The Socialist Economy Theory and Practice by T.B. Bottomore PDF

The Socialist Economy
The Socialist
Economy
Theory and prc1ctice
Tom Bottomore
ii HARVESTER
WHEATSHEAF
First published 1990 by
Har\'ester Wheatsheaf
66 Wood Lane End, Hemet Hempstead
Hertfordshire HP2 4RG
A division of
Simon & Schuster International Group
� Tom B. Bottomore 1990
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Typeset in I0/ 12pt Times

by Witwell Ltd, Southport
Printed and bound in Great Britain by

Billing and Sons Limited, Worcester
British Library Cataloguing in Publication Data
Bottomore, Tom, /920-

The socialist economy : theory and practice.
I. Communist countries. Economic policies
I. Title
330.9171'7
ISBN 0-7450-0118-1
ISBN 0-7450-0119-X pbk
I 2 3 4 5 94 93 92 91 90
Contents
Introduction: Socialist economy and socialist society
The nineteenth-century vision 9

2 Marxist conceptions of a socialist economy 22
3 The experience of planning since the First World War 33
4 Critiques of socialist planning 52
5 The state, bureaucracy and self-management 70
6 Plan and market 82
7 Problems of socialism today IO l
8 Modes of transition to a socialist economy 121
Bibliography 138
Index 147
Introduction: Socialist economy
and socialist society
Socialism, as a p o l i t ical d octrine and a social m o ve m e n t , h as neve r

set itself p u rely eco n o m ic aims. Fro m the begi n n i n g i t s ideal was the
creation of a new type of society, o r , as G ramsci e x p ressed it, 'a new
civilization'. S o m e critics i nd eed h ave argued t h at socialist t h i nkers,
at any rate u ntil the 1 920s, l a rgely ignored t h e q uest i o n o f h o w a
socialist economy would act ually fu nction; and M ises ( 1 920 , 1 922).
in one of the most extreme and vitriolic attacks, clai med t o show
that it would not fu nction at all.
In this b o o k I shall c o n s i d e r whether, and for w h a t reasons.
earlier socialist t h i n ke rs d id u n d u ly neglect the eco n o m ic problems
of socialis m ; what has been learned , o r can s t i l l be lear ned , from t he
debates of the 1 930s about socialist calcu lation and cent r a l p l a n
ni ng; and fi nally, what new conce p t i o n s and p ract ices have eme rged
fro m the experience of socialist devel o p ment i n the po�t-wa r
period . My approach to t hese q ue s t i o n s is s o c i o l ogi ca l , set t ing
eco n o m ic relations i n t h e i r w i d e r social and c u l t ural fr amewo r k .
and this corres ponds broadly w i t h the idea o f t he connect ion�
between eco n o m y and society t h at h a s ge nerally been expressed in
socialist thought.
There a re , to be s u re, d iverse c o n cept i o n s o f socialis m .' h u t what
is co m m o n to almost all of t hem is a co n vict i o n o f t h e fu n d a m e n t a l
i m p o rt ance of t h e eco n o m y i n s h a p i n g s o c i a l life a s a w ho l e; an id e a
which found its most t renchant e x p ress i o n i n Marx's so cial t heo ry.
I shall interpret t h at t he o ry, w h ich has been reform u l ated. m odified
2 The Socialist Economy
and ' reconstructed ' by many late r t h i n kers,� not as asse r t i ng a

universal and s t r ict d e t e r m i nat i o n of t he po l i t ical and cultural
'superst ructure' by the eco nomic ' base', but as a rgu i n g t h at the
m a n ne r i n w h ich h u man bei ngs p rod uce and reprod uce t he material
conditions of t h e i r existence is a m aj o r factor in the creat i o n of a
whole 'fo rm of l ife '; or, i n M arx's o w n word s , t h at the 'mode o f
prod uct i o n should not b e regarded s i mply as the rep roduction o f
t he physical e x i s t e nce of ind ividuals. I t is far m o re a defi n ite fo r m
o f act ivity of t hese i n d ividuals, a defi n ite w a y of expressing t h e i r
l i fe a defi n i t e mocle o f life' ( M arx and E ngels, 1845-6, v o l . I ,
.
sect i o n I A ).
Marx goes o n to say, i n the same passage, that w h at i n d ivid uals
are 'coi ncides ' with their product i o n , 'with what they prod uce and
holl' t hey p rod uce'; and it is this concept i o n which h as largely
guided socialist period izations of history, up to the advent of
modern capitalism and the movement towards socialism. The
crucial feature is hvw h uman bei ngs prod uce, which encompasses
both the tec h n ical means of p rod uction (and notably since the
nineteen t h ce n t u ry the spectacular advance of science and
technology, which also profo u nd ly affects what is p rod uced ), and
the way i n which the social labour p rocess is organized ; that is to
say. the social relations of prod uction formed by the d istinctive
characte ristics, in d i ffere nt historical periods, of the 'owners of the
cond i t i o n s of prod uct i o n ' and the 'd irect prod ucers'. In modern
capitalist society, accord ing to M arx's analysis, the social relations
of product i o n , w h i c h establish t h e framework of a d is t i nct mode of
l i fe. are constit uted by the capitalist owners h i p of means of
prod uct i o n and by wage labour; and the essence of the socialist
alternative - not only i n its :v1arxist versions - has always been the
t ransformat i o n of private owners h i p into social owners h i p , which
M arx expressed by referring t o a fut ure society of 'associated
prod ucers'.
The 'assoc iated mode of prod uct i o n ', as M arx called it i n the
t h i rd volume of Capital ( 1894, ch. 23), o r more ge nerally 'cooper
ative prod uct i o n ', was not t reated i n the socialist literat u re of the
ni netee nth ce ntury as having only an eco nomic sign i ficance, but as
a vital element i n the const i t u t i o n of a new fo rm of society i n which
ind ivid uals would no longe r be dependent upon d o m i nant m i n o r
it ies. but would be able to deve l o p freely in a social environment
which they took a fu ll and equal part i n creating. At the same t i me,
Socialist economy and socialist society 3
as natural beings, they would s t i l l be s u bject to m a t e r ia l constraint!>,

and M arx was m o re realistic than s o m e o t h e r socialist thi nk e rs or
prophets in recog n i z i ng that
the realm of freed om . . . [lies] . . . o u t s i d e the sphere o f material

prod uction proper. Just as the savage "Tlust wrestle wi th nature in
order to satisfy h is wants, to maintai 1 ind re prod uce his life, so
also m ust civil ized man, and he must d o it i n all fo rms of societ)
and under any possible mode of pro< uct i o n . W i th his d ev e l o p me nt
the realm of natural necessity e x p a m s, because his wants increase:
b u t at the same t i me the fo rces of prod u c t i o n , by which these
wants are satisfied , also i ncrease. Freed o m i n this field cannot
consist of anything else but the fact that soc ial i1ed humanity. the
associated prod ucers, regulate the i r exchange with nature ration
ally, bring it under the i r common control, i nstead of bei n g ruled
by it as by some b l i n d power, and acco mpl ish the i r task with the
least expend i t u re of energy and u n d e r such cond i t ions as arc
proper and worthy fo r h u m a n beings. N eve rtheless, this always
remains a real m of necessity. ( M a r x , 1894. v o l . I l l. ch. 48)
Hence M arx's further contention that a p recond i t i o n of freedom is

the red uction of working h o u rs and t h at 'a nat i o n is t ruly rich when.
i nstead of working twelve h o u rs, it works o n ly s i x ' ( M arx, 1 857 8,
p. 706).
On the other hand , M arx cert ainly antici pated a co n t i n ue d
growth of material wealth , and above all a virt ually u n l i m ited
develop ment of h u man powers of prod uct i o n , i n socialist society:
but this view raises d i fficult q uestions, which have increasing!�
preoccu p ied socialist t h i n kers, about the h u man rel a t i o n t o n a t url'
and t he possi b i lity o r desirab i l i t y o f set ting out deliberately t o
satisfy i n the fu llest meas u re all conceivable mat e r i a l n eed s. rat her
than encouraging the e m e rgence of a new structure of nee d s i n
which no n-mate rial need s acq u i re greater i m p o rt a n ce . ' True. t hen:
are in M arx's own writi ngs occasi o n al references t o t he ecological
cond itions of h u m a n ex istence, as i n the passage in Capital (I R94.
vol. I I I , c h . 46) w h i c h he concl udes by s a yi n g t h a t 'Even a wlwlc
society, a nation, o r all c o n t e m p o rary s o c i e t ies t ake n t oget h er. arc
not the absolute o w ne rs of the eart h . They arc o nl y it s ocrn p a n h.
its beneficiaries, and l i k e a good p at erfam i l i as have t o le a \ e it i n
i m p roved cond ition t o succeed ing g e ne rat i o n s ' ; a nd h is social
philosophy as a wh ole - particularly in the ea rly wr i t i n g s . t h ough
not only there - emphasizes human freedom and creat ivity outside
t he sphere of work, along with a steady red uct ion of the t i me
devoted to t h a t sphere, rather than the expansion of material
prod uct ion as such.
Neve rthe less , i n the act ual development of socialist economies in
the twentieth cent ury , as well as i n socialist thought more generally,
t here has undoubtediy been an intense p reoccupation with sheer
eco nomic growt h, and i n the past decade or so with the new
p rospects fo r growt h opened up by the 'scientific-technological
revo l u t i o n '. M any factors have contri buted to this particular
orientation of socialist thought and p ractice:
I. The ad vent of socialism i n cou ntries which were, fo r the most

part, economically backward , agrarian and peasant societies,
and the perceived need fo r extensive and rapid ind ustrialization.
2. The exten t of poverty i n the capitalist societies d uring the
depress i o n of the 1 930s and the commitment to erad icate it.4
3 . The rapid post-war expansion of 'organ ized capitalism', char
acterized by large-scale state i ntervention, partial planning and
very high rates of growt h, and the need fo r socialist societies (as
well as socialist gove rnments when they come to power i n
capitalist countries) to com pete effectively w i t h capitalism i n the
provision of high material levels of l iving.
4. The confl ict between power bl ocs w h ich has led to the invest
ment of i m mense resources in the development of ever more
sophist icated and ex pensive weapons.
This ad d iction to growth has, of course, been co ntested by many

