any new radical government’s platform.
Trial and Error
No system in history, including capitalism, sprang into existence ready-formed. It took generations of trial and error to develop that system. One of the mistakes often made in the effort to create socialist societies in the past has been to impose abstract schema on a country. And all at once. This was one of major blunders made in the Soviet Union when Stalin introduced collectivisation into agriculture from 1928 onwards. Or by Mao, three decades later, when he pushed through the Great Leap Forward in China in 1958. The result in both cases was a massive fall in agricultural output and the starvation of untold millions. It was mistakes like this which convinced Deng Xiaoping and the Chinese leaders who have followed him to advance through experimentation.
Creating a Democratic Socialist society will be no different. This is particularly true given the different conditions applying in each country and continent. There will be a lengthy transition in which experimentation will be key to successfully implementing our new approach. Testing will be needed to try out different ideas in order to see which methods work best. Trying out new concepts in a few regions and sectors first. Learning from that experience and then applying those lessons across the whole of society. This is the scientific approach which we as scientific socialists should follow as we implement our ideology of advancing the living standards and interests of the majority of the population (rather than a small minority as under capitalism).
We do not assert that humans are innately good or bad. Dialectically, we recognise that there is both negative and positive potential in human nature. As such, we do not vainly hope to create a system where humans only act on their positive impulses. Such a perfect society will never exist. Instead, we seek to develop a democratic socialist society that consciously builds on and encourages the positive aspects of humanity and minimises the negative. And which strives to live in harmony with the natural world around us.
This is in direct contrast with capitalism which by its very nature amplifies all the worst aspects of humanity. Where increasingly greed and selfishness, cheating and dishonesty rule. And such values are tolerated because so many under capitalism have risen to the top this way. If we all cheated on and stole from each other then life would become intolerable and virtually unworkable. Limited levels of trust are necessary to get things done. But in a world of cutthroat competition such trust increasingly breaks down.
Indeed, capitalism is a society in which the criminal world is just the illegal face of the official system. This is no wonder when the whole morality of capitalism is based on exploitation and alienation; cruelty and oppression; corruption and favouritism. In its very DNA, capitalism is unjust and discriminatory – instigating racial and sexual division, violence and militarism. And then tries to cover it all with a hypocritical mask of virtue and civilisation.
Democratic Socialism stands for the exact opposite of capitalism. Its values are based on democracy and participation; openness and transparency; sharing and cooperation; solidarity and unity. Its morality is based on love and trust; generosity and honesty; kindness and respect, care and selflessness. The very values of family life that we hold dear but which run counter to capitalist ideology. A democratic socialist society is one which seeks to put these values into practice and where they would be glorified. And through socialisation, education and a democratic media to inculcate them into this and future generations. In this way, society’s institutions, culture and guidance can bring out the best aspects of humankind. While this would not eradicate all negative human behaviour, it would certainly greatly reduce it’s baneful influence.
Do the Ends Justify the Means?
Given that these are our values, one important question has been posed in past examples of revolution: can we set aside our values in order to achieve victory, or to secure it? In other words, do the ends justify the means? The experiences of the past have answered both questions in the negative. Those who have used dictatorial methods in order to achieve democracy and socialism, have achieved neither. Rather, they have corrupted and distorted themselves. And discredited the movement they claimed to represent. No wonder that so many people today are cynical and sceptical of socialism. Not only must we strongly affirm our commitment to democratic socialist values, but show in action that we will abide by them in good times and bad. Thus, ‘we need to be the change we want to see in the world’. With our organisations reflecting as much as possible the society we are trying to create. Only in this way can we begin to regain the trust of working people in our movement, and in our ideology.
While capitalism was responsible for greatly developing the world’s economic forces and much of the technology we see today, it is also the cause of most of our present ills. Capitalism’s encouragement of the exploitation of humanity and the environment for selfish and short-term profit has produced today’s natural destruction. And the great and widening differences between the super-rich and the rest of us. Producing an extreme level of inequality in both power and wealth. And not just between individuals but between nations too.
The greed that drives capitalism has created wide-scale crime and corruption. Its destructive and divisive competitiveness has generated discrimination and war. Its indifference has bred widespread poverty and hardship. And its blind and short-sighted abuse of the natural world threatens both the future of mankind and our fellow species.
Capitalism’s worship of individual wealth and ownership at the expense of everything else, has thrown up increasingly powerful and damaging forces. It is a system dangerously out of control. A system that must be replaced if humanity is not only to flourish but even to survive.
So the bedrock of our ideology is the need to replace capitalism with a different and better way of organising society. But what to replace it with?
As we have shown in the first half of this Manifesto, past attempts to create a new society through the state-dominated system in the Soviet Bloc, or through social democracy in the capitalist nations, have ultimately failed. In both cases, while major gains were achieved, working people ultimately ended up powerless. Contrary to the intentions of the founders of the socialist movement, these two ‘socialist’ experiments ended up creating bureaucracies in which the majority remained ruled over rather than ruling. Creating a ‘public sector’ in which the ‘public’ had no real say.
On the other hand, capitalism’s claims to be democratic are becoming hollower by the day. The control of the media by the wealthy and the powerful; the employment of increasingly effective public relations techniques; and the use of fake social media; all have combined to make a mockery of rational public discourse. In this way, the super-rich elite are too often able to manipulate and divide the electorate. And get them to vote against their own interests.
In any case, capitalist democracy has always been highly limited. Allowing wealth to have an inordinate influence on elections and on the politicians elected by them. Even then, capitalist democracy does not extend to the economy or most institutions of society which are still run in a dictatorial fashion.
It is increasingly apparent that the lack of power is now the key problem for working people. The question of who controls society and in whose interests. The answer to this question forms the two halves of our ideology. Firstly, to make a genuinely democratic public sector the leading force of the economy, and society as a whole. One in which the exploitative chaos of capitalism is replaced by a truly participatory form of public planning, investment, innovation, ownership and services.
Secondly, to ensure that the people really control that economy and society. Not just able to cast votes in distorted and unfair elections through which we periodically elect national and local representatives. Representatives who can be corrupted and are free to impose decisions upon us.
Rather, we need to add to our limited democracy a new model of continuous, participatory, active democracy. A model based on the principle that whenever a citizen is affected by a decision he or she should have a practical way to influence that decision. That there should be “nothing about us without us”. Only in this way can we begin to end the alienation that excludes us from power over our day to day lives. And to end the exploitation that inevitably results from such powerlessness.
For this, we need a model that makes the representative democracy we have today truly accountable and transparent. And combines it with newer forms of direct democracy and jury-style citizen panels. Not in a way that weighs us down with interminable meetings or constant votes over minor issues. But a model that for the first time allows us to have a say in all the key issues and major controversies that concern us.
To achieve this, a political, social and economic movement is needed of working people that puts genuinely participatory democracy at the heart of its programme and its practice. For this purpose the old ‘Socialist’ label is no longer sufficient. A label that is associated for too many with a top-down, bureaucratic and inefficient form of governance. Our renewed version of socialism has to be based on a real form of democracy. One that firmly integrates the two concepts together. Thus, our goal cannot just be for ‘Socialism’ but must now be for ‘Democratic Socialism’.
Thus, Democratic Socialism is not about handing power over to the state. Rather, it is about empowering people, enabling them to gain control over the state, over society and over their own lives. And through this to make it possible for citizens to prosper and fulfil their human potential.
Similarly, socialists are thought to want to achieve equality by levelling everyone down. Of course, we want to end the obscene and wasteful levels of wealth held by the billionaire class. But for everyone else we want to level up. In the process, we recognise that people have different levels of talent and capacity. But we also understand that almost everyone has a special ability for something. Our task is to create a society which helps people to discover their hidden talents, and fosters and rewards them.
Nor do socialists want to abolish freedom of choice. In reality, most choices in capitalism are only available to the rich. For the rest their choices are greatly limited by their economic and social circumstances. Even most of the elite end up obeying the dictates of the system – the boss who is driven by his shareholders; the politicians who have to obey their funders; the billionaires driven by greed for increased power and status. Instead, a democratic socialist society would seek to greatly expand freedom of choice by raising living standards and security. And by providing increasingly improving facilities for education, leisure and culture. Not for the few but for all.
The Need for Unity
Of course, standing in the way of achieving the transformation of society are powerful forces. The wealthy class that dominates much of the world will not give up this power easily. Working people have overwhelming numbers and the potential to make this change. But only if we are united. Only then can we achieve hegemony over the ideas and forces of our capitalist rulers. Sadly, at the present time this is not the case. In the absence of a widely-held democratic socialist ideology, the various progressive movements that exist today are not only weak and confused, but deeply divided. Divided by gender, by race, by religion, by nationality, by sexual orientation and so on. This division between identity and class are false choices. Both should go forward together. We must continuously strive to unite the various campaigns for equality with the wider democratic socialist struggle for the transformation of society. In this way, the old slogan: “Unity is Strength” can be made a reality. And working people can gain power over society.
