Inicio > Economía marxista, Teoría crítica acumulada > “New Market Socialism: A Case for Rejuvenation or Inspired Alchemy?”: Dimitris Milonakis

“New Market Socialism: A Case for Rejuvenation or Inspired Alchemy?”: Dimitris Milonakis


1. Socialism as a concept has its roots in the eighteenth century Enlightenment’s ideals of equality and co—operation, whereas the term itself was coined during the 1820’s. Throughout most of its history and certainly throughout the nineteenth and early twentieth century, from Karl Marx and Frederic Engels to the Fabians, the concept has been held to be synonymous with corporate planning in the context of common ownership of the means of production. As such, the essence of the concept has traditionally been based on a critique of capitalism as an exploitative class system and has correspondingly been hostile to both markets and private ownership (Hodgson, 1999b, ch.2).

2. Market socialism as a concept has a shorter history: its origins can be traced back to the calculation debate of the 1920’s and 1930’s. However, the basic idea associated with itto marry socialism with markets—is contemporaneous with the invention of the term ‘socialism’. Thus from Pierre Proudhon’s free association of small independent producers what Marx called ‘petty bourgeois socialism’ to John Stuart Mill’s sympathy with decentralised co—operative socialism, the idea has been to combine the efficiency of markets with the egalitarian goals of socialism. Having said this, it is also true that the idea of combining socialism with the market would be considered a contradiction in terms by most nineteenth century socialists (ibid).

3. It was not until the ‘calculation debate’ of the 1920’s and 30’s that the concept of market socialism itself was used and the idea of the marriage of socialism with markets re—emerged. Although the ‘calculation debate’ started as a reaction by the Austrians (see Mises, 1920) to central planning, the debate itself was actually conducted between socialists of neoclassical persuasion (Lange, Dickinson, Taylor, Lerner) and representatives of the Austrian school (Mises, Hayek, Robbins) with Marxian interventions by Dobb. The result was the crystallisation of the idea of a marriage between markets and socialism in the form of a formal model proposed by Lange which has since become the standard point of reference. It was widely thought at the time that the midway house (midway betweencentral planning and capitalist free markets) presented by Lange’s ‘competitive model’ had won the argument (see for example Bergson, 1948).

4. This was a reflection of the ideological climate of the period which was characterised by ‘the intellectual dominance of socialism’ (Mises, 1981, p. 465). The widely held view at the time was that the socialist system was a more advanced economic system than capitalism, reflecting the fact that, at that time, the Soviet economy was witnessing exceptionally high rates of growth at a time when the West was plunged into the vagaries of the Great Depression of the 30’s. Even then, however, the ideological climate on the left was such that the idea remained in a subordinate position among socialists. The fact that nothing approximating Lange’s model had ever been tried in practice pays testimony to this. At that time the term ‘socialism’ was still being used in the traditional sense to imply central planning and state ownership of the means of production.

5. ‘Socialism’, in this traditional sense, although much debated, has been on the retreat since 1945. The relative success of welfare state mixed economies of the West during the so—called golden age of capitalism in the 50’s and 60’s coupled with the problems increasingly facing the centrally planned economies, contributed to a discrete change in the ideological climate. This change was reflected in the reform movement in the centrally planned economies. The main thrust of these reform proposals what came to be known as ‘central planning with a regulated market’ was the introduction of the (limited) use of markets in the context of state ownership.

6. and central planning. It was in the 1980’s and 1990’s, however, with the rise to dominance of the free market ideology of the New Right, together with the demise of the centrally planned economies that the ideological climate changed decisively.

7. Following the revival of the Austrian school in the 1980’s, it has increasingly been argued that the ‘calculation debate’ had been wrongly interpreted as having been conducted between socialists and non—socialists arguing within the same paradigm. Rather, the revisionists suggest, what was involved was a clash between two different epistemological and methodological paradigms. Seen in this light, the conclusion drawn by most is that the Austrian challenge had not been met effectively and that they had won the earlier argument (Vaughn, 1980; Murrell, 1983; Lavoie, 1985; Adaman and Devine 1997; Ioannides, 2000).

8. At the same time, the demise of socialism in Eastern Europe is thought by many socialists to have invalidated Marx’s vision of socialism interpreted as the abolition of private property combined with conscious central planning. This is more than evident in recent discussions of alternative models of socialism where Marx is hardly mentioned.3 In such a climate many socialists have resorted to reliance on the market once again,favouring either proposals involving some sort of mixed economy as in the case of Nove and Brus & Laski, or a reformulation of the concept of market socialism, as in the models proposed by Bardhan and Roemer and others. At the same time radical political economy is being abandoned by these writers in favour of neo—classicism. Naturally, the way the issue of socialism is being treated has also been changing radically, away from the traditional issues of exploitation, class, power, conflict and social transformation to concepts such as (juridical) property relations and equitable distribution of income. In reformulating the concept of market socialism, recent developments within mainstream economics in the form of the ‘new information economics’ and the incentive compatibility and the principal/agent literature, have played an important part, both in the recent critiques of the early models, as well as, in the conceptualisation of the new models.

9. Based on these developments, Lange’s model is seen as limited from the modern perspective, its main deficiency being identified with its neglect of the twin 10. issues of incentives and monitoring. But these late models will also be critically shown to be equally limited by their own context. The aim of this article is exactly to examine the relative merits and drawbacks of the new generation of models of market socialism. This will be done, firstly, by putting these modern versions of market socialism into the perspective of the history of economic thought. Thus, after a brief sketch and a critique of Lange’s proposal, the main elements of the Austrian and the new information critiques of this model are critically assessed. This leads in the fourth section to the presentation of the basic elements of the new generation models. Then, in the last two sections, the new generation models are subject to close scrutiny. This is done, firstly, by making the necessary comparisons and drawing the necessary contrasts between modern and earlier versions of the model (mostly the Lange model) to see what is new that they have to offer and whether they really represent a sharp break with the past. Secondly, the internal consistency and coherence of these models is scrutinized in terms of their own proclaimed goals. Finally,
based on this scrutiny, a more thorough methodological critique of these models is provided.

New Market Socialism: A Case for Rejuvenation or Inspired Alchemy?

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