thin kers i n the socialist movement itself, and it has always been
qualified by the commitment to broader social ideals. Within, or on
the fri nges of, M arxist t h o ught the 'critical theorists' of the
Fra n k furt School� e x p ressed with particular fo rce their opposition
1 0 the main tende ncies of development i n ad vanced ind ustrial
society i n all its fo rms, argu i ng that the d rive to dominate nature
t h rough science and technol ogy necessarily invo lves the d o m i nation
of h u man bei ngs and is the maj o r obstacle t o emanci pati o n . 6 I n t he
past few decades im portant ecol ogy movements have emerged in
the ind ustrial countries, most prominently in West Germany where
the Green Party has had significant electoral success . These move
ments have been supported by many socialists7 and have themselves
Socialist economy and socialist society S
had an i m p o rtant i n fl ue nce o n the i d e as and p o l icies of social ist

parties, giving a new salie nce to a i ms w h i c h had become obscu red
by the co ncentrat i o n of atte n t i o n on m ate rial pro d u c t i o n .
But i n recogn izing the develop me n t o f new attit u des to economic

growth we should not overl o o k tht> fact t h at soc i a l ist t h o ug h t and
practice always envisaged growth .1 t he context of a more com
prehensive reorganiz'lt i o n of soci; .I l i fe , and also l a rgely assumed
that the problem of scarcity - in t 1e sense of an i n a b i l i t y to satisfy
the b asic mate rial needs of all mtm be rs of society, at t h e leve l of
civilizat i o n already attai ned - w ould already have been ove rco me
by the development of capitalism i tself. H e nce, i n e x a mining t he
achieve ments and problems of the p rese nt-d ay s oc i a l ist societies we
h ave to consider not only what is prod uce d , i n w h at cond i t i ons it is
prod uced , and the e fficie ncy of the p rocess of prod uct i o n as a
whole, b u t also h o w the p rod uct of the soc i al labour process is
allocated and d istributed . There are, of c o u rse, great d i ffe rences
between the socialist industrial c o u n t ries and t hose socialist coun
tries of the Third World w h i c h h ave o nly rece ntly e m barked on the
process o f economic development and i nd ustrializat i o n ; but what is
evident i n all these societies is the sustained c o m m i t m e n t , fro m t he
outset, to the widest possible extension o f public services
education, health care and other welfare services, the pro v is i o n of
housing, public t ransport and recreatio nal faci l i t ies w i t h i n the
limits o f t h e i r economic resou rces; and i n t h i s respec t they h ave
ach ieved some notable successes. G e o rge and M an n i ng ( 1980) note
that 'social po licy is m o re ambitious i n its aims i n the Soviet U n i o n
t h a n i n welfare capitalist societies', e v e n though ' n o t always m o re
compre hensive in its achieve ments' ( w h ich will be a ffected by t he
rate of eco n o m ic growth), and that, 'the d o m inant i d e o l ogy o f the
Soviet U n ion provides a m o re secu re environment for the growt h of
social policy' ( p p . 168-9).8 I n the d evelo p i n g countries t h e m ost
stri king s uccesses ( fo r exam ple, in Cuba and m o re rece n t ly in
Nicaragua) h ave been in overc o m i ng illite racy and p rovidi ng bas ic
health care fo r t h e mass of t h e populat ion: the major prohlem�
those of meet ing t he rap id ly rising expectations o f t h e i r p o p u l a t i o n s
while at the same t i me investing h e avi ly i n t he i nfra�t ruct u re of
prod uction, cou nteri n g the te nd e nc ie s t o w a rds the grmHh of
bureaucracy and a new centralization of p o w e r a n d rnp i n g wi t h t he
.
hostility of the capitalist w o rl d , w h i c h is expressed in cconom1c

pressure a n d s o me ti m e s direct i n t e rve n t io n (part i c u l a rly hy the
U n i ted S t ates). Q
The eco n o m y . therefo re. has a crucial i m p o rtance in the creat ion
of a socialist society i n two res pects. Firs t , the social ownership of
the principal means o f production is i n tended t o e l i m i nate the
d o m i nation of society by a particular class, and t o establish t he
cond i t i o ns in which all mem bers of society can participate actively
i n t he m anagement and development o f their p rod uctive resources,
i nc l u d i n g the use o f their own labour p o wer. But this goal of
widespread partici patio n has encounte red many o bstacles i n the
actual deve l o p ment o f socialist societ ies, and in the p ast few
d ecades n u merous p rojects and experi ments designed to i ncrease
part icipation by a t h o roughgoing refo rm of the econ o m ic system
have taken shape. These c h anges, the controversies which s u rround
them, the new d i rections of socialist t h o ught with regard t o central
planning, self-management and markets, are maj o r subjects for
analysis in the fo llowing chapters.
Seco nd, an efficient, well-managed , p rod uctive economy is an
i nd ispensable c o nd i t i o n for attai n i n g the broader aims o f socialism
- the e l i m i nation o f poverty, i ncrease o f leisure time, extensive
social services, a high level o f education and general culture . But in
this respect, too, the existing socialist societies have faced serious
d i fficulties, and ever si nce the 1 920s t h e re has been much debate
about the efficie ncy of centrally planned econ o m ies. This question,
which will be exami ned i n Chapter 3 below, raises some larger
issues, broadly of two k i nd s . I n t h e fi rst p l ace, the problem of
efficiency may be d i rect ly l i n ked w i t h that of participat i o n , and the
al leged deficiencies of cent ral planni ng, as we shall see, may be
ex plained in part by t he stifling of i nitiative , respo nsibility, choice
and decisi o n , a m o n g ind ividuals and groups in society at large. But
second , we have to consider the n o t i o n of efficiency itself i n a wider
context. A socialist economy se rves a socialist society, and the
rat i o nalizati o n of p rod uct i o n i n order to achieve an ever i ncreasing
flow of material goods s h o u ld not be given an absolute priority
regardless of such considerations as working c o n d i t i o n s and h o u rs
of w o r k , the environment and the depletion of natural res o u rces, or
whether what is prod uced adds appreciably to t h e quality of l i fe and
the level of civilizat i o n . These are , h oweve r, very complex issues
and I shall exa m i ne them more cl osely i n later chapters.
What will be evide n t , I hope, t h roughout this b o o k , but should
be em phasized very stro ngly at the outset, is t h at I d o not claim to
Socialist economy and socialist society 7
possess any incont rove rt i b le criterion of w h at socialism really 1s,

but s i m ply a general co ncept i o n of a socialist society (which
certainly excludes some other types of society) w i t h i n w h i c i ; a
considerable variety of econ o m ic and social arr an ge m ents is p·i�
sible. S ocialis m , l ike every h u man act ivity o r form of life, is a
historical phenome n o n and no om .an reaso nably pretend to
foresee i n detail h o w it w i l l evol· e , o r p recis ely h o w future
generations w i l l resolve, or perhaps o meti mes fail to resolve, t he
problems that its fu rther deve l o p men generates. I n t his spirit I am
inclined to t ake as a k i n d of m o t t o for the present work the
observation t h at E ngels made apropos of a n o t h e r matter. Replying
to a letter fro m Kautsky about the problem of excessive population
growth (an issue o ften raised by opponents of socialism in t he
nineteenth century, on M al t h usian grou n d s ) , Engels ( I February
1 88 1 ) wrote:
Of course the abstract poss i b i lity e x ist s that the number o f h u m a n

bei ngs w i l l become so great that l i m its will have t o b e s e t t o its
increase. B u t i f at some p o i n t c o m m u nist society sh ould f i n d itse l f
o b liged t o regu late t he prod uct i o n o f hu man beings. as i t has
already regulated the prod uct i o n of things, it will b e p recisely and
only t his society which carries it out witho u t d i fficulty .... In any
case, it is a matter fo r those people [in c o m m u nis t society) to
decide i f, when and how they act , and what m e a ns they wish to
employ, a n d I d o not feel called upo n to offer t h em s u gg e st i o ns or
advice. I daresay they will be q u ite as clever as we a re .
Notes
I. Schu mpeter ( 1942. p p . 170· I ) c l a i me d that socialism is so "culturall�

indeterminate' that it cannot be p recisely defi ned except i n purell
eco n o m i c terms, but t h i s is a c o n s id e ra b le exaggeration. a s I shall argue
later.
2. Sec, in particular, Habcrmas ( 1976) an d Larrain ( 1986).
3. There is an exce l l e n t d iscuss i o n of this question. i n rel a t i o n 1<1 Mal\\
own t h o ught, i n H e ller ( 1976), and a com p rchcnsi,·c general d i srn s s i o n
in S p ri ngborg ( 198 1).
4. Postan ( 1967) o bse rved that an "i d eo l ogy of gr o wth ' e m crgl·d in part
from earlie r p re occup a t i o n s with fu ll e m ployment whid1 had their
sou rce i n the controversies of the 19JOs: 'Full e m p l o yment e\'enlually
developed into a policy and an economic philosophy much wider in its