Our programme for the democratic socialist transformation of society is based on the following three main elements:
A Democratic Economy: a framework for the transition to a democratic socialist economy.
Democratic Public Power and Control: A new participatory model for a genuinely democratic society.
A Democratic Public World: Applying our programme at an international level.
TOWARDS A DEMOCRATIC ECONOMY
In outlining our Democratic Socialist Alternative, we should begin by looking at what the economic transition to a democratic socialist society would look like. But, why focus first on the economy?
While the economy is not the only thing that is important in life, our ability to improve living standards and to solve many of our problems obviously require a successful economy. As such, many of the things we want to do in society need finance to implement. For example, if we really want to free women we have to provide the highest standard of child care at the lowest cost, if not free, to all. This will require significant financial resources to implement. Similarly, if we want to stop climate change and restore the environment we need major public investment which will require a large financial outlay from society.
On the negative side, it was the ultimate failure of the Soviet economy, its stagnation and crisis in the 1980s that brought down the system. And it will be the success or otherwise of our future democratic economy that will determine if our democratic socialist society will survive and prosper.
After all, whichever countries begin the transformation first, they will have to compete with capitalism internationally for some time to come. Only if they have a dynamic, sustainable and advancing economy that proves itself more innovative and efficient than capitalism, will they be able to demonstrate the superiority of democratic socialism and become the dominant economic form on a world scale.
Not only that, the economy of any country is the substructure upon which the superstructure of society – its laws, politics, culture and so on – rest. If we are not able to create a stable and effective economic base then the future institutions of our democratic socialist society will not last, never mind maintain a future of abundance and relative peace.
Inevitably, the form that an economy takes, affects the values and morality of the society that depends on it. Thus, capitalism is the main source of the destructive competition, greed and division that we increasingly see throughout the capitalist world. Only if we are able to construct an effective alternative economy based on cooperation and sharing, can we hope to develop a future world where humanity and nature move forward in harmony.
So getting our economic programme right has to be the first consideration of our new democratic socialist alternative.
A Mixed Economy
Historical experience has shown that the economic transition to a democratic socialist society will initially be based on a mixed economy. Indeed, most societies in history have been based on mixed economies. For example, within slavery there were feudalistic forms. And within feudalism, capitalistic forms. If this was not the case how would it have been possible for feudalism to grow up within slavery, then challenge and replace it? Or for capitalism to build up within feudalism and when strong enough overthrow it?
Even after one system had been replaced by another, for a long time remnants of the old system remain side by side with the newly dominant economic form. Often for centuries. Just think about the example of slavery in the United States which operated side by side and in competition with the capitalist form. And eventually came to blows with it. Or consider how long feudalistic land ownership continued to operate in Latin America and parts of Africa, long after they had become capitalist.
Within capitalism today, we have both capitalistic and socialistic economic forms coexisting. In this particular version of the mixed economy, clearly markets and the privately-owned sector is dominant. Thus, the big companies and the wealthy elite drive the economy, decide on most investment and so on.
However, in addition to this prevailing private sector, we have a large non-capitalist sphere which includes publicly-owned companies, public services, workers cooperatives, a voluntary sector, as well as the household economy. Most of these have grown up inside capitalism in response to the needs of working people. Such socialistic forms point to the future. And they show that what we are proposing for our democratic economy is not invented out of thin air, but is firmly based on the economic forms that exist today. The difference is that we intend to transform these socialistic economic elements into democratic forms. And to make them the rising economic force in society.
During this transition to democratic socialism there will still be a pluralistic mixed economy with markets and elements of private enterprise, especially in the form of small and medium-sized businesses. There is absolutely no need to abolish markets and take everything into public ownership as they once did in the state-controlled societies such as the Soviet Union and China. Small businesses fulfill a valuable role in flexibly satisfying needs at a micro level that the larger companies either can’t or don’t want to deal with. They also provide a useful outlet for individuals who don’t want to work as part of a larger team but want to be their own boss.
But small businesses are not the driver of advanced capitalist economies. In most sectors 3-4 companies dominate over 90% of economic activity. Thus, big business dominates the economy. And it is on big business that we are focused. We intend to release the large enterprises from the grip of the small minority that own and control them. And use them for their selfish and often destructive purposes. These enterprises need to be brought under the ownership and democratic control of the majority of the population
So, the dominant and leading parts of the economy should and will make up the core of our democratic economy. Firstly, in the form of large democratic public enterprises and democratic public services; as well as in the voluntary and household sectors. Secondly, in the shape of cooperatives and collaborative peer production.
This democratic socialist approach to the mixed economy will be very different to the capitalist version. Instead of the pro-capitalist slogan (adopted in the 1950s by the German Social Democratic Party): ‘As much market as possible; as much state as necessary’; our democratic socialist mixed economy will be based on the reverse and enhanced principle: ‘As much democratic economy as possible; as much private economy as necessary’.
In this democratic socialist form of mixed economy, for a time there will be a “dynamic interaction” between the planned democratic sector and the market-influenced private sector. With both sides acting as a discipline on the other. Over time, by directly involving the workforce, consumers and other affected groups in governing economic activity, the democratic sector will become increasingly efficient and responsive to the needs of the economy. And as this evolves, the role of markets and the privately-owned sector will naturally decline. Thus, markets and private businesses will continue to exist within a democratic economy as long as the citizens find them worthwhile. But they will be well-regulated in ways that minimise exploitation.
At the same time, a mixed pluralistic economy helps preserve people’s independence. In the Soviet Bloc people were often entirely dependent for their employment on the state and its officials. And this put them in a very vulnerable position. If they stepped out of line they could end up in a dead end occupation without hope of fulfilling their education and intended careers. As the new model of participatory democracy becomes embedded and effective this will reduce people’s fears. And this need for economic pluralism will lessen.
For all these reasons, the transitional process to a fully democratic economy is likely to last a considerable time. Even when an individual country has reached the point where the democratic sector accounts for almost all of the economy, there will still be a capitalist world market operating. That is, until the democratic economic model becomes dominant worldwide.
For a Democratic Economy
In contrast to the dictatorially-run, capitalistic system that dominates most of the world economy, we propose a new democratic model consisting of five basic elements:
❖ Democratic Dynamic Planning
❖ Democratic Public Investment
❖ Democratic Public Innovation
❖ Democratic Public Ownership
❖ Democratic Public Services
FOR DEMOCRATIC DYNAMIC PLANNING
Everyone knows that planning is a sign of professionalism. Planning for things in advance is almost always superior to going into a situation unprepared. It gives us the chance to take what we have learned from the past and apply it to the present. Of course, we also need to retain an element of spontaneity. To be ready for the unexpected. But the process of planning allows us to anticipate many problems in advance rather than be surprised and derailed by them. And in this way to better shape the outcome in our favour.
Planning allows us to coordinate the various sectors of the economy and public services to better achieve successful outcomes. In this way we can begin to overcome the disorganisation of capitalism – a chaotic arrangement in which each company seeks to do its own thing, and each sector operates independently of the other. Planning permits us to start integrating the economy and to consider what each sector needs to do to properly deliver on the needs of society.
So for example, if we wanted to solve the housing crisis in a country, we would logically need to coordinate a range of industries to ensure that a serious programme of house and apartment building was carried out. This would require the coordinating of land availability; building companies; construction workers, steel, wood and insulation supplies; cement production; the provision of public utilities such as power, water and sewerage; and so on. Under market-driven capitalism, many of these resources will be mobilised in arrears. So the project will be started with its initial phases and the later requirements will be expected to be available on demand. But all too often such an unplanned and uncoordinated approach will result in shortages and bottlenecks with associated cost overruns. No wonder that so many projects under capitalist governments end up being severely delayed and massively over budget.
As we will examine in our next Manifesto section on Democratic Public Investment, the way out of the increasing stagnation and economic crises afflicting most capitalist countries, is to mobilise the expansion of their economies on a sustainable basis through the use of public investment. But this can only be done efficiently through planning.
If planning offers so many advantages, why then do the ideologists of capitalism oppose planning in society? And why do they ridicule the past socialist efforts to plan the economy. Rather than properly evaluate the successes of such efforts as well as their shortcomings? Even more strange, why do the capitalists completely ignore the key role that planning is playing in the incredible economic advance of China today?
