On markets and the impossibility of socialism

In the Buddhist view, suffering (pain, anxiety) is a ‘noble’ truth. Why noble? Because it can be a great teacher. Instead of running away from our pain and anxiety, we can sit and look into its causes and, with the right insight, this can lead to great compassion and kindness towards others – that pain you’re feeling is the exact same pain felt by many billions of other sentient creatures on this planet, and realising that can move you closer towards them, and perhaps to help them if you can. I therefore had no trouble feeling great compassion for comedian Andrew Maxwell as he took a busload of conspiracy nuts on an American road trip to expose their stupid beliefs and opinions to the glaring light of science and reason, and film the results for the BBC. Like Maxwell, I too have very often been a smug arse, rolling my eyes into the back of my head every time someone opens their mouth to tell me what they ‘believe’.

But much more to the point for the purposes of this blog, I also felt a great compassion for the grunting thickos who had to parade their ignorance of the subjects on which they were claiming special knowledge before the world’s great experts and authorities on those same questions. Well, we’ve all been there, haven’t we? And the slowly dawning realisation that what you ‘believe’ or think may well be a load of old poop can be scary – it’s like having the rug pulled out from under your feet. Losing your religion, even if your ‘religion’ is resolutely secular and based on science, is like losing your mooring in a world of constant flux – your mind gets tossed about on the waves of change, and there’s no safe harbour in sight. OK, so the safe harbour was always illusory – a creation of your own mind – and it is better to learn to go with the flow than try to fight the tide. But it’s still scary – even people dedicated in principle to science and reason may find themselves clinging terrified to what they already think they know. This goes some way to explaining confirmation bias.

I’ve experienced this rug-pulling a couple of times in my life before, and it happened again recently while reading two very disturbing books. The first was David Graeber’s Debt: The First 5,000 Years. The second, and most disturbing, was David Ramsay Steele’s From Marx To Mises. Of course there’s nothing very horrific about either book, but they were disturbing to me – disturbing to my peace of mind, the confidence of my opinions, the stability of my worldview. You fancy you know something about the world, about a given subject. You may even have written whole essays on it, had them published in magazines, or proudly shown them off to the world on a blog. Then, wham! Ideas you were previously quite confident were held only by fools, dupes and cranks turn out to be very well grounded indeed – leaving you feeling like, well, like a fool, a dupe, a crank.

After an initial feeling of drowning in a choppy sea, I have since pulled myself back onto dry land, and regained something like my previous composure, a tentatively renewed confidence in my old views. But whether this is because of confirmation bias and the fear of losing my religion, or because of some sense or reason on my part, I don’t know.

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If I might be forgiven for painting a hugely oversimplistic and schematic picture, and that a mash up of Graber, Marx and Steele that pays no particular respect to any of them, a new view of the world might look something like this:

Markets do not arise spontaneously through trade, itself a reflection of a supposed natural tendency to truck and barter. Markets are created by states. Originally, it went something like this. The state needed to find a way to solve the huge logistical nightmare of keeping an army on the march – how to feed it, provide it with clothes and fuel, and so on. Doing it directly would be hugely complicated and costly. Instead, what you can do, if you’re a state, is pay your soldiers with money (coins). Then you demand taxes from the rest of the (peasant) population, which has little to do with money and rarely has any. The result is the peasants spontaneously organise themselves to provide things the soldiers need, exchanging those goods for the money. The soldiers get provisioned by the population as a whole, the peasants get money to pay their taxes, the state gets its money back, along with a well provisioned army. Money, markets and the state work together for the general good.

With the development of industry and capitalism, you get a similar problem, and a similar solution spontaneously presents itself. The manager of any productive enterprise needs to make decisions about which technical processes and what combinations of raw materials and labour and so on to put to work. Marx, in his penetrating analysis of capitalism, showed that many of the features of capitalism that well-meaning reformers and socialists wanted to do away with were actually intrinsic and socially necessary features of capitalist industry. What he didn’t consider so closely was whether industry on a mass scale, and with a well developed division of labour, might not also intrinsically and necessarily require capitalism, money and markets, in order to make economically efficient decisions.

Steele, following Mises and Hayek and others, argues that this is indeed the case, and that socialism – in the sense of industry on a mass scale but without markets, and with production organised on the basis of ‘from each according to ability, to each according to need’ – is impossible, and, where tried, will surely lead to impoverishment and disaster on a mass scale. It’s just not possible to make economically efficient decisions about production without the information that prices give us – prices aggregate dispersed social knowledge about supply and demand and individual preferences and so on, and present individuals with information it would otherwise be impossible for any individual or guiding authority or committee to get.

This, says Steele, is a strong argument against the possibility of socialism, regardless of what we may decide the implications are more generally (for politics, for economics). It certainly adds force to Graeber’s unusually positive (for a socialist/anarchist) appraisal of the potential of markets, and his claim that communism, where it has existed, has always been a communism of consumption and of moral demands for a fair share (‘to each according to needs’) rather than of common ownership and democratic control of the means of production.

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I’ve no idea just how much truth there is in what I’ve just written. But following the argument (I’m talking mainly about Steele’s now) reminded me of other times when I have fallen under the spell of very compelling theories. What happens is, you accept (more or less on trust) one or two basic premises, and then watch spellbound as a grander and grander picture emerges of the logical consequences. Making those kinds of arguments is an art in itself, and reading them can be the source of much pleasure – it is a window on reality, a view of the world from the point of view of a fellow creature, his soul reaching out to ours and imploring us to see the world as he does.

This can every bit as exciting and important as a novel, which also does this. But at the end of it, we have to remind ourselves that this is someone else’s reality tunnel – we have to step back from it, stop thinking, take a clear look, and wonder just what relationship the premises have to the real world, or rather, to the world as we see it, and as others have seen it. Do the premises and the logic and the resulting picture seem reasonable? If not, is that because it’s mostly hokum, or because there are deeper mysteries at work than casual acquaintance can fathom? Are there deep scientific or mathematical laws at work? Or is it all just guesswork and loose metaphors, dressed up in military uniform and made to strut around authoritatively? Are markets really the only kind of economic order that can spontaneously emerge to direct social production? Is private ownership and exchange and prices the only way to embody dispersed information in a form that could inform production decisions?

If so, economics and social science would really be a very deep mystery indeed, at least to me. Not that that’s an argument – what’s my opinion got to do with it? My own guesses about the answers are no doubt implied by the questions. But they are guesses. Whatever the truth may be, these extraordinary books are certainly very good to think with. And there’s plenty more thinking to do.

Note to self: further reading and further reading.

PS: Not that the answer to these questions really much affects ‘what is to be done‘. Also, Nobel Prize in economics goes to work on non-market mechanisms.

2 thoughts on “On markets and the impossibility of socialism

  1. John Green

    Thanks for that, Stuart, very interesting. The Graeber comment struck a chord with me as someone who could never figure out why, say, (legal) ownership of the means of production was more important than (actual) control over the means of production or ownership of the fruits of production or control over the fruits of production or even control over the distribution of the fruits of production. Not that the absence of any democratic control over the workplace is any great shakes so long as one has control over the distribution of the fruits of production, but I’ve always felt – or maybe just imagined – there’s been a tendency to fetishize one aspect of the process as the solution to our woes at the expense or neglect of the others.

    Reply

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