implications . . . into a po licy of economic growth. '
5. For a general account of the sc hool see Bollomore (I 984b).
6. See es pecially M arcuse ( 1 964), and for a more general d iscussion Leiss
( 1 972). I consider many of these argu ments exaggerated and misguided
and I h av e critici1ed them in Bouomore ( 1 984b).
7. See the discussion in Bahro ( 1 982), especially the essay on 'Ecology
1.:risis and socialist ideas', which also co nsiders t he relation of M arx's
thought to ecology. observing that ' M arx already perceived the contra
diction between capitalist prod uction and nature. It was j ust that this
was not yet so acute for him to place it at the centre of his analysis'
(p. 30).
8. Sec also the excellent acco unt of social pol icy in H u ngary by Ferge
( 1 979).
9. For a more detailed acco unt see Wh ite ( 1 983).
1
The nineteenth-century vision
The ideas of 'social i s m ' and 'co m m u nis m ', 1 and s o c i a l i s t m ove
ments, s p read rapidly i n E u rope fro m the 1 830s . Both t h e ideas and
the m ove ments had i m p o rtant antecedents i n the soc i a l c r i t i c is m
and revolts of earlier t i mes, b u t w h at was dis tinctive i n t h e
n i netee nth c e n t u ry w as t h e extent of the move m e n ts , t h e i r o rg a n irn
tion on a national and eve n i nternatio n a l scale, t he i r g ro w i n g
ident ificat i o n w i t h the specific situatio n and i n terests of t h e i n d us
trial w o rking class, and at the same time the syste m at i c e l a b o rat i o n
of a n e w 'world view'. T h e latter w a s fi rst s igna l l ed by t h e
appearance of the w o rd 'socialism' itself, and it t h e n d eve l o pe d i n a
great variety of fo rms: in socialist doct ri nes fro m t he S a i n t
S i m o nians to t he Marxists; i n soci a l e x pe r i m e nts , a nd t h e l i terat u re
about the m , i n s p i red by Robert O we n , the F o u r i c r ist s a n d m a n y
othe rs; i n major po l i t ical move ments d u ring the revol u t i o ns o f 1848
and in the Paris Co m m u ne ; and i n social m o v e m e n t s w h i c h c reated
trade u n i o ns, cooperative societies and a host o f ed u c a t i o nal and
cultural i n s t i t u t i o n s .
M a r x and Enge l s , i n the Com munist Man(f<'.1·10 ( 1848). we re
highly critical o f the early 'uto p i a n soc i a l ists '. o b s e n · i n g t h a t
because ' t h e eco n o m i c situat i o n ... docs n o t a s yet o ffe r t o t he m
t h e mate rial cond i t io n s fo r the em a n c i pa t i o n o f t he p roletari a t '.
they have to search fo r ' n e w social laws' to bri ng t h ose co n d i tiom
about, and paint 'fa ntastic pict u res o f fu t u re s ociety'. In M a rxis t
though t , and in much o t h e r social i s t t h o ug h t . w h ic h i nsp i red t he
9
form a t i o n and d evelopment of new p o l i t ical part ies in t he latter

p a rt of the ninetee nth ce n t u ry, atten t i o n was concent rated upon the
economic development of capitalism and t he o rgan izat ion of the
ind ust rial w o r k i ng class as an effective p o l i t ical force. But t he
Ut o p i a n element d id not d isappear fro m t he socialist movement,
and indeed it rev i ved s t rongly towards the end of t he cent u ry i n two
wid ely read and i n fl uential novels, Ed ward Bellamy's Looking
Badrn-ard ( 1 887) and W i l l i a m Morris's News fro m No wh ere ( 1 890) .
Bot h novels expounded a vision o f a new society fro m which
i nj us t ice, poverty and crime would be e l i m i nated, and in which a
complete eq u a l i ty would p revail. I n both cases the effective func
t i o n ing o f the new social system d e pended u l t imately upon a rad ical
t ransformation o f h u m a n n a t u re, s o that the senti ments favourable
t o peaceful cooperation, social responsibility and non-acq uisitive
ness became p red omi nant. M o rris had little to say in his novel
about t he economic o rganization of his Utopia, but Bellamy, on the
other hand , devoted much attention to economic questions and
co nceived the eco n o m ic struct u re o f the new society as the o u tcome
of the trust movement in American ind ustry: 'the epoch of the trusts
had ended i n the Great Trust ' ( 1 887, p. 4 1 ) . I nd ustry would be
centrally d i rected by the government and production would be
carried on by an 'ind ustrial army' in which everyone between the
ages of twenty-one and fo rty-five would serve.
Bellamy emphas ized liberty as wel l as equality, particularly in the
sphere of consumpt i o n , where every cit izen would be free t o spend
the annual c red it assigned t o him as his share of the national
prod uct in any way he pleased , and p rod uction w o u ld respond to
consumer preferences. But the 'ind ustrial army' was to be very
autocratically constit uted , as was the national gove rnment, and
Bel lamy largely ignored the d angers to both freedom and equality
inherent in this extreme centralization and the emergence of a
powerful bureaucracy. The success of t he new society t hat he
portrayed depended essentially, as I have suggested , on a ch ange in
the orientation of human pu rposes fro m self-seek i ng and com
pet itiveness to cooperation and a subord i nation of ind ivid ual
reward to the general welfare; and this is still more apparent in
News from No wh e re where M o rris, who was repelled by Bellamy's
picture of a completely plan ned social order, depicts the future
society as one that is based upon volu ntary, spontaneous cooper
ation without any elabo rate organizat ion of the economy, govern-
The n ineteenth-century vision 11
ment or ad m i n istrat i o n . I n any case, as Morris explicitly said , his

Utopia was 'not a pred ict i o n , but a descri ption of the k i n d of
society i n w h ic h he would feel most at h o m e ', h is pers o nal vision of
'
the good society' (Cole 1 954, p . 423). As such it evidently appealed

to many people at t he end of the n inetee nth century, and it still has
its appeal i n the vastly c hanged c i rc i nstances of today.
A l t h o ugh M arx rejected U t o p i: n socialism as having been
largely superseded by the develo p m• nt of the w o r k i n g cla s s mo\'e -
ment, t h e re we re u n d o ubtedly U t oi: i a n e l e ments, as well as many

unresolved problems, in h i s o w n b rief and scattered comments on
the fut u re 'society of associated p rod ucers'. As Heller ( 1 9 76, pp.
1 1 8 -30) h as noted , i n h i s conce p t i o n of t h i s form of society 'Marx is
w o rking w i t h an e n t i rely new struct u re of ne ed s i n which human
'
labour will (a) cease to be 'alie n ated ' ( i . e . performed under external
compulsion), and ( b) become travail allract(f ( i e 'a field for t he
. .
self-realizati o n of t h e h u m a n personality' and he nce a v i t a l need).

But t hese two aspects are not t reated by Marx in p re c i s el y the same
way in d ifferent writings. In the Grundrisse both c o n d i t i o n s arc
met: labour ceases to be alie nated and it also b ec o mes tral'Oi!
a l lra c tif(as i ntellectual labour). I n Capital, vo l . Ill, h o weve r. Marx
declares that labour and material p roduction al ways remain a
'realm of necessity', and the realm of freed o m o n ly begins w h e re
labo u r ceases; all that can be achieved i n the sphere of material
prod ucti o n is a h u mane o rganization of the labour p r oces s as a
cooperative activity and the d i rection of p rod uct i o n to the satisfac
tion o f 'true social need s '. But as H e l l e r pertinently as k s : how can
'true social needs' be meas u red ; how can the d i ve rs ity of i n d ivi d ual
needs and t h e i r rapid changes be p rovided fo r; who makes t h e
decisions about h o w p rod uctive capacity should be al l oc a t ed ? On
the last point, M arx would no d o u bt have rep l i ed : c•1•eryo11e ( i.e. all
the associated producers ) . Yet the d ifficult ies a rc evi d e n t a n d . a�
Heller comments; ' H o w can every i nd ividual m a k e such d ec i sions'!
Marx d id not answer this q uest i o n , because fo r h i m it d i d n o t a r ise.
For us, h o wever, in o u r ti mes, it has become perhaps the most
decisive question of all'.
I t is a q uestion (to be e x p l o red m o re fu lly i n l a t e r c h apte rs) w h i c h
has now to be considered not only i n t he o re t ical or s peculat ive
terms, but in the light of the histo rical e xp e r i e nc e we h ave ga i n e d
from the movements toward s socialism i n m o d e rn c api t alis t
societies and fro m the d i verse atte m pts t o co n s t r u c t soc i a l i s t
12 � Socialist Economy
M>Cietin. Thi.I i' not to say 1 ha1 the Utopian element5 in socialism
oughl no•· 10 be diw:arded, or have in effect been di5Carded, in
favour of i.omc k ind of 'new reali.im', although that may well accord
with lhc d itpir i led poli1ical mood of lhi' fin de siicle. H eller s study '
co ncludn op1imii.1ically that lhe Utopian aspects of Marx's ideas

on lhc fu 1 u re i.ociely of anociated producers re mainfertik, provid
ing a norm 'againsl which we can measure the reality and value of
o u r ideu' and em bod y ing 'the most beautiful aspiration of mature
h umani ty ; and in wme of the social movemenl5 of the 1960s, which
'
•ere �urely not its uhimate manifestation, this aspiration found for
a lime a fr�h and invigorating e xp ression . 2
In the nineteenth century, al all events, the various currents of