It is not that the capitalists are against planning in principle. In fact, it is in order to avoid the chaos inherent in their pro-market ideology that the capitalists do use some elements of planning. But for whose benefit? As fellow Socialist Network contributor to our Manifesto drafting process, Jonathan Clyne, in his ‘Transition to Socialism 4.0’ points out: “Central planning is inevitable in a developed economy. The question is by whom and for whom.”
In practice, all the big companies utilise planning to a great degree for their internal operations. They plan for everything inside the company: their research and development; their customers; their product design; their labour force; their ordering and supply; their production; their marketing; their logistics. Everything that is possible to plan for, they will plan. And to this end they use massive computing resources. Even super computing and drill-down big data.
All of this is essential to the success or failure of the big companies. And represents one of the major advantages they have over their smaller competitors. In the big companies the management fully understand the advantages of advanced planning over ‘making it up as you go along’.
But the same companies vigorously object to external planning. They strenuously oppose planning that is imposed on them by governments or society as a whole.
Ironically, it is the reverse situation when it comes to competition and coordination. Outside the company the owners are all for competition (at least in public). But inside the company the bosses are all for cooperation and coordination. They fully understand the benefits of both aspects without which their company would tear itself apart at the seams. A high degree of division of labour has developed in large-scale production and distribution where one worker depends on the efforts of another in a chain. This is a clear example of cooperation and interdependence without which modern industry would break down.
Such levels of cooperation have also spread to the white collar side of the big companies. Anyone working in a large company today will be familiar with the constant emphasis on the need for ‘team working’. Employees are urged to be team players, operating together for the good of the company. And this makes perfect sense. While there have been occasional attempts to introduce competitive systems into companies, setting different divisions against each other. Such efforts have usually yielded disastrous results and been dropped.
Why then, this contradiction in the policy of the big companies between what their practices are inside the company, and what their policies are outside in society as a whole? Why support planning and coordination inside the company, and oppose them outside the company?
The answer is all about power. Inside the companies the management have complete control over the elements of their business and can direct them to the central goal of increasing the wealth of the owners and their management representatives. Thus, the dictatorial nature of the company can ensure that the planning of resources, and the cooperation and coordination of its employees, is focused on the firm’s profits. And anyone objecting to this central goal is rapidly excluded.
But this is not the case outside the company. Or in society as a whole. Outside, the management of an individual company is in competition against other companies. And its success is usually at the cost of another. This is not a situation where cooperation works.
Similarly, an individual company is not able to dictate what society wants in general. In fact, society is likely to demand things of the company that it doesn’t want to do. This is because society is often dealing with the negative outcomes caused by these companies. Or by the things they have failed to do. For example, a firm may not be providing a safe environment for its employees. Or it may be producing unsafe products for its customers. Likewise, it may be polluting the environment or failing to invest sufficiently for the future. In such situations, planning by society will demand actions from the company that may increase its costs and reduce its profits.
That is why companies normally object to cooperation and planning in the economy. And use their social and political influence to reduce it to the minimum. However, there have been historical exceptions to this.
Planning within Capitalism
In the political situation of the immediate decades after the Second World War that we examined in our earlier Manifesto section on Modern Capitalism, capitalism was forced to temporarily accept some aspects of socialist economic policy. At that time, the rapid growth of the post-war USSR economy increased the pressure on the capitalist governments to imitate some aspects of the soviet economy. But naturally they did so in a pro-capitalist way, in the form of state capitalism. Thus many advanced countries adopted elements of planning and state intervention in their economic practice. As Jonathan Clyne explains: “Government planning in capitalist countries before the neoliberal epoch was called indicative planning. The government was indicating, and perhaps subsidising, what would be good areas to invest in.”
As such, in the era of the Post-War Settlement there was considerable planning carried out at national and local level by the advanced capitalist states. Planning for the building of infrastructure. Planning for the spending of national funds for research and development. Planning for the activities of state-owned enterprises and public services. Planning for housing and industrial development.
This use of Indicative Planning was also applied to some extent to individual industrial sectors. In various countries, such as France, the state intervened to identify and promote leading companies as national champions. All this helped the capitalist countries to move forward successfully in the post-war decades. However, the falling rate of profit and investment inevitable in the further development of the capitalist economies, began to seriously undermine the corporatist consensus that had underpinned this process. By the late 1960s Neoliberal ideas which directly opposed state planning and intervention began to come to the fore. And once the economic crisis of the 1970s broke out, Britain and the United States increasingly led the way towards the abandonment of such planning and state intervention, along with the post-war economic strategy as a whole.
Meanwhile, in certain developing capitalist countries, governments went much further than the limited efforts at planning and coordination in the more advanced economies. The east Asian states, Japan, South Korea and Taiwan in particular, adopted what came to be known as the Development Model. These states had emerged from the Second World War in ruins. Their economic circumstances were desperate and demanded more decisive measures if they were to modernise. Accordingly, these states took the state capitalist model much further with their governments playing a far greater and coercive role in the economy.
Identifying which of the latest technologies to build their economies on, the East Asian capitalist governments instructed their business elites where to place their investment in research and production. And forced them to cooperate in production where necessary. Fortunately for these countries, they were operating under the supportive umbrella of America. This included not having to spend much on the military, most of which was provided by the United States. It also entailed having ‘favoured nation’ status which allowed them to export to the US without having to pay tariffs.
The result of this heavy government intervention and favourable international environment were spectacular rates of growth. Growth that enabled these East Asian states to break out of the poverty trap and join the select group of developed nations.
Despite the relative success of planning and state intervention in the advanced capitalist countries, the world economic crises of the 1970s and 1980s consigned these ideas to the museum. At least among the capitalists and their neoliberal spokesmen. Now, it all seems a distant memory.
As a result, today we live in an economy where all the old chaotic features of capitalism have resurfaced. Albeit at a higher and more destructive level especially when viewed in terms of the planet’s deteriorating climate.
The Boom-Bust Business Cycle
One of the inevitable downsides of a capitalist economy is that it is made up of separate, competing and relatively autonomous private companies. These companies inevitably end up doing their own thing without reference to the needs of society as a whole. One of the strange results of this arrangement is the destructive boom-bust business cycle.
Under capitalism, when capitalists become aware of a highly profitable sector they naturally seek to invest in it in order to partake of the feast. This knowledge circulates in various ways so that other capitalists become attracted to the sector and invest in it. However, the lack of centralised coordination and planning means that while companies and investors may get to know of attractive investment opportunities, they don’t know if and how their rivals intend to take advantage of them. As a result many of them wastefully invest in duplicate production or service facilities. This inevitably creates a situation of oversupply which ends up with a glut in the market and a major fall in the prices they can charge. Thus the promising high rate of profit that had attracted their investment in the first place disappears and is turned into its opposite. The investors start losing money and thereby fail to realise their investment.
The result is that many of them are forced to get out of the sector – usually the weakest and resource poor – close down their production, lay off staff and lose their capital. Then, just as with the earlier period of over-investment, the lack of coordination within the capitalist market leads to a process of over-destruction of facilities with a greater reduction of productive capacity than is needed. This then leads to a situation of undersupply and shortage. And a resulting rise in price and the rate of profit. In other words, back to where the process started. Thus, the cycle starts all over again.
In the meantime, all this has led to a tremendous waste of capital and production. At the same time, it has caused major economic and social disruption for the workforce involved. Often this can mean the ruin of many workers and the small businesses that were dependent on the sector. Moreover, it tends to further concentrate ownership in each sector, reducing the number of small companies and increasing the domination of the biggest enterprises.
This widespread wasteful and destructive pattern of capitalism is well known to anyone in business. And is present in all sections of capitalist production. For example, in mining, agriculture and traditional manufacture. It equally affects the latest areas of new technology. Thus, we see repeated cycles of boom and slump in the computer semiconductor and solar panel sectors.
This damaging cycle of undersupply and overproduction is inevitable in a capitalist market. Even if all the players knew what the overall size of the market would be (which with the lack of planning they don’t), the problem would still occur. Because of the lack of any central coordination, each capitalist would still be seeking to increase their share of the market and therefore ramping up their individual production. Thereby, collectively producing too much. And later cutting back in the same way.
The boom-bust cycle does not just operate in individual sectors. It is also active across the capitalist economy as a whole. In those periods of capitalist upswing the effects of the overall cycle are less noticeable. But in periods of long decline like we are living in today, the downward part of the cycle bursts upon us dramatically. And brings with it mass unemployment and poverty. Moreover as enterprises grow bigger and bigger; and society grows more complex and interdependent, the atomised decision-making of firms, and the booms and slumps that result, creates even more destructive outcomes.