Utopian sociali'lit thought played an important part in the creation
and de \·e lopme nt of new types of social organization: the early
fo rms of trade unionism; lhe cooperative factories - described by
Marx (Capital, vol. Ill, ch. 27) as a new mode of production 'within
the old form· - and the broader consumer cooperative movement;
and Friendly Societies as a major form of mutual aid. At the same
time socialist ideas began to be more widely and systematically
diffuted th rough the development of mass political parties. Some of
thele parties were Marxist; notably those in Germany and Austria.
whic h were growing rapid ly by the end of the century and had
created for millions of workers a distinctive way of life that has
been described as taking on the character of 'a state within a state'
(Netti 1965J. Othcrr. were created either as the political arm of the
trade union movement, concentrating on piecemeal legislative
changn to improve the conditions of workers - as was largely the
case with the British Labour Party - or more generally as parties
which conceived the attainment of socialism as the outcome of a
grad ual pr OCCH of economic and social reconstruction rather than a
\udden revolutionary tramformation.
The growth of mus parties, with their leaders, officials,
newspapers, and numerous su Mid iary or related organizations, and
their continuous involvement in day-to-day poli tics brought about ,
changes in the formulation of socialist aims. While Utopian ideas

continued to provide a general stimulus to the socialist movement,
the politica l parties had neces sa r ily to engage in s t ruggl e s for the
achievement of interim reforms which would i mp rove the con
ditions of the working class - universal suffrage, trade union rights,
factory le gi slation, the expansion of education and of health and
welfare services. By the end of the century the outcome of t�

reforming activities came to be r.een by some M>Ciali!>t� a� an
important element in the changes in capi tali !>t M>Cicty 1Ahitb

required a more 'gradualist' conception of the tran!>ition to
socialism.
One of the most influential formu' < · :ons of thi!> \ie1A appeared in
a series of articles on 'problems of S<. ::1alism ' by Bernstein ' 1 896-8).
subsequently expoundt:d more com lrehensiv ely in a book < 1 899 J
which set off the 'revisionist debe: :e' a mong Marxist socialist!>.
Bernstein's arguments were directed primaril y against an ·economic
collapse' theory of the demise of capital ism and the ad\ent of
socialism, and against the conception of an incre�ing polarization
of classes, accompanied by intensifying class conflict. in capitalist
society. His ideas are conveniently summari zed in a note found
among his papers: 'Peasants do not sink; middle class does not
disappear; crises do not grow ever larger; miser and serfdom do
y
not increase. There i$ increase in insecurity. dependence . social

distance, social character of production, functional superfluity of
property owners' (Gay 1952, p. 244). In the last chapte r of his book
Bernstein discussed 'the tasks and possibilities of social democracy'
in the light of his revision of Marxist theory, and dealt with three
main issues. First, he drew attention to the importance of cooper
ative organizations as 'the easiest accessible form of association for
the working class' (p. 125) which ' bear in themselves enough of the
element of socialism to develop into worthy and indis pensable
levers for the socialist emancipation• (p. 187), though he was cri tica l
of those conceptions - Utopian in his view - which regarded
producer cooperatives as the principal way of organizing socialist
production (pp. 109-20). Second, Bernstein emphasized the role of
democratic institutions and the activities of numeroui. in depe nde nt
self-governing associations in the movement towards socialism : •the
conquest of the democracy, the formation of pol itic al and social
organs of the democracy, is the indispensable preliminary condit i o n
to the realisation of socialism' Cp. 163). Thi rd , he noted the
significance of municipal socialism in the ad\'ance to w ards a
socialist society and as a field of fruitful acti\'ity alonE?'.'iide the

parliamentary struggle.
Bernstein had been greatly influenced by the ideu of the Fabian
socialists (with whom he established close relations durin� his exile
in England from 1888 to 1901) which were another major factor in
the revision of socialist conceptions at the end of the nineteenth

century; indeed B e rn a rd Shaw, in his preface to the 1908 re print of
the Fuhian Essays, claimed that: 'Since 1889 t he S o ci alist move
ment has been competely tr an s formed throug h o ut E ur ope; and the
result of this transformation may fairly be described as Fabian
S oci a l i sm ' ( 1931, p. xxxiiiJ. The main te nets of t he new conception
were set out in a historical essay by Sidney Webb. I n the first place
it was evolutionist (explicitly related to t he theo ries of Comte,
Dar win and Spencer), and in consequence 'grad ua l i st' : ' N o p h i l o
sopher now looks for a n y t hing but the gradual evolution of the new
ord er from the old, without break of cont i n u ity o r abrupt change of
the entire social tissue at any point during t he process' ( 1 93 1 , p . 29).
The Fabian thinkers, t herefore, were totally o p posed t o all U topian
o r ' c a tast r o phi c ' views o f the trans i t i o n to sociali s m: 'h istory shews
us no example of the sudden substitution of Utopian and revolu
t i onary romance ' (ibid.). Webb then continued by associating the
socialist movement with d e m oc racy: 'The main stream which has
borne E u ropean society towards Socialism d ur i ng the past JOO
years is the i rres istible progress of Democracy' ( p . 3 1 ) ; and he
s u m m arized his view by saying t h at socialists now realize that
' i m p o rtant o rganic changes can o n ly be . . . d e m ocratic, and thus
acceptable to a maj o rity of t he people, and p repared for i n the
minds of all . . . grad ual, and thus causing no d i s location, h owever
rapid may be the rate of progress', and i n Britain at any rate,
'cons t i t u t io nal and peacefu l ', (p. 32). Webb also laid stress upon
munici pal soci alism (and Bernstei n fol lowed him i n this respect),
o bserving that 'it is t he m u n icipalities which have d o ne most to
"socialize" our i nd ustrial l i fe ' (p. 47).
But the growth of socialist part ies brought another change
bey ond the i ncreas i ng i nvolvement in reformist pol itics and the
ad option of a more grad ualist outlook. The eventual socialist
economy came t o be co nceived m o re expl icitly in terms of the
nationalization of maj o r ind ustries and the i n t roduction of cen
tralized economic planni ng, w h i le the ideas of cooperative prod uc
t i o n and self-management by the 'associated p rod ucers' we re largely
d i s m issed as Utopian fantasies . ·1 Thus A n n ie Besant, i n her con
tribution to the Fahian Essays on ind ustry under socialism, though
she allowed fo r some urban and regi onal o rgan ization of ind ustry,
argued that concu rrently with this would proceed ' t he ta ki ng ove r
of the great ce ntralised ind ustries, ce ntral ised fo r us by c a pital is t s ,
The nineteenth -cen rury vision 15
w h o t h u s unconsc i o usly p ave the way fo r t h e i r o w n superscssion'

( S haw, 1 93 1 , p . 1 46). The argu ment is c l ose t o t h at of Marx and
later Marxists conce r n i ng the p rocess of 'socializ a t i o n of the
economy' reach i n g fu lfi l m e n t i n a soci a l is t s oci et y w hen:, as
H ilferd i n g ( 1 9 1 0, p . 27) l ater e x p ressed i t , p rod uctio n would bt:
regulated by 'the local, reg i o nal o r 1 l i o n a l commissars' who v. ould
•
'shape, w i t h conscious fo resi g h t , 'he w h o l e eco n o m i c life of the

c o m m u n i t ies of w h i c h they are th• a p p o i nted rcpresentati\ cs and
leaders, i n acc o rd ance w i t h t h e n :eds of the m e m be rs '. and the
labo u r p rocess as w e l l as t h e d ist r i b u t i o n of prod ucts would be
'subject to ce n t ral c o n t rol'.
By the begin n i ng o f t he twentieth ce n t u ry the s o c ialis t parties.
whether they were Marxist o r not, had reached ve ry s i m i la r
conclusions a b o u t h o w a social ist eco n o m y s h o u l d b e organi1ed
t h rough the nat i o n alizat i o n of m aj o r i nd ustries and ce n t ra l ized
eco n o m ic p l a n n i ng. But t here was l i t t l e e x perie nce of o p e rat ing
publicly o wned i nd ustries, outside the l i m ited field o f m u n i
cipal enterp rise, a n d t h e p rojects fo r socialis t reco n s t ruct i o n were
couched i n very general and abst ract te r m s , w i t h o u t m uch c o n s i d e r
ation i n detail of t he p r o b l e m s t hat m ight e m e rge . It wa�
recogn ized , to be sure, t h at t he fut u re society c o u l d not be
completely p l a n ned i n advance ( and fo r t h a t reason t he U t o pia n
schemes were rej ected ) ; A n n ie Besant ( S haw 1 93 1 , p p . 1 40- 1 ) aimed
'to forecast, not the far-off future, but the next social st age . . . to
w o rk o u t c hanges practicable among men and w o m e n as we k n ow
them', w h i le K arl K a utsky ( 1 902, p . 1 05) i n h i s essay o n ' t he d ay
after t he revol u t i o n ', e x p ressed very clearly the view t hat after t he
conquest of p o l i t ical p o we r 'problems w i l l arise o f which wc k n ov.
nothing and many w i t h w h i c h we a re occ u p ied today w i l l by t h a t
t i me be solved . New m e a n s t o the s o l u t i o n s o f these d i ffe re n t
problems w i l l a l s o arise o f w h i c h we t o d ay have n o s u s p i c i o n . '
Kautsky w e n t o n , h o wever, t o e x a m i ne m o re c l o s e ly t ha n wa�
usual among socialist t h i nkers some of the i m med iate p r o b l e m s
that might be encounte red i n co nst ruct i ng a socialist e co n o m y. O n e
of these w a s the i nce ntive t o w o r k , which he thought wo u ld d epe n d
partly o n w o rk i ng-class d isci p l i ne , t h o ugh this w o u ld b e a
'democratic d isci p l i n e ' p resu p p o s i n g a 'dem ocratic o rgani1.atio n o f
labou r' a n d a 'democratic fac t o ry ' ( p . 1 26); a n d he als o n o t ed t hat
there w o u ld be vario u s fo r m s of s o c i a l property natio nal.
municipal and c o o perative w h i l e pr i vat e p ro pe r t y co u l d stil l exist
in many means of production (p. 127). But the effects of this

working-class discipline would also need to be complemented by
making work itself more attractive, reducing the hours of labour
and improving conditions in the workplace (p. 128). These were
ideas that had already been briefly formulated by Marx, though as
the discussion by Heller, cited earlier, indicates, the problems are
more complex than was foreseen by socialists in the nineteenth
century.
Kautsky also expounded very clearly the role of money in a
socialist economy:
Money is 1he simpl e st means k nown up to the present t i me which

makes it pos s i ble in as comp licated a mechanism as that of the
modern prod uctive process, w i t h its t remendous far-reach i ng d iv
is ion of labour, to sec u re the circulat ion of products and their
d i s1ri b u t ion to the individual mem bers of society. I t is the means
w h ich makes it poss ible for each one to satisfy his necessi ties
accord ing to his individual i n c lination (to be s u re w i t h i n the
bou nds of his economic power). As a means t o such circulation
m o ney will be found ind ispensable u n t i l someth i ng better is d is
covered . To be sure many of its fu nctio ns, especially that of the
measure of val ue. will d isappear, at least i n i n ternal commerce.
( p. 1 29 )
H e then went o n t o discuss how the incomes o f workers might be

increased under socialism, pointing out that because of the need for
investment and public expenditure there would be 'none too much
remaining over from the present income of the capitalist to be
applied to the raising of wages' (p. 136), and emphasizing as the
main factor a rapid expansion of production. This, he argued,
could be achieved mainly by a rationalization of production which
would concentrate it in larger, more efficient plants, and by the
elimination of economic crises. But Kautsky, unlike Marx in the
Grundrisse, did not specifically include the progress of science and
technology among the important factors affecting the productivity
of labour, and he did not therefore discuss the question of how
technological innovation would be organized in a socialist society,
or whether it might be impeded by the development of a bureau
cratic system of state management. In the last part of his essay,
however, Kautsky did suggest some variations and limits in the
socialization of production. He made clear, first, that there would
be municipal and cooperative e nterprises alo ngside the large state

owned concerns; and seco nd, that not all product i o n would be
socialized , and many ind ivid u al prod ucers would re m a i n active:
. . . the greatest d iversity and possibility of c h ange w i l l rule ...

The most m a nifold forms of proper v i n t h e means of p rod uc t i o n
- national, m u nicipal, cooperative' uf c o n s u m p t i o n and produc
tion, and p rivate - can exist besid1 each other i n a soc i a l i s t
society, the m o s t d i verse fo rms o f ndustrial o rgan izat i o n ... of
remuneration o f labour . . . o f cin u l a t i o n of products .... The
same manifold character o f economic mech a n i s m that exists today
is poss i b le in a socialist society. (p. 1 66)
Apart fro m agricu l t u re, w here K autsky st ressed t h e i m p o rt a n t ro l e

of s m all farmers, a maj o r sphere fo r the devel o p me n t o f s m all- s c a l e
and ind ivid u al enterp rises was, in his view, t h at of i ntel l ec t u a l
'
producti o n '. The educat i o n a l syste m and sci e n t i fic research w o u l d

need to be nationally o rganized , but i n the a r t s a n d l i te ratu re free
individual act ivity must p revail, and K autsky s u m med up h i s i d e as
i n t he p hrase 'Co m m u n i s m i n material p roduct i o n , anarchism in
the intellectual' ( p . 1 83 ) .
Although socialist t h i n kers, a s I have i l l ust rated , became i n c reas
ingly p reoccupied w i t h the q uest i o n of o rganizing and manag i ng an
economy based u p o n the socializat i o n of large-scale e n t e r p r i ses .
and relying to a great extent u p o n cent ral plan n i ng , U t o p i a n ideas

d id not vanish c o m p letely fro m the socialist movement. The
Utopian novels o f Bellamy and M o rris were the mselves pub l i s h e d
late i n t he n i neteenth cen t u ry and were very w i d e l y read. I n
particular, the i d e a o f self-management by the as so c i a t ed pro
'
d ucers ' re mai ned potent and assu med new fo r m s; f o r exa mple . i n
the French syndicalist movement, w h i c h also strongly influenced
the wo rkers' m o vement i n I t aly a nd S p a i n i n t h e A m e r i ca n
.
I nd ustrial W o rkers o f the W orld, a n d i n t he guild socialist nHwe

ment i n Britai n . The latter develo ped i n a c l i m a t e o f opi n i o n t hat
owed much to Morris, and ' News from Nmdl<'r<' ... m i g h t he
taken as the vision that t h e g u i ld soc i a l is t s s t ro\'c t o i n t erp ret i n a
fo rm approp riate t o the twentieth century' (G l a ss 1966. p. 8).•
S o mewhat later, towa rd s the end o f t h e F i rst W o rld War . t he
idea of self-manage ment rece ived a new i m pu ls i o n fro m t he
emerge nce of workers ' a n d s o l d iers' counc i ls and t he dew l opment
of what came to be cal led the 'council moveme n t '. Karl Renner
( 1 92 1 ) a n alysed t h i s phenomenon i n terms of an oppos i t i o n
bet wee n a ' p u rely p o l i t ical de moc racy ' and 'economic de moc racy',
characteri1 i ng the 'council syste m ' as one in w h ich p o l i t ical fu nc
t ions o r pol i t ical s ig n i fi cance are assigned 'to collect ivit ies which are
fo rmed by the common i n terests of an occupation, a status group,
or a class '; a nd bes ides c i t i ng the example of the R ussian 'd ictator
sh i p of workers ', peasants' and soldiers' councils' (which he d i d not

e x a m i ne fu rther) he d iscussed the work o f the Webbs o n ind ust rial
democracy, and the ideas of G u ild Socialism in Britain. Renner
recog n ized the i m p o rtance of what he cal led 'volu ntary economic
d e m ocracies' (such as the t rades u n ions, cooperatives and Friendly
Societ ies), bu t he concl uded that the role of the state and polit ical
democracy were crucial and paramount i n regulat i ng conflicts of
interest bet ween various sect ional groups i n society, and he d id not
d i rectly add ress the issue of workers' self-management, which was
neve rt heless ve ry p r o m i nent in th ose sect ions o f the council move
me nt th at focused atte n t i o n on the 'factory councils' as a means o f
achiev i ng i nd ustrial de mocracy ( Bauer 1 923, Bricianer 1 978,
G ram�ci 1 9 1 9-20, P r i b icev ic 1 959).
The idea of self-management as an esse ntial feature of socialist
society has re mai ned vigorously al ive up to the p resent t i me. It
found practical express i o n in the Yugoslav system of workers' self
management ( B roc k meye r 1 970) wh ich has had an i ncreasing
i n fl uence, during the past two decades, on the eco nomic reforms i n
other socialist countries from Eastern Europe to China; a n d i n a
more Utopian and speculative fo rm it played an i m portant part i n
t h e rad ical social moveme nts of t h e 1 960s, expressed i n t h e concept
of 'participatory democracy' (Jacobs and Landau 1 966). One
reason for its conti nued , and even growi ng, influence in socialist
thought is undoubted ly the i ncreasing dissatisfacti o n with some of
the conseque nces of bureaucratic ad m i n istration of state-owned
enterp rises in capitalist countries, and still more with the author
itarian and cumbersome management of the whole economy i n
soci alist count ries; a d issatisfact ion which concerns both t h e human
relations with in the enter p rise or i ndustrial sector, and , in varying
degrees, but most obviously in some socialist countries, the overall
efficie ncy of the system of production and d istribution.
But an economy based upon self-manage ment of individual
enterprises itself encou nters proble ms which have been widely
d e bated , in response to the criticisms that were leve lled at the ideas
expounded by the council m o ve m e n t , t he synd icalists a n d t h e G u i l d
S ocialists,s a n d i n t he l i g h t o f e x perience of the act ual fu nct i o n i n g
of coope rative prod uction and self- m anage m e n t . Two i s s u e s h a ve
been crucially i m portant i n this d e b ate the e x t e n t t o w h i c h
e ffective participation i n m a n age m � · t can really b e ac h ieved i n
enterprises which d i ffe r greatly i n s i , . e , c o m p lexity a n d tec h n ologi
cal sophisticat i o n ; ano t h e w ays i r w hich i n d ivid ual e n t e r p r i s e s
should be related to the national and i n ternat i o n a l eco n o m y .
t h rough central o r regional p l a n n i n g o r t h r o ugh m a rket mecha
nisms ( m o re o r less st rictly regulated ) - and t hey will be c o n s i d e red
i n detail i n later c hapters.
By the early years o f the twentieth ce ntury t he socialist v i s i o n h a d
assu med , as I h ave illust rated , a d iversity o f fo r m s . a n d i n t he
course of t h is century it has bec o m e ever m o re d i ve rse. in t h e o ry
and i n p ractice. But t h i s growing d iversity, marked especially by t h e
rift between the aut h o ritarian or totalitari a n soci a l i s m of Eastern
Europe and the d e mocratic socialism o f Weste rn E u rope. was
accompanied after 1 945 by a steady advance o f the 'socialist i d ea · i n
many of the capitalist countries, and by a grad ual e x t e n s i o n o f
broad ly socialist policies and i n s t i t u t i o n s . I n most o f the W e s t
European cou ntries m e m bers h i p o f socialist p a r t i e s , and t h e
socialist v o t e , increased s u bstant ially ( t h o ugh B r i t a i n w a s a n otable
except ion), and i n m a n y countries socialist gove r n m e n t s h a ve b e e n
in office fo r lo nger o r s h o rter periods ( Bott o m o re l 984a, c h . 1 1 ) .
S i nce the m id - l 970s, h owever, t h e re has been a n o t a ble res u rgence

of capitalism , and the v i rtues o f private enterprise and a m a r k e t
eco nomy h ave been widely and vigorously e x t o lled ( agai n w i t h
exceptional fervo u r a n d effect in Britai n, reflect ing t h e weak ness o f
t h e socialist movement). T h i s c hange h a s reawa ke ned d iscuss i o n o f
the content and p rospects o f the 'socialist i d e a ' i n t e r m s oft e n
rem i n iscent o f the revisionist d e bate p rovo ked b y Ber n s t e i n a t t h e
e n d o f t h e n i netee nth century,� a n d the d ebate h as bee n g i v e n fre s h
i m petus by the refo r m s that are n o w u nd e r way i n t h e U S S R a nd
other socialist countries.
A n i m p o rtant part o f the d ebate conce r n s t h e p o l i t i c a l i n s t i t u
tions o f a socialist society, and above a l l t h e 4 ues t i o n o f d c m ocrac�· .
pluralism and ind ividual li berty; but the eco n o m i c st ru ct u re o f
socialis m , which is l i n ked i n m a n y res pects w i t h t h e p o l i t i c a l
proble ms, re mains a crucial issue, and is t h e p ri n c i p a l s u bj ec t o f t h i s
boo k . I n assessing the cu rrent ret h i n k i ng and rest ruct uring of