Ironically, the great loss of production and resources incurred by the chaotic capitalist boom and bust business cycle is referred to in the economics profession as “the process of creative destruction”. This so-called ‘creative’ destruction not only causes widespread suffering among working people. But, it also represents a huge waste of human effort and savings. And is a great drawback for business development, increasing the risk of failure for new firms. More widely, it is a major element of instability in the economy and society as a whole.
Socialist economist, Pat Devine, explains how the capitalist boom-bust cycle works across the economy as a whole: “In the upswing, when expectations are buoyant, enterprises invest in order to take advantage of the increasing demand. This occurs throughout the economy and for a time the growth of capacity in the different branches of production is mutually reinforcing, with respect both to the availability of necessary intermediate inputs and to the multiplied and accelerated generation of demand for their output. Eventually, however… the accumulation of productive capacity outstrips the possibilities of selling its output profitably, expectations change and a cumulative downswing sets in. Boom gives way to slump, capital equipment is scrapped, workers are unemployed and resources are generally wasted.”
Political theorist, Mark Fisher, expressed the madness of the capitalist boom-bust cycle in more psychological terms: “With its ceaseless boom and bust cycles, capitalism is itself fundamentally and irreducibly bi-polar, periodically lurching between hyped-up mania… and depressive come-down. The term ‘economic depression’ is no accident…”
Part of any modern definition of capitalism usually includes the concept of free markets. Certainly, this a core aspect of the neoliberal ideology that continues to dominate capitalist economic thinking.
Implicit in the ideology of markets is that all the suppliers and purchasers in the market are equal. That there is a level playing field in which no-one has a built in advantage over the others. But reality is the opposite in the advanced capitalist economies with two or three large companies controlling 90% of each sector. These large companies distort the market in a multitude of ways. They undermine competition in each sector and the economy as a whole. They drive up prices and remove much of the incentive for innovation.
But there are many kinds of markets. Some are useful and necessary. Some are quite the reverse. As British socialist Ken Coates notes: “‘The market’ has a nice, old-fashioned ring to it; shopping on Saturday morning among the stalls in a market place, where those who seek to sell their wares have to respond to the demands of the buyers, charge a fair price or fail to clear the stock they brought. Most markets are not anything like that. The market comprises in effect many markets: labour markets, housing markets, commodity markets, money markets… as well as the supermarkets and the corner shop and market stall.”
For example, a local fruit and vegetable market does not operate in the same way as shopping in supermarkets. It is easy to walk around a local market and compare prices and quality. But, far less easy to go back and forth between supermarkets. That is why many families choose a particular supermarket for its convenient location, size, pricing, etc. And do all their weekly shopping there. Supermarkets deliberately make this choice difficult by offering specially low prices for selected products as loss leaders. And then rely on you buying other products there for convenience. Similarly, an upmarket supermarket may attract customers by offering some products at a higher quality, but then provide many that are exactly the same as elsewhere but a little more expensive.
Supermarkets often also take advantage of being in a shopping centre which attracts people for its other shops, eating facilities, car parking etc. We only have so much time and energy after all, and retailers play on this. In these and many other ways, individual stores gain advantage over smaller shops. Thus, shopping is rarely conducted on a level playing field.
One of the myths is that socialists are against competition. This is not the case. What we are against is destructive competition. Healthy competition is a very different matter. It has a vital role to play in spurring on achievement while providing excitement and entertainment in life.
Scottish socialist Alan McCombes in his brilliant book ‘Imagine, A Socialist Vision for the 21st Century’ sums this up as follows:
“Socialism would not seek to abolish competition, but to channel it in a different direction. There are two types of competition: negative, unhealthy competition, which is about exploiting, humiliating, injuring, killing, or conquering your opponent; and constructive, healthy competition, which is about testing your skills and talents against those of others, and in the process raising everyone’s standards.
Under capitalism there is little genuine healthy competition. Rivalry between businesses involves the bigger, wealthier corporations driving their weaker competitors to the wall. Rivalry between nations involves bigger, powerful states grabbing resources and territory from their smaller neighbours.
In society as a whole, competition, far from being suppressed, could be directed away from the accumulation of money and power into more constructive channels, such as music, sport, literature, painting, film-making, songwriting, sculpture, architecture, or photography. Sport and popular culture could be subsidised in a future socialist society as ballet, classical music, and opera are in this society.”
A key theoretical motivator for the early Neoliberal capitalist movement was its argument that markets and pricing were far better than a planned economy for generating accurate information about customers’ wants. And then satisfying these wants with available products and services. The neoliberals argued that this automatically led to efficiently matching demand with supply. That this accurate information formed the basis of a dynamic process in capitalism through which investment and production flowed quickly to where it was most needed. In contrast, a planned economy not only involved artificial government interference in the operations of the economy. But, it was based on inaccurate, out-of-date information that created massive distortions in the supply of goods and services. As well as in many other aspects of the economy.
This theory formed the core of the neoliberal founders, Ludwig von Mises and Friedrich Hayek’s economic critique of the Soviet economy. And formed a key part of the ‘socialist calculation debate’ that began in the 1920s between socialist economists and their capitalist counterparts.
There was obviously considerable truth in this capitalist critique of the centralised, rigid and bureaucratic planning system that operated in the Soviet Bloc. To make matters worse, this was in an era before computers, where attempts to accurately and rapidly analyse the performance of different branches of industry and the economy as a whole, was an almost impossible task.
But there was a major flaw in this capitalist critique of planning. Namely, the assumption that in real life markets yield accurate and timely information to which prices respond free of interference. But this is not what really happens. Just like the rest of capitalist economics, this is based on an artificial model of perfect markets that do not exist. In the real world, markets are manipulated by powerful economic forces. Such as artificial shortages, price-fixing, monopoly, the business cycle, political action, corruption and so on.
Even at the best of times, customers never have genuinely equal access to products and services. Their buying decisions are influenced and limited by a myriad of factors. Not least by their lack of sufficient knowledge about the alternatives on offer.
The more sophisticated that products become and the more complex the economy, the more difficult it is to acquire information on them in the marketplace. Anyone trying to purchase home electronic products online can testify to the difficulty in choosing which is best for their needs. The manufacturers even get fake positive reviews posted up in the online marketplaces like Amazon.
This is even more the case in markets that cater for business and finance. One of the big advantages of the rich is their greatly increased access to information. As sociologist Colin Crouch, explains in his excellent book ‘The Strange Non-Death of Neoliberalism’ “The problem is particularly severe in financial markets, where the wealthy can afford highly skilled professional advice to help them in their decisions, enabling their incomes to grow much faster than those of small investors. Similarly, organizations are in a better position to acquire information than are individuals. This means that producers are likely to be better informed than customers…, employers better informed than employees, and large firms than small ones.”
The lack of a level playing field for consumers and smaller businesses in the market is becoming ever more crucial as human knowledge and expertise take on an increasingly important role in modern capitalism. Nowhere is this clearer with the emergence of Big Data as indispensable for effective sales and marketing. The collection of data about customers and citizens is now prevalent throughout society under what has been well described as Surveillance Capitalism. Quite correctly we don’t trust the corporations with our information which makes us all more vulnerable to targeting and commercial manipulation.
Lack of Consumer Power
Contrary to the myth, markets provide very limited power to the consumer. As passive agents in the production chain, consumers have to accept what is on offer. In truth, the classic capitalist retail mottos “the consumer is king” or “the consumer is always right” have little meaning in practice. Consumers have no real say over a product or service. Over its design and functionality or its quality and durability. Even over its price and availability. Their sole influence over a product or service, even if an important one, is whether to buy it or not. In this way, the relationship between the seller and buyer in a capitalist market is a passive one. It is essentially a ‘take it or leave it’ position.
Indeed, the more each sector becomes dominated by a few giant companies, the more our choice as consumers is reduced. Even on price, consumers are being increasingly ripped off. With choice limited to a few overpriced brands which use their muscle in the market to overcharge us, while wasting fortunes on packaging, marketing, sales operations and distributor margins.
Market research does offer the possibility of gathering useful knowledge on the wishes of the consumer. But even this is distorted by the control of the companies who mainly use such research to seek information that fits within their existing strategies and short-term profits. Rather than genuinely seeking to learn about and satisfy consumer needs.
Colin Crouch, who describes our current era as a ‘post-democracy’, comments that “Although in principle the market is governed by consumer sovereignty, consumers cannot decide what products will be made available. Only firms can do this. The consumers’ role is a passive one… And since the firm is the only proactive participant in the market, the more that we live in a society that privileges the market, the more we live in a society that privileges the firm as the source of any human creation.”