socialism we d o not need to ad opt either of two extreme positions:
one which c l i ngs obd urately to past fo rmulae and to the idea of a
sudden m i raculous transformation of human nature and society o n
' t h e d ay after the revo l u t i o n '; or one w h i c h rejects almost t h e entire
past along with any Utopian vision, i n favour of accommodation to
what see ms i m med iately, or i n the short term, feasible. Nor d o we
need to fear, or to regard as symptoms of a profound and perhaps
terminal crisis, the critical reassessments and reforms which are
now t a k i ng place. Socialis m , l i ke capitalism, is a historical phe
nomenon, subject to all k i n d s of change and processes of develop
ment o r decay, and every generati o n has to face new situations,
problems and opport u nit ies - i n large part i nherited , to be sure,
fro m the past - with which it must grapple as i ntelligently and
resolutely as it can. N o one can pred ict with any accuracy exactly
what k i nd of world human bei ngs will i nhabit a hund red years fro m
n o w , if t h e y s t i l l have a wo rld to i nhabit; b u t w e c a n at least be
confid ent, I t h i n k , that the n i neteenth-century vision of sociali s m
h a s become a n e n d u r i ng p art of t h e furniture of t h e h u m a n mind,
and that the socialist idea and socialist practice, however greatly
mod ified by new experience, w i l l remain powerfully effective for a
long t i me to come.
Notes
I . The terms 'socialism' and 'communism' were used more or less i nter
changeably in the early ni neteenth century, although the former was
more widely employed , and t h is pract ice continued through much of the
century. M arx and E ngels followed this usage to some extent and did
not take strong exception even to the term 'social democratic' which had
been ad opted by some socialist parties, altho ugh E ngels later ( 1 894)
expressed reservations, saying that while 'the word will pass muster' it
was really unsui table 'for a party whose eco nomic programme is not
merely socialist in general but specifically commun ist, and wh ose
ultimate polit ical aim is to overcome the entire state and conseq uently
democracy as wel l . ' Only in the twentieth century, particularly after the
creation of the Third ( Communist) I n ternational and of separate
Communist part ies, did the term 'communism' acq uire a more d is
t i nct ive meaning, embodying the idea of revol utionary act ion in con-
t rast with socialism as a more peacefu l , grad ual an d ' re fo r m i s t '

approach t o social change, w h i le at t he same t i me c o m m u n i s t "'c i e t y
came t o b e represe nted ( notably b y Le n i n ) a s a second , h igher s t a g e i n
the development of p ost-capitalist societies. O n the d i ve rse a n d c h a n g
ing usages see the article by J aszi ( 1 934), Stanley M oore ( 19 8 0 ) , and t h e
entries o n ' C o m m u n i s m ' and 'Socialism' i n Bot t o m o re ( 1 9 8 3 ) . l n t h i s
b o o k the t e r m 'socialism' w i l l be w c l t o refe r t o a l l t h ose movements
which a i m o r h ave ai med t o c reate a 'class less societ y ' or, i n o n e fo rm or
another, a 'society of associ ated p n d ucers', and t o the d i ve rse types of
society which claim t o have achievt d , i n some d egree , t h ose a i m s ; a n d
a n y necessary d istinctions betwee n d i ffere n t m o v e m e n t s and societies
will be made at the approp riate p l ace i n t h e t e x t .
2. A n o t h e r defe nce o f U topian t h o ught w a s made by Otto N e u rat h ( 1 9 1 9 )
who argued t h at 'we fi n d i n u t o p i as prophetic t rains of t h ought w h i c h
rem a i n closed t o t h ose who, proud of their s e n s e o f r e al i t y , s t u c k fast t o
yesterd ay and c o u ld not e v e n c o n t r o l the p resen t '; and h e s u gg e st ed t h a t
Utopias might be regarded as 'const ructions of soc i a l e ngi neers'. M o re
generally, i n his writing on economic p l a n n i ng (which w i l l be d i scussed
i n the next chapter), he ad vocated the elaborat i o n o f ' a l t e rn a t i ve
scientific utopias' as part o f the p l a n n i ng p rocess. See also the d iscuss i o n
i n Landauer ( 1 959, ch. 46).
3. For a n i l l u minating d iscuss i o n of 'statist', 'col lect ivist ' a n d ' a sso c i a t i o n
ist' vers i o ns of socialis m , see Yeo ( 1 987) .
4. G lass's study provides a good acc o u n t of t he backgro und and d e v e l o p
ment o f G u ild Socialism, i n which G . D . H. Co l e played a m aj o r ro l e
fro m 1 9 1 3 to 1 923 (see Cole 1 920). M o rris s ketched h i s own vision of t h e
future o rga nizat ion of i n d ustrial p rod uction in his essay · A fac t o r y as i t
might b e ' ( 1 907); and i n the early 1 950s I h a d the pleasure o f v i s i t i n g a
workers' cooperative ( ' B o i m o n d a u '), e ngaged i n thE' m a n u fa c t u re n f
watch cases i n Valence i n France, w h i c h had c o nj u red t h i s v i s i o n i n t o
reality.
5. See t h e comments by Renner ( 192 1) a n d G l a s s ( 1 966, c h . 7).
6. For a n early reasses s m e n t , w h ich r a i s e s m a n y i ss u e s t h a t a rc h i g h l �
relevant t o the p rese n t c o n t roversies sec K o l a k o w s k i a nd H a m ps h i re
( 1 974).
2
Marxist conceptions of a
socialist economy
Marx referred o n ly i n the most general terms, a n d o n rare

occasions, to the socialist mode o f prod uctio n , as t h at of the
'associated prod ucers', o r as the 'sel f-government o f the prod ucers',
and in the Grundrisse ( p p . 704-6) as an econ o my, such as h ad
already begu n to develop u n d e r capitalism, i n w hich the 'creation o f
real wealth . . . depends u p o n the general state of science and t h e
progress of tec h n o l ogy' a n d 'ge neral social k n o w ledge h as become a
direct productive force'. For the most part, l ater M arxist t h i nkers,
at the end of the n i netee n t h cen t u ry and in the first decade of the
twentieth century, "91 n t i n ued to describe the socialist economy
mainly in terms of a progressi o n into public owners h i p of the large
scale enterprises and financial institutions which had become
i ncreasi ngly dominant in the capitalist economy, without consider
ing i n any detail h o w t hese public corporations would be managed
or precisely how a centrally planned econ o my would funct i o n . As
Landauer ( 1 959, p. 1 6 1 1 ) observed :
I n the last years before the First World War the grou ndwork was
l aid for the great advance of socialist theory i n the i n terwar years,
but this preparato ry work was done in the main by some of the
critics of socialism and not by the socialists themselves. The period
from 1 900 t o 1 9 1 4 was unfavourable to the emergence of a
realistic theory of socialism because one wing of the socialist
movement was committed to M arxism which offered no basis fo r
such a theory, and the other wing was too much u nder the
22
Marxist conception s of a socialist economy 23
i n fl uence of t h e historical and i n s t i t u t ional ist schools . . . to be

greatly interested in any sort of t heoretical analysis.
The work of K arl K autsky, as I i nd icated i n the previous c h a p t e r ,

w a s rather exceptional i n d iscussi n g ( w h i le reject ing, i n M a r x 's
terms, any intention of writing rec i o �s fo r the k itchens of the futu re )
some of the problems t h at w o u ld t ace a socialist regi me afte r t h e
social revoluti o n , a n J i n o u t l i n i n !! an eco n o m ic struct u re i n w h ich
large state-ow ned enterprises w o t ld be c o mple mented by cooper
ati ve production and by small-scall! o r i n d ividual p rivate enterprise.
G rad ually, h o wever, i n the new cond i t i o ns res u l t i ng fro m the
growth of large working-class parties, which needed t o p rese n t
more detailed eco n o m ic a n d social pol icies i n t h e i r progra m me s .
a n d especially after the R ussian Revo l u t i o n , w h i c h m a d e t h e
constructi o n of a socialist economy an u rgent p ractical q u e s ti o n .
M arxist t h i n kers w e re obliged to consider m o re carefully and

thoroughly the nat u re o f econ o m ic institutions and mech anisms i n
a socialist society.
I n this reorientat i o n o f thought t he e x perience o f the 'war
economy' d u ring the First W orld W a r played an i m p o rtant part ,
and was analysed i n various w ays . K arl Renner ( 1 9 1 6) , i n a s e r i e s o f
articles o n 'problems o f M ar x i s m ', argued that the war eco n o m y
had accelerated a p rocess o f 'the penetration of the p rivate eco n o m y
down to its elementary c e l l s by the state' a n d the e m e rgence of
'control of the w h ole private secto r of the eco n o m y by w i l led and
conscious regulation and d i recti o n ', conclud i ng that society had
'entered an era o f state eco nomy . . . though e n t i rely w i t h i n t h e
framework o f the capitalist economic o rd e r '. T h e social izat i o n of
the economy had t aken an unfo reseen c o u rse, i n which, fo r t h e t i m e
being, the principal agents were 'all-powerfu l national states', and
this posed new problems fo r the socialist movement. One i m p o r ta n t
aspect of h i s argument, w h i c h he and o t h e r A u s t ro - M a r x i s t s
developed i n later writi ngs, w a s t h a t a w o r k i ng-class g o v e r n m e n t
could build upon and extend the econom ic fu nc t i o n s o f t h e s t a t e
that had already emerged i n capit alist society and w o u l d n o t n eed
to reconstruct the e n t i re state mach inery. At the s a m e t i m e t h e re i s
apparent i n Renner's d iscussion a conce r n a bo u t t h e 'al l p o w e r fu l -
state'; this concern was later e x p ressed m u c h m or e s t r o n g l y by

H i lferd i ng ( 1 94 1 ), after the e x p e r ien ce of t h e S t a l i n i s t reg i m e in t he
Soviet U n i o n and the N a t i o n a l S oc i a l i s t reg i m e i n G e r m a n y . in h i �
t h o ro ughgo i ng revision of the M arxist t he o ry of t he state.

Q u i t e a d i fferent aspect o f t he war eco n o my was given promi
nence by Otto Neu rath i n art icles p u blis hed between 1 9 1 6 and 1 920,
m o re particu larly a fter his e xperience as the creator and p resident
o f a ce n t ral plan n i ng o ffice i n Bavaria i n 1 9 1 9 . H e described this
e x perience i n a lect u re given t o the Sociol ogical S ociety of V ie n n a
( 1 920). a n d began b y o bserv i n g that:
At 1 h e begi n n i ng of lhe revo l ulion p e o p l e were as u n p repared for

l he lask of a socialisl econ omy i n Germany as lhey had been for a
war economy when war broke oul i n 1 9 1 4 . The German
. . .
Social Democratic Parly had nol worked o u t a n econ o m i c pro

gramme and was u n able t o p u t fo rward clearcut d e m a nds fo r
socializa t i o n . . . . The tec h n i q u e of a socialist econ o m y h ad been
bad ly neglected. I nstead, only criticism of the capitalist society was
offered . . . . That was why, when rev o l u t i o n broke out, a c o m mis
sion fo r socialization h ad t o be called to d iscuss the basic prin
c i p les. Longwinded, sterile debates took p lace, showing d i s agree
ments of a l l s o rts, without p roducing a u n i fo r m p rogramme.
N e u rath went o n to describe b riefly h i s work d u r i n g the period of

the s h o rt-lived Bavaria n Soviet, and to make clear his own
c o m m itment to 'full socializat i o n ' and central pla n n i ng as agai nst
the part i al meas u res that we re b e i n g i n t rod uced i n Germany as a
whole. H is conception of a socialized economy was outli ned i n
articles o n t h e w a r eco n o m y a n d o n t h e i m med i ate post-war
attem pts at socializat i o n w h i c h were col lected in a volume e n titled
Through the War Economy to the Natural Economy ( 1 9 1 9) . I n one
of t hese articles ( 1 9 1 7) he argued that the decline of the free trade
eco nomy was accompanied by the advance of a n 'ad m i n istrative
economy' orientated towards an econ o m y i n k i n d , which 'seems to
i nc l i n e towards the fu rthering of a certain u n i fo r m shaping of the
econ o m ic o rganization, based o n cent ralized meas u res'. In a later
re port ( 1 9 1 9) del ive red to the M u nich W o rkers' C o u ncil, he set out
more fully his idea d a socialist eco n o m y :
T h e I o t a ! organization wh ose creation we d isc ussed c a n raise the

economic efficie ncy of the ord er of life only if i t possesses an
adequate economic p l a n . I t is not e n o ugh to k n o w 1he possibil ities
of prod uct ion and consu mption as a whole, one musl be able to
Marxist conceptions of a socialist economy 25
follow the movement and fate of all raw materials and energies. of
men and machines t h r o ughout the e c o n o m y [and fo r t h is p u r p o � e ]
w e need u n iversal statist ics which , i n c o o rd i n ated s u rveys, c o m
prise w h o l e c o u n t ries o r e v e n the w o rld . . . Economic plans
w o u l d h ave t o be des i gned by a s p e c i a l office w h i c h w o u l d l o o k
o n t h e t o t a l national e c o n o m y a s a ! i g l e g i a n t c o nce r n . M o ne y
p rices w o u l d not be i m p o rtant fo r ih s u rv e y s , s i nce w i t h i n t h t:
framework o f a planned e c o n o m y s 1 ch p r i c e s , a s l o ng as t h e y
continue at a l l , a r e fi x e d i n an esse n i a l l y a r b i t rary m a n n e r b y
associatio n s , by t h e state o r by othe r a u t h o r i t i e s , whereas pr e
viously they w e re a u t o m at i c res u l t s of c o m p et i t i o n . The c e n t r a l
office fo r measure ment i n k i n d , as we m i g h t c a l l t h e o ffice m e n
t i o ned above, w o u l d h ave as one of i t s t a s k s t h e p r e s e n t a t i o n o f
the e c o n o m i c p rocess at a n y g i v e n t i m e , b u t above a l l w o u l d h a ve
to design the economic plans fo r t h e fu t u re . . . . We m u s t at l o n g
l a s t free o u rselves fro m o u t moded p rej u d ices and regard a l a rge
scale economy i n kind as a fu l l y valid fo rm o f eco n o m y w h i c h i s
the m o re i m p o rtant t o d ay i n that a n y c o m p le t e l y p l a n n e d e c o n
o m y a m o u nts t o a n e c o n o m y i n k i n d . To s o c i a l i ze t h e re fo re m e a n s
to further a n e c o n o m y i n k i n d . . . . I n a large-scale e c o n o m y i n
k i n d , i n a s o c i a l i zed e c o n o m y , m o n e y n o l o nger i s a d ri v i n g fo rce .
N o l o nger is there a 'net p ro fi t ' fo r w h i c h p rod u c t i o n occ u r s .
M oney c o u ld re m a i n a t best as a t o k e n fo r a c l a i m o n a l l s o r t s o f
g o o d s and services which t h e i n d ivid u a l c o n s u m e r is g i v e n t o
e n able h i m t o arrange h i s c o ns u m p t i o n .
Neurath went o n t o consider some specific problems o f a social i zed

economy: in particular, 'eco n o m i c e fficiency' - w h i c h he saw as
being decided by d i rect c o m parisons and j udgements ( m ad e by t h e
economic central office a n d the people's rep rese n t a t ives) o f t h e
desirability of alternative projects and plans and what he cal led
'substitute incentives', largely in terms of b o n uses fo r h igh e r o u t p u t .
which involved a t rend towards 'tec h n i c i s m '. H is w ri t i n g s . u p t o t h e
early 1 920s, were the most forceful e x p ress i o n of t h e i d e a of a
socialist economy as a ' m o neyless' eco n o m y . which had . accord i ng
to Landauer ( 1 9 59, p. 1 636) 'the value o f a b o l d i n t e l l e c t u a l
experiment w h ich . . . calls i n t o consc i o u s ness t h e re a s o n s fo r v a l i d
opinio ns', and also p rovoked 'the appearance of t h e n e w . aggrc s s i \'c
school of anti-socialists', led by L u d w i g von M i se s . t h o u g h i t s i d e a s
were consonant 'with suggest i o n s made b y M a x W e b e r ' ( p . l <i 3 7 ) .
Mises insisted o n the need fo r an ac c o u n t i n g sys t e m b a sed u p o n
v a l u e u n its i n any c o m p l e x s o c i e t y a n d h i s c ri t i c a l a s s a u l t o n
,
socialist p l a n n i ng was t he p ri ncipal s o u rce of t he 'calcu lation

debate' o f the 1 920s and 1 930s , which w i l l be considered i n Chapter
4 below.
A t t h is point. howeve r, i t is w o rth noting that N e u ra t h 's concep
t i o n of 'calculati o n i n kind ' is significant also fro m another aspect,
si nce i n p ri nciple it e n a b les econ o m ic p l a n n i ng to take into account
t he use. as between generations, of n o n-renewable n atural resources
( raw materials and energy) . Neurath h i mse l f, in a later essay ( 1 928),
raised t h is q uestion i n d iscussing the formulat i o n of p roduct i o n
plans fo r p rovid i ng housi ng:
One may ch oose between plans: t h ose t hat with the same effort
consume more raw materials than others are of course eliminated .
M ore d i fficult is the case where h igher consumption of raw mater
ials goes with less work. The question might arise, should one
protect coal m i nes or put greater strai n on men? The answer
depends for example o n whether one t h i n ks t h at hyd raulic power
may be sufficiently developed or t hat solar heat m ight come to be
better used , etc. I f one believes the latter, one may 'spend' coal
more freely and will hardly waste h u m a n effort where coal can be
used . I f h owever one is afraid that when one generation uses too
much coal thousands w i l l freeze to death in the fut u re, one might
well use more human power and save coal. Such and many other
non-techn ical matters determine the choice of a techn ically calcu
lable plan. (p. 263)
Neurath, however, d id not pursue the ecological issues and i n

general there was little i nterest, and very l ittle debate, among
M arxists concerning ecology ( M arti nez-Alier 1 987, ch. 1 4). I t is,
however, an i m portant subject for modern socialist thought and I
shall return to it i n a later chapter.
After the Russian Revolution the principal M arxist d i scussions
of economic planning took place in, or with reference to, the Soviet
Union. The Soviet planning ex perience, i n its particular historical
context. will be exami ned in the next chapter. Here, I shall confine
myself to the d iscussions among M arxists i n the period from the
First World War to the 1 930s, which also related to the attempts at
partial planning i n some West European countries and the conse
quences of the war economy. As I noted earlier, Renner ( 1 9 1 6), in
his articles on 'problems of M arxism', had d rawn attention to the
great expansion of state i nterve ntion in the economy and raised
Marxist conceptions of a socialist economy Zl
questions about how the activities of the i nterve n t i o n ist s t a t e could