The logic of market forces lead to major geographical inequalities and imbalances. Economically successful areas tend to attract more investment while the other areas fall further behind. Sometimes this is because at one time an area had some advantage such as a suitable port, or better land for agriculture and mineral resources. Those living in unsuccessful economic areas tend to suffer poverty and decline. Under capitalism people are then expected to travel from the depressed areas to the more prosperous ones. This leads to all kinds of problems including the break up of families. In most capitalist countries large sections of the population end up living in different areas from where they were born, away from their relations and the cultures they were familiar with. This situation is then replicated on an international scale with forced economic migration from one country to another.
On the other hand, many families just can’t afford to move. And thus are forced to remain in depressed areas and in poorer countries. All this is completely unnecessary and arises because of the lack of positive planning of economic life. Under capitalism, we don’t collectively determine our economic fate. It is largely decided by the market and we are expected to accept the negative outcomes as inevitable. “The anarchy of production, even when called the invisible hand, closes workplaces, undermines communities and destroys valued cultures and ways of life. In doing so it causes misery and despair and also the bitterness and anger which have motivated struggle against closure and unemployment through the ages… market forces act blindly and those affected are not involved in taking the decisions that affect them.” (Pat Devine)
One of the worst enablers of exploitation are labour markets. As if humans are products to be bought and sold, like pieces of meat or cans of beans. Future generations who are fortunate to grow up in a democratic socialist world will look back and recognise labour markets as yet another form of slavery. And wonder how we tolerated them. It was no accident that work under capitalism was described as ‘wage slavery’ by earlier generations, who compared it to life before capitalism. And through the contrast could see capitalism more clearly for what it really was.
In labour markets, workers are usually in a much weaker position than the employers who are seeking to buy their labour time. To this end, employers dislike full employment and favour a certain level of joblessness. This gives them the upper hand in their relationship with their employees. When there are enough workers unemployed, anybody refusing orders or resisting exploitation can then be threatened with the sack. And replaced by another worker desperate for work.
It’s not just our jobs that are at stake in the labour market, but how much we are paid. Wages in the labour market are in no way fair. They depend not only on one’s skill or hard work but on demand for labour in any location. Or on the fortunes of the sector one happens to work in. In some cases, wages reflect the bargaining position of the workforce in a particular part of the economy. For example, despite being highly skilled, nurses are often poorly paid because they are naturally reluctant to go on strike and leave their patients in distress.
Once you are working, wages are then at the mercy of the attitudes and decisions of the boss. That is why it is absolutely vital for workers to become organised in unions and to fight for their rights. But increasingly the economic climate combined with intimidation from employers are making it difficult for unions to recruit and organise effectively.In a democratic economy this situation will be very different. In contrast to capitalism, union membership will be encouraged and become the norm. The right of unions to negotiate will be automatic. And restrictions on the right of workers to withdraw their labour will be removed. Moreover, we will consciously pursue a full employment strategy in which work will become a right not something we depend on the whim of employers for. In such a situation the labour market will increasingly become redundant.
But this will still leave open the question of what people will get paid. In contrast to the unfair, transactional system that decides salaries under capitalism – a system that causes great discontent among workers – in a democratic economy we would need to move towards a more legitimate way of deciding on salaries for each occupation and profession. One that begins with the creation of a genuinely representative workers and community commission that would fairly evaluate the different categories of work and recommend their appropriate level of remuneration. This evaluation would naturally need to take into account the levels of skill and training, danger and effort, and so on that are involved in the various types of work. And be updated periodically to reflect the changing nature of the economy and the work it requires. The criteria, ratios and recommended wage levels arising from this assessment system would need to be approved democratically in a practical way. And be introduced and tested in phases. Such a commission would also need to be flexible enough to react to major wage disputes and update its criteria accordingly.
Without such a fair, transparent and democratic alternative to the market method for the setting of wages, the transition to a democratic socialist society could face many difficulties. For one thing, the empowered workers will naturally be impatient to use their new-found power and consciousness to end exploitation and rectify injustices. If no fair and open system is available to resolve their disputes, they will understandably exercise their right to take strike action. Which could cause great and continuous disruption to society.
The Advantages of Planning Over a Market-Driven System
One of the problems in the debate between planning and markets is that the neoliberal capitalists tend to talk about markets in theoretical, abstract and ideological terms. Instead, we need to differentiate between those markets that are really useful versus those that are inherently destructive. And in the transition to a democratic economy we need to identify what rules are needed to ensure that the markets we do retain produce positive results.
Even more important, we should avoid arguing against markets in general, but rather oppose the concept of a market-driven and dominated economy. In such a society solidarity between citizens is increasingly replaced by dog-eat-dog competition. And the old principle of treating others in the way we would want ourselves to be treated, is more and more changed into a philosophy that justifies manipulation and exploitation.
In this type of economy, the invisible hand of the market effectively removes human agency in the direction of our economic life. As Pat Devine in his excellent book ‘Democracy and Economic Planning’ explains: “Since each capitalist takes decisions independently of all other capitalists… resources are allocated and reallocated between different uses without any conscious overall decision or direction. The overall outcome is willed by no one.”
Likewise, on an individual basis a market-driven economy atomises people and encourages short-termist individual solutions without thought to the effect on others.
The underlying case for planning in a society where a democratically-run public sector leads, is that it allows for us to consciously direct economic life and make the best use of our resources. Instead of private enterprises planning and making decisions independently of each other for the narrow self-interest of their owners, planning allows us to coordinate economic activity for the benefit of the citizens as a whole. Rather than economic decisions being taken by a multitude of competing organisations in a shortsighted, chaotic manner; planning offers us the opportunity to adjust and shape our economic activity in a rational, integrated and long-term way.
One simple example is how we deal with unforeseen emergencies. Planning gives us the chance to anticipate possible threats. And prepare the resources and procedures needed to minimise them. The market-driven capitalist economies with their short-termist approach are rarely able or willing to plan for emergencies. The latest example of this can be seen in the response to the Coronavirus pandemic. This pandemic was not the first in recent years. In the last two decades we have had no less than five other international outbreaks of infectious diseases: SARS in 2002, Swine Flu in 2009, MERS in 2012, Ebola in 2014, and Zika in 2015.
In response to these recurring outbreaks, in 2014 the World Health Organisation urged all its members to conduct exercises to see how prepared they were for a worldwide pandemic. Many advanced countries carried out these exercises and identified various shortages of equipment and facilities. But most of them failed to rectify these shortfalls. Or even to carry out their own recommendations. For this reason, they were very slow to respond to the Coronavirus pandemic and lacked the facilities to handle it. As a result, millions died unnecessarily.
Contrast that to China’s reaction. Its experience of the earlier outbreaks had caused it to introduce fast reporting procedures, stockpile appropriate equipment and prepare quarantine plans. Thus within three days of the appearance of Covid-19 in a hospital in Wuhan, Chinese medical staff were able to identify the virus and report it to the World Health Organisation. And then to notify the American Centre for Disease Control the following day. Granted that local authorities then fumbled their response in the following three weeks, thereafter China’s national leadership introduced a full set of quarantine measures in an incredibly effective operation. Completely locking down the country for two months and wiping out the virus. During this period, it used its massive inventory of temperature testers to identify everyone with a fever and treat them immediately. For this purpose, it was able to effectively mobilise its medical staff, distribute stored personal protective equipment and stockpiled scanners, and thereby save thousands of lives. The result is that China was the most successful country in handling a mass outbreak of Covid. With only 4600 deaths out of 1.4 billion, the lowest number of global deaths per head of population. This was a classic example of the benefits of planning and preparation over spontaneous reaction.
The Planned Economy Experience
Earlier in our Manifesto we have looked at the experiences of the planned economies in the Soviet Union and China. In doing so we have seen the massive gains that were achieved by this planning process. Gains that allowed these extremely backward countries to drag themselves out of their backwardness into the modern age. But we have also honestly described the brutal and painful consequences that were experienced in this process. Experiences that inevitably flowed from the particular types of centralised command planning systems introduced, and the way that they were implemented by Stalin in the Soviet Union and by Mao in China.
The Soviet Example
As we explain in detail in our Manifesto’s section on ‘Socialism and the Soviet Union’, the USSR’s centralised system of command planning was by its very nature highly hierarchical, with the passing of directives downwards to subordinate units. As Jonathan Clyne from our Socialist Network explains: “Soviet planning was called quantitative planning. The quantities and prices of everything produced were decided, and supposedly balanced, centrally.”
Socialist economist, Pat Devine, accurately summed up some of the problems that flowed from this version of planning: “At the economic level this type of planning displays systemic inefficiency, biased information flows, absence of adequate feedback mechanisms, low priority to consumer and user wants, private attempts to by-pass the formal system and official attempts to enforce it… In such a system, bureaucratic arbitrariness, on the one hand, and individual dependence on hierarchic superiors, on the other, are likely to be the norm.”
The personal economic dependence inevitable in the Soviet planning system encouraged risk avoidance and discouraged innovation. It also led to many strange and contradictory outcomes. Leading development economist, Ha-Joon Chang, highlighted some of these: “Here was a country that could send men into space but had people queuing up for basic foodstuffs such as bread and sugar. The country had no problem churning out intercontinental ballistic missiles and nuclear submarines, but could not manufacture a decent TV – it is reported that in the 1980s the second-biggest cause of fires in Moscow was believe it or not exploding TVs.”
These types of problems formed the core of neoliberal criticisms of Soviet planning from the 1920s onwards. In particular, the neoliberals pointed to the inability of central planning to collect accurate information on demand and supply. And to be able to rapidly respond to it. As a result Soviet central decisions on production and prices were continually inadequate and often led to distorted outcomes.
The conclusion that was drawn by the neoliberals and is now the generally accepted view among capitalist economists and politicians is that “The limits of economic planning have been resoundingly demonstrated by the fall of communism. In complex modern economies, planning is neither possible nor desirable. Only decentralized decisions through the market mechanism, based on individuals and firms being always on the lookout for a profitable opportunity, are capable of sustaining a complex modern economy. We should do away with the delusion that we can plan anything in this complex and ever-changing world. The less planning there is, the better.”” (Ha-Joon Chang)
However, the incredible success of planning in China has spectacularly disproved this view.
The Chinese Example
As we have examined in detail in our Manifesto Appendix ‘Socialism and China – the Maoist Era’, in the immediate period after the Chinese Revolution of 1949, Soviet-style Five-Year planning was attempted with some success. But this was soon cut across by the disastrous ‘war communism’ years of The Great Leap Forward. And to a lesser extent during the Cultural Revolution that followed soon after. Nevertheless, the Chinese economy did significantly advance in the first three decades after the Revolution. Bringing with it rising production and industrial infrastructure, along with major improvements in health and life expectancy, literacy and public services.
But it was after Mao’s death in 1976, that the Chinese economy really took off. The emergence of a new leadership headed by Deng Xiaoping created the opportunity for a new type of planning to develop. As part of the now famous ‘reform and opening up’ era, many important changes were made by the Chinese Communists to the type of planning that had operated in the Soviet Union. These have proved to be highly successful in driving forward the Chinese economy and society. And in turning it into a growing superpower that now rivals the United States. This looks set to establish China as the leading economy of the world.
What were these changes in planning?
First of all, the adventuristic mistakes of the Mao era instilled a deep aversion to the rapid imposition of ideologically-driven turns in the economy. Instead, the new leadership approached the need for economic changes with caution: ‘crossing the river by feeling for the stones’ as the new approach became known. Accordingly, the new leadership emphasised the need for an experimental way forward, trying out new methods first in a few local areas. Only if these proved successful would they then be introduced on a national basis.
The first example of the new experimental changes came with the decision to allow peasants in one region to privately sell produce that was in excess of their state targets. This new arrangement proved highly successful. It spread rapidly and spontaneously across China as farmers grasped the opportunity to increase their living standards. The results were dramatic with agricultural output increasing tenfold in five years. This ended the food shortages that had bedevilled China for centuries. And opened up great opportunities for wider economic development.
The new Chinese leadership was greatly encouraged by this success. And emboldened to remove restrictions in other areas of collective and private enterprise. A key part of the new approach was a growing understanding of the failures of the Soviet Command Economy planning system. That trying to set prices and production targets centrally didn’t work well. Consequently, it was decided to let the market begin to find its own price levels, First in one sector then another. And to allow enterprises, state and private, to themselves decide on production to meet real demand. Thus, planning in China gradually became less ‘commanding’ and directing. And more ‘guiding’ and coordinating.
This less rigid and more relaxed approach was soon extended to participation in the world market, as part of the ‘opening up’ aspect of the new reform era. Special Zones were created to encourage foreign companies and foreign investment to come to China. The success of these first zones led to their extension to other areas of the country. First on the Eastern coast then further inland.
Inevitably, significant mistakes were made along the way. But the planning process learned from these mistakes. As such, it was becoming more flexible, incorporating feedback from the outcomes. These changes showed promising results. Over time, the planning process improved and became more accurate. To help with this, now the latest and most powerful supercomputers are used.
A Dynamic Planning Process
In these ways Chinese planning has evolved into a more dynamic system. One that is no longer guiding only the state-owned sector, but also the growing private sector. And the interaction of both with the world economy. In doing so, this process uses the state owned enterprises (SOEs), the public services, and the state-owned banking sector to take a strategic lead in implementing planning decisions. In the case of the state banks, the Chinese planning system determines finance and credit flows to reinforce the planning guidelines. These public institutions then provide a framework for the private sector to develop and operate in. Simultaneously, the private sector acts a constant discipline on the state sector pressurising it against arbitrary and inefficient production and pricing decisions.
Ironically, China’s Five Year Plans save private sector companies from having to do much of their own research on the economy and the market as a whole. It also greatly reduces the need of the private businesses for sector planning – the Five-Year Plan’s targets and forecasts provide a relatively reliable guide to future levels of demand and sector performance.
Another important development in Chinese Planning concerns the role of innovation. Over time, the need for innovation through scientific and technological research and development became an increasingly key part of the Chinese planning process. This involves consulting with leading technical experts around the world in order to identify the industries of the future so that China can be ready for and take advantage of them. That is why China was able to build up the world’s largest solar panel and wind turbine production capacity. And why it is now investing so heavily in robotics, artificial intelligence and quantum computing. To give just a few examples.
Over time, Chinese planning has become more sophisticated with national Five-Year plans reflecting a bidirectional process that flows from local to national level, and back again. Every local area and sector produces their own sub-plans which are collated together nationally. These are then considered as to how well they might meet national priorities. The plans are then amended accordingly and transmitted back down the chain.
Similarly, the planning system pinpoints what resources are needed locally and nationally to meet the planning targets. These resources will include what housing, education and infrastructure would be needed to ensure fulfilment of the plans.
The Power of Planning
For an example of the operation of this planning process, let’s look at China’s development of the new electric vehicle sector. For reasons of technological complexity China was never able to fully overcome the technical advantages of the existing foreign car companies. This, despite successfully encouraging them to locate large production facilities in the country. The petrol and diesel engines in modern vehicles are extremely complicated having been slowly developed over a century of design and production. Not surprisingly, the leading international car companies have protected their technological advantage in this field very closely. However, the Chinese government was able through its planning process to foresee very early on the potential of electric vehicles, with their greatly simplified engines. And to recognise that it offered a potential for China to leapfrog the existing automobile technologies and become a leading player in original global vehicle production. The new electric vehicle technology also had the great advantage of not polluting the air which had become a major problem in many Chinese cities.
Using its planning process, the Chinese government set about identifying all the elements that would be needed to deliver a successful electric transport sector. These included encouraging the development of a large-scale, home-grown electric battery industry – batteries being the most important and most expensive part of electric vehicles in today’s early phases. The government also set in place rules that instructed all car companies to come forward with electric models, while offering financial help with investment, research and development to achieve this outcome. This succeeded in kickstarting the technological know-how and supply side of the sector.
Likewise, the government found ways to stimulate demand by subsidising the selling price to the end user, while offering preferential terms for car use through the number plate system – in many areas electric car owners can now drive their cars immediately while internal combustion engine-powered car owners often have to wait up to two years to drive their new vehicles. Moreover, in many areas, local government set target dates for all buses and taxis to become electric. Meanwhile, the government at national and local level was also able to use its planning system to prepare the necessary factory facilities, housing for workers and logistics to ensure a relatively smooth roll out of electric production. Not least, it greatly expanded relevant college courses for the engineers that would be needed for the new sector.
The end results have been dramatic. China now produces over half of all the world’s electric cars. It dominates the production of electric buses, trucks, vans, taxis and motorbikes. And it is a major player in electric battery production. The large scale of production that has arisen from all of this has resulted in Chinese electric vehicles being much cheaper than elsewhere while matching the quality of anything being produced globally. Now we are seeing the emergence of a range of Chinese quality brands that look set to make major inroads in car markets in Europe, USA and so on.
This and other examples such as high speed trains, infrastructure building and green energy technology demonstrate the power of planning. Especially when combined with public investment. It also explains why China is able to build things so much more quickly and cheaply than any other country. This used to be explained away in the West by reference to China’s source of plentiful hard-working cheap labour. But the steady increase in real wages in China over the last decade no longer supports such an explanation. Clearly, something more fundamental is going on here.
Finally, for China’s latest 14th Five Year Plan, a new element of popular consultation was introduced. Specialist groups across the country were convened to examine and comment on the ideas and priorities being proposed for the new plan.
What conclusions can we draw from all this? As the old expression goes: ‘the proof of the pudding is in the eating’. The massive success of the Chinese economy has proved that the more dynamic and decentralised planning model that has evolved in China over recent decades works far better than anything that has been seen before. Either in comparison to the Soviet bloc of earlier years. Or the capitalist world of today.
For the purpose of developing an effective planning system for the democratic economy we are proposing, we can learn a great deal from China’s successful practice. But we don’t need to limit ourselves only to the Chinese model which inevitably reflects its historical experience and limitations. For instance, in the more advanced economies we shouldn’t need to rely on such a large private sector. Instead, we can meet demand with a more efficient and innovative public sector model based on the full participation of workers, consumers and other affected groups (for more details see our Manifesto sections Democratic Public Ownership and Democratic Public Services).
Of equal significance, the Chinese planning model is limited by its method of governance – being part of a top-down administrative system Chinese planning inevitably includes many unnecessary examples of bureaucratic mistakes and wastage. In contrast, we can go further than China by creating a much more democratic and participatory planning process. Thereby achieving a more efficient and responsive outcome. One that better meets the needs of working people.
The Alternatives of Market Socialism & Anarchism
There are a number of socialists who have tried to come forward with ideas that operate socialism within a market-driven economy. Then there is also the whole anarchist tradition. To their credit, both schools of thought have sought to seriously address how an alternative to capitalism could function in practice. Unfortunately, in seeking to avoid the centralised, top-down planning systems of the past, they have ended up abandoning the very principles of planning and central coordination. Instead they look to a utopian economy mainly consisting of self-governing, worker-run enterprises, which negotiate between each other.
While workers and other kinds of cooperatives must form a vital part of a democratic economy (see our Manifesto section on Democratic Public Ownership), in our view they cannot be the dominant part of such an economy. Certainly, a purely cooperative system may at first sight appear attractive. But it is essentially a micro-economic system that does not address the macroeconomic planning and coordination of resources that efficiency and equality demands within the economy as a whole. In practice, a mainly cooperative-based system can only entail a reversion to an earlier smaller-scale form of economic activity with great implications for lower living standards and reduced prospects. Instead of starting from where big business has left off, with its levels of advanced and efficient large-scale production, the market socialist and anarchist solutions would break up the large enterprises and try to turn the clock back to an earlier economic era of smaller economic units.
Being based on a multiplicity of small and inevitably unequal enterprises, we do not believe that such a system can take us forward to a cooperative and harmonious economy. Never mind a future society of abundance. Past experience such as in Yugoslavia shows that workers’ control of each enterprise does not by itself take the economy and society forward in a sustainable manner. Rather, it creates a situation where each enterprise has no choice but to destructively compete with each other. And thereby potentially creates the basis for conflict and capitalism to revive again.
Last but not least, an economy based mainly on self-governing workers cooperatives can only be partially democratic. By its nature, it excludes large sections of the population from having a say over the economy, including the retired, the disabled, those in education and so on. The same problem exists for the other types of cooperatives.
How a Democratic Dynamic Planning Process could work
The first and most obvious point is that planning must set realistic targets that relate to existing resources and potential. And which efficiently anticipate demand. This all requires accurate information provided on a timely basis. As we have seen in top-down planning systems in the past, such as in the Soviet Bloc, information was often manipulated to provide benefits for production units at each level. For example, targets were often lower than potential in order to reduce pressure on managers. Or performance overstated in order to falsely reach targets and secure rewards.
Fortunately, today we have fast computers which when combined with big data handling can instantly provide the data needed for efficient planning. Also appropriate algorithms can be used to spot misreporting and artificial distortions. Equally important, the empowerment of the workforce and consumers in a democratic planning system can add an important element of policing against false reporting by management.
In the early period of any transition to a democratic planned economy, it is inevitable that pricing will be greatly influenced by the market internally and on a world-scale. Past attempts to set prices centrally and artificially have not worked well. They have led to unnecessary shortages and surpluses. Or to black markets where products and services are sold at levels very different from the official price. We need to start with prices that reflect the real world situation.
That said, it should be our aim to begin to move away from the unstable and exploitative aspects of market pricing. Such as raising prices just because there is a temporary shortage even though the costs of production have not changed. This only penalises the poorer members of society and provides artificial profits for producers. Taking advantage of modern computers and automatic generation of data and feedback statistics, we can shift to a system where supply is quickly adjusted to meet demand.
Obviously, this will not always solve supply problems especially if there has been a natural disaster or major interruption. In such unusuals situations, customers can be kept informed of the situation so they understand why prices have increased. And in extreme cases, temporary compensation can be provided where needed to offset hardship. Nevertheless, as the planning of the economy becomes more accurate and more rapidly responsive, it should be increasingly possible to improve the balance of supply and demand. And to increase stocks to better cope with regular fluctuations. In these ways we can minimise situations where rising prices are used to respond to supply shortages.
On the issue of what prices to charge, a rationally planned society would move away from the capitalist ‘charge as much as we can get away with’ approach which exploits customers. And moves increasingly to a fairer ‘cost-plus’ system. In such a system the price of a product or service should reflect the actual costs of production plus an extra margin for further research and development. The introduction of transparency and participation of customer representatives will naturally play a major part in keeping prices to a fair level that reflects the actual costs of production. And build in motivation to keep reducing costs through innovation and efficiency.
As we explained above in our examination of China’s development, a key aspect of its success has been the evolution of its planning process. From the rigid, slow and top-down nature of the Soviet planning system which China copied in the early 1950s. To the flexible, experimental, decentralised and interactive nature of planning that the Chinese use today. This is a ‘dynamic’ system of planning which uses feedback and fine-tuning to improve the plan’s implementation as it goes along. And which not only guides the public sector but the private sector as well – the latest Chinese Five-Year Plan has identified some of the negative effects of privately-owned companies that have become too dominant in their sectors. And declared its determination to rein them in.
From the outset, the planning process for our democratic economy should also be dynamic. One that incorporates the best of the Chinese planning system. But goes further. For example, in the process of transforming those advanced economies which have moved beyond the early and middle phases of capitalist development, we won’t need to rely on such a large private sector. Especially one that includes huge private companies with all the problems of exploitation and monopolisation that they inevitably represent.
Even more important, we must adopt a genuinely democratic version of planning.
As capitalist firms become bigger so too does their impact on society. At the same time, their decisions taken independently of each other increasingly undermine any rational attempts to coordinate the economy and take it forward. In this way, the growing role of the big companies in the capitalist economies undermine democracy. How can governments elected on a progressive economic programme hope to carry it out if the main levers of economic decision-making are in the hands of giant companies? Companies whose interests have relatively little to do with the priorities of any national government. We saw a dramatic example of this in the modern phase of globalisation. Firms sought to invest and open up production overseas in order to reduce costs and increase profits. With the inevitable result that jobs were lost at home and workers bargaining power weakened.
In contrast to capitalism, planning in a democratic economy would empower the people’s control over the economy. The Red-Green Study Group in their ‘What on earth is to be done?’ summed up the alternatives well: “The democratic control we envisage over the economy means the ability to take conscious decisions over the use and distribution of society’s productive resources. So market forces cannot be the predominant mechanism for allocating those resources as it is under capitalism.”
For example, only democratic planning within a democratic economy can ensure a relatively even distribution of economic activity and resources. In this way, it can bring investment and well-paid employment to depressed areas and sectors.
Under democratic planning, for the first time consumers, workers, suppliers, small businesses and affected communities will have a direct say over the direction and impact of production. Such planning, if done transparently, would move the economy away from short-termism and encourage people to think of the medium and long term.
Just as important, democratic planning would tap into the creative abilities of the population as a whole. Thus planning would no longer be dominated by technical experts as it has tended to be even in the Chinese system. But could include good ideas and feedback from the whole of society.
In addition, the involvement of the public in democratic planning would encourage people to think not just of their own interests but of their communities and society as a whole – capitalism assumes that we are only motivated by individual selfish interest. But a lot of human experience exists outside the market. In the family, among friends, in the voluntary and household sectors and so on. In fact, voluntary effort is a much more important factor in the economy than people realise. Take the example of the blood sector. In many countries people donate blood voluntarily. In some nations like the United States, people are paid for giving blood. But blood donated voluntarily rather than for money is usually of a much higher quality. This shows that human solidarity can deliver better outcomes.
Indeed, in a world dedicated to the interest of the community as a whole, people will be more willing to sacrifice, to cooperate and to go the extra mile. We have seen this in times of crises such as the Coronavirus pandemic. But also in times of war and conflict. A leading advocate for media democracy, Dan Hind, gives an excellent example of this type of cooperation and solidarity in his book ‘The Return of the Public’: “During the Second World War the British population became less mentally distressed, contrary to the predictions of many psychiatrists. The sense of shared jeopardy and the introduction of universal services both served to reduce levels of what the social scientist Richard Titmus called ‘social disparagement’. The war brought a sense of common purpose and sharply reduced the levels of economic inequality. People felt dignified and elevated during the six years in which they worked together to save their country and their way of life; the war qualified hierarchies by asserting a civic equality. Overwhelmingly committed to the immediate task of national survival and to the creation of a new society after the war, the British became happier...”
Democratic planning in a democratic economy means that we will be placing our interdependence with others at the centre of our decisions. Such planning offers the possibility for citizens to better control their lives free from the wasteful and destructive outcomes of rule by a coercive market. In contrast, in a capitalist world with its unfair distribution of wealth and power, the pursuit of narrow self-interest is the main value encouraged and expected. In such a society people will tend to look out for themselves and to find ways round the rules.
Pat Devine, in his excellent book ‘Democracy and Economic Planning’ summarizes the case for democratic planning: “At its most general the case for planning is that, through conscious social decisions and action, it enables more effective use of society’s productive resources, in accordance with collectively and individually determined preferences, than would be possible without it… It is a necessary condition for people individually and collectively to be able to control their lives, to exercise self-government. Thus, planning enables the maximization of positive freedom, by contrast with the wasteful and destructive automaticity of the unregulated market in which individuals and communities are buffeted by impersonal and coercive market forces beyond their control…”
But how could ordinary people be involved in democratic planning in a practical way?
To begin with, Commissions would need to be created for each economic sector such as transport, energy and so on. This would allow representatives of each sector’s workers, consumers, suppliers, businesses, etc. to join with representatives of a transformed parliament in discussing the problems of their sector and formulating ideas, policies and plans for that sector. These commissions would employ experts to assist in the process of analysing problems and formulating plans.
Such commissions would also be needed at a local and regional level. This would ensure decentralisation and devolution of decision-making. If everything has to be decided by the centre it can easily become overloaded. And the lack of on-the-ground information can lead to major errors. It is essential to allow citizens and businesses, community and environmental organisations, alongside locally elected authority representatives, to have a representative voice on economic and planning issues that affect their localities
The details of how to ensure that such commissions are genuinely representative, transparent and accountable are explained in our Manifesto section on Democratic Public Power and Control. Also explained are how to avoid burdening citizens with constant decisions and meetings. As well as how to create a democratic media through which the public can have a full voice in debate and decisions.
Nationally, the various proposals produced by sectoral and local commissions would be drawn together.These would need to be negotiated and coordinated so that a draft National Plan could emerge every five years. This would then be published and discussed in society as a whole.
The National Plan would need to focus on the overall budget for the country and include its main objectives and priorities. Such objectives and priorities would naturally include our aims for the overall balance between investment and consumption. It would detail our economic growth targets and the budgets for the public investment needed to achieve them (see our Manifesto Section on Democratic Public Investment). Plus the science and technological research and development programmes to ensure a high level of innovation (see the Manifesto section on Democratic Public Innovation).
The Plan would need to outline a proposed allocation of investment for the major expansion of key existing industries. And the creation of new industries as well as the distribution of investment between regions. This would form the basis of projections for the growth rates of different branches of industry, for employment, regional distribution of work and so on.
In light of the climate crisis, a key element of the National Plan would be the policies needed for pollution control, environmental protection and resource conservation, alongside appropriate energy and transport proposals.
A key part of the Plan would cover public services and living standards and the balance between them. This would encompass the coverage and character of social provision, education and training, recreation, housing, health, social services and social security. It would aim for an increase in living standards and a movement towards greater income equality. And would include a regular national job evaluation and wages exercise (see our earlier text on labour markets), combined with a review of working hours and holidays with the aim of steadily reducing working time.
Last but not least, the National Plan would need to devote resources towards culture and the promotion of more humane social relations.
In terms of public consultation, the National Plan would need to be a general summary of more detailed and transparent plans for each sector and locality. It would need to offer a limited number of realisable alternative options that the population could decide between. How such decisions could be made should be open to experimentation. For example, the overall priorities of the plan could be decided by five yearly parliamentary elections. Or it could be voted on in a truly democratic national referendum prepared and informed by a citizen jury-style panel, and preceded by discussion via a democratic media.
To begin with, the planning process should start out with modest targets that can be increased if and when we succeed in achieving them. The first Plans will naturally require a lot of work and many new decisions. But as each planning period passes those areas that had worked well would continue as before. And the focus would tend to be on a more limited list of issues and sectors that had previously underperformed.
It may be argued that the majority of people are not educated or sophisticated enough to participate in decisions on a National Plan. Or that they do not have enough time to go through the details of a national budget. But it is not the fine detail that the citizens need to decide on but the overall priorities that will affect their jobs, living standards and public services. And they are quite capable of deciding on these.
Certainly such a transparent and open debate will be far better than the current setup where parliaments tend to pass budgets unchanged. Even in the US which has one of the most active financial oversight systems, the changes it makes to budgets in Congress are too often only to the benefit of special business interests. We can hardly make a worse job of things.
The international context will inevitably impose constraints on national plans, and the objectives and strategies contained in them. How national planning can be integrated into international trade will be examined in more detail in our later Manifesto section on a Democratic Public World.
Clearly, the capitalist market-driven system creates major drawbacks for economic life. It produces a chaotic and uncoordinated economic system in which each sector and each company is left to do its own thing. It generates boom-bust cycles that cause major instability, hardship and waste for society. It favours the winners of economic competition over everyone else and distorts all aspects of society. It encourages unhealthy competition and elevates short-sighted greed above long-sighted collective good. It develops massive inequality between geographical areas leaving whole regions depressed. It exploits workers whose labour power is sold at a great disadvantage. It also exploits the customers, suppliers and all the other agents of production. It leaves us as passive consumers that have no real influence over the products or services on offer. It atomises us as individual economic actors and takes decision-making out of our hands. Finally, it blindly drives the economy in directions over which we have no control.
In contrast, socialist planning for the economy and society offers key potential advantages over the capitalist spontaneous market-driven alternative. It lets us coordinate the various branches of the economy and take them forward in a conscious and integrated manner. It permits us to mobilise the resources of the economy and finance, and allocate them to the most needed areas and sectors. It allows us to ensure a relatively equal society and produce a good balance of public and private goods and services. And it offers the potential for democratic control of the economy by the population.
In practice, planning has had its own problems. The centralised, rigid, top-down form of planning that operated in the Soviet Bloc and in the early years of the Peoples’ Republic of China, produced both positive and negative outcomes. On the one hand, it delivered very fast economic performance and took these very poor economies and society and brought them into the modern age. Thereby, it raised the living standards of the population and delivered a high level of public services to them. And it created a relatively equal society.
On the other hand, it achieved these things, especially in its early phases, at a great social cost in terms of widespread suffering and repression. And in the Soviet Union the bureaucratic limitations of this planning system led to a gradual slowing down of economic growth and eventually to its stagnation. This caused a political crisis in the Soviet Bloc and its collapse at the end of the 1980s and into the early 1990s.
China’s development, however, took a different course. It learnt from both the Soviet experience and its own. Accordingly, it introduced major reforms to both its planning system and its operation of the economy. These reforms to its planning system made it become much more flexible, experimental and dynamic. Moving away from commanding to guiding the economy, the new Chinese approach to socialist planning has allowed a large privately-owned sector to develop and for the market to set prices and some other aspects of economic operation. As such, Chinese planning does not just set out to govern the public sector but also seeks to influence the direction of the private sector. These changes have left behind many of the distortions of the old Soviet approach. The new Chinese planning model also relies much more on feedback to ensure that its Five Year Plans are more accurate and responsive. Last but least, Chinese planning has elevated the need for constant technological innovation to a much higher level. The results of all these changes have been spectacular as everyone can see.
For the planning system we need in our transition to democratic socialism, we can incorporate the most successful aspects of the new dynamic Chinese planning model. But we should go further. For one thing, in the more advanced economies democratic public ownership will avoid the need for a large private sector.
Even more important, we must adopt a genuinely democratic version of planning. One that involves people both as citizens at a local and national level. And as active agents in the production of public goods and services. In this way we can create a new model of Democratic Dynamic Planning.