be t ransfo rmed i n a socialist d i rect i o n ; and later, H i l ferd i ng ( 1 9 2 7 )
argued that post-war capitalism had moved towards an 'organized
economy' in which the 'capitalist pri nciple of free c o m pet i t i o n ' was
replaced by 'the socialist princirl � of plan ned p rod uct i o n ', and t h a t
the p resent generation faced ' t . ie p roblem o f t ransfo r m i n g w i t h
t h e h e l p of t h e s :ate, which onsciously regu l ates society - a n
economy organized a n d d i recte• . by t h e capitalists i n t o o n e w h ich is
d irected by the democratic st ate'. The A ust ro- M a rxists clearly
conceived the socialist economy as one i n which prod uct i o n w o u l d
be d o m i n ated by large state enterp rises, w i t h p u blic owners h i p o f
the financial institutions as a maj o r element, and d i rected by a
central plan, and this was also, as we h ave see n , the view of
Neurath, who was broad ly i n sympathy with them and contributed
regularly to their j o u rnal Der Kampf
I n the event, the Austro- M arxists and the Austrian socialist party
( S P O) never had the opportunity to i m p lement their eco n o m i c
p l a n s for the country as a w h o l e , but in V i e n n a , where the socialists
were in power u ntil 1 934, another aspect of socialist plan n i ng was
evident i n their achieve ments in p rovid ing work i ng-class h o us i ng,
health and welfare services, and cultural facilities, and i n bringing
about maj o r educational reforms ( Bauer 1923, G u lick 1948 . vol. I .
chs 1 0, 1 3 - 1 6, 1 8). This was important i n giving prominence to an
essential element i n socialist planning; namely, the o rga n izat ion o f
p rod uction to satisfy basic human need s for the whole population.
and a new, more equal d ivisi o n o f social welfare. Equally i m po rt a n t
w a s the Aust ro- M arxist criticism o f t h e cou rse taken b y t h e
Russian Revol ution, b e s t e x p ressed b y Otto Bauer ( 1923) i n h i s
b o o k o n t h e A ust rian revo lution, where he a l s o q u a l i fied the i d e a o f
a centrally planned a n d managed eco nomy t h rough h i s advocacy o f
works' councils:
Only this self-ed ucat ion i n and t h rough t h e pract ice o f w or k s "
councils will create the p re req u i s i t es fo r a soci a l i s t m o d e of p ro
d uction. The e x a m ple o f R ussia, where t h e d e m oc r a t i c o rg a n i 1 :1 -
t i o n of indust ry w h i c h w a s attem pted i m med i a t e l y a ft e r t h e
October Revolution soon gave way t o b u re a u c ra t i c s t a t e
capitalis m , demonst rates t h at o n l y h u re a u c ra t ic s t a t e s oc i a l i s m
which merely repl aces t h e d e s p o t i s m o f t h e e m p loyer hy t he
despotism of the b u re a u c r a t is p o s s i h l c so l o n g as t h e w o r k e rs
lack the capacity fo r self-government in the labour p rocess . . . . As

an instrument of proletarian self-government i n the p rod uction
process the works' councils constitute a p re l i m i nary st age of the
socialist mode of prod uct i o n . Co nseq uently, their creat ion and
development is a more i m portant p reparation fo r a social ist sys
tem of society than any fo rcible act of e x p ropriat i o n , i f the results
of the latter are no more than state or m u n icipal u n d e rtakings
ad m i n istered on bureaucratic li nes. ( p . 1 66)
M uch of the M arxist d iscussion of a socialist econ o my i n the early

1 920s was p reoccu p ied with the q uestion of the role of works'
cou ncils, and more broad ly with workers' self-management, i n
relation to a cent rally planned a n d managed economy - not only i n
Austria, b u t in R ussia (especially through t h e activities of the
Workers' Oppos i t i o n , i n which Alexandra Kollontai took a lead ing
part) 1 , in Germany, in Czechoslovakia and i n Italy (notably i n
G ramsci's articles o n t he T u r i n factory councils) - a n d the d is
cussion h as revived vigo rously i n recen t years. But fro m the mid
I 920s t o the 1 930s M arxist theory came to be d o m i n ated partly by
t he cont roversies in the Soviet U nion and their repercussions
elsewhere, partly by the 'calculation debate' p rovoked by anti
socialist critics.
The influence exerted by the controversies among S oviet
M arxists was theoretically u nfortu n ate i n the sense that they had
less to d o with the construction of a socialist eco nomy than with the
indust rialization of a backward , ove rwhelmingly agrarian society.
A more extended analysis of the development of the Soviet
economy, and of the historical c i rcumstances which affected it, will
be given in the next ch apter, and i n the present context I shall
consider only the principal theoretical ideas which emerged . The
'ind ustrialization debate' took place between 1 924 and 1 928,2 and
the main p rotagonists were B u k h arin and Preobrazhensky, t h o ugh
many other lead ing economists also took part ( E rlich 1 960, chs I
and 2 ) . Bukharin, w h o h ad fe rvently s u p p o rted the economic policy
of 'War C o m m u n i s m ', involving the extension of nationalization
and d i rect control of t he whole economy, and p resen ted a theoreti
cal j ust ification of it in h i s Econom ics of the Transformation Period
( 1 920), changed his views rad ically after the introd uction of the
New Eco nomic Pol icy ( N E P) which Le nin persuaded the party to
ad opt at the end of the civil war and foreign interve n ti on , as a
Ma rxis t co
nceptions of a socialist economy 29
means of restoring th e s h at tere · ·

d economy. I n a sen es of articles
fro m the end of 1 92 4 Bu k h arin n o w
ad vocated , fo r the agri c u l t u r a l
secto r of the econo my , a l i b eral izatio n of trade and
a relaxa t i o n o f
the restric tions o n h iri ng l abour , but at the s a m e t i me
a strong
� ffort to promo te pe asa nt c ooper a t i ves . I n t h e i nteri m , he argued ,
We have to tell the peasa ntry , al . t s strata: get ric h , acc u m u l ate .
develop your econo My' , s i n ce t h i ; , along w i t h a l i beralizat ion of
foreign trade, would h ave a stim u l ating effect o n the d evel o p ment
o f ind ustry and indus trial i n vestn ent, and w o u ld make possible a
red uction i n i nd ustrial p rices . These p o l i cies as a whole . B u k h a r i n
argued , would p ro mote general eco n o m ic growt h .
Preobrazhensk y ( 1 926 ) , o n the other hand , e m p h as i zed the
i m p o rtance o f rapid i n d u strialization t o overcome the 'goods
famine' and to absorb the s u rplus agrarian population; he noted
t h at this must take p l ace o n the 'new tec h n o logical basis' w h i c h
requ ired an e v e r i n c reasing amount o f c a p i t a l per worker. But t h i s
p o s e d a massive problem of accumulati o n , a n d t he c r u c i a l part of
P reobrazhensky's work was his formulation of a 'law of p r i m i t ive
socialist accumulation' ( by analogy with M ar x 's d escript i o n of
' p rimitive capitalist accumulation' i n the early stages of the develop
ment of capitalism), which involved the suppression of the 'law of
value' governing competitive markets and the imposition of 'forced
s aving' on the peasantry, mainly t h r o ugh m o n o poly p ricing by the
state. But Preobrazhensky introduced several qualifications into his
a rgu ment, recognizing t h at the p o l icies he advocated faced m aj o r
problems and contradictions, not least the d anger of a 'peasants'
strike'; and i n a later state m e n t o f his position he concluded t h a t
'the sum total of these c o n t rad ict i o n s shows h o w st rongly o u r
deve l o p ment toward socialis m is c o n fronted w i t h t he nece s s i t y o f
e nding o u r socialist isolati o n , n o t o n ly fo r p o l i t ical but a l s o fo r
e conomic reas o n s , and o f leani ng fo r s u p p o rt in the fu t u re o n t h e
material reso u rces o f o t h e r socialist c o u n t ries' ( E r l i c h 1 9 6 0 . p p . 5 5 -
9) . W h at P reob r a z h e n s k y d id n o t fo resee , a s he ac k n o wled ged i n
h is speech t o t h e seventee nth p a rty congress i n 1 9 3 4 . wh e re h e a l s o
ren o u nced h i s law o f p r i m it i ve socialist acc u m u l a t i o n as ' a crude
a na logy with the e p oc h o f p r i m i t i ve capitalist a c c u m u l a t i o n '. w a s
t h e fo rce d c o l lectivizat i o n o f the peasant ry c a r r i e d o u t by S t a l i n . as
a me a n s o f acc u m u l at i n g the re s o u rces fo r r a p i d i n d u s t r i a l i z a t i o n
( N o ve 1 969, p . 2 20 ) . .
The i n d u strializat i o n d e bate i n v o lved a c o m p l e x o f eco n o m i c a n d
political issues such as M arx ists in Western E u rope, beginning with

M a rx himself, had never expected to confro n t : the i nd ust rializat ion
of a back ward economy and the const ruct i o n of 'socialism i n one
country '; the maintenance of w o r k i ng-class d o minance and Bol
shevik rule in a society which had t h ree m i l l i o n ind ustrial workers
and eighty million peasants; t he constant t h reat, o r fear, of military
intervention by the capitalist powers. H e nce, a c o nsiderable gulf
emerged between the p reoccupations of S o v iet M a rx ists and those
in the West. and this was widened by the d ivision i n the i nter
national worki ng-class movement between the old social
de mocratic parties and t he new communist p arties. For the most
part the social d e m ocratic M arxists remained c ritical of S oviet
policies, and especially of the political d ictatorship, and conceived
the advent o f socialism as the outcome of a 'slow revolution' i n
which, accord ing t o H ilfe rd ing, organized capitalism would
gradually be transformed i nto socialism as the d emocratic state
took possession of the 'command i ng heights' of the economy. Few
of them undertook an analysis in any detail of the development of
the Soviet economy, o r its fundamental p roblems; one such
attempt, by Fried rich Pollock ( 1 929), which was described by a
S oviet reviewer as having 'an outstanding place in the ocean of
literature on the U S S R and its economy',J was i n fact a largely
descript ive account of the system of central planni ng, while the
theoretical d iscussion which Pollock p romised for a later volume
never appeared .
I t was, however, the implementation of a central plan, which had
its fi rst begi nni ngs in the same year ( 1 92 1 ) as the int rod uction of
N E P, with the creation of the State Planning Commission ('G os
plan') , that mainly interested socialists elsewhere, and from this
aspect there was not such a great difference between the concerns of
Western M arxists and S oviet M arxists. But the former found
themselves increasi ngly i nvolved i n a theoretical defe nce of the
possi bility of ce ntral planning in an advanced ind ustrial economy,
against t he criticisms of anti-socialist economists such as M ises and
H aye k ; this 'socialist calculation debate ' of the 1 920s and 1 930s,
and its prolongation in more recent controve rsies, will be discussed
i n Chapter 4. Here, it should be noted that the external conditions
of t he debate changed d ramatically between the end of the 1 920s
and the mid- 1 940s, in the fi rst place as a result of the p rofo u nd
economic depression in the capitalist c o u n t ries, which was inter
preted by m any M a rxists as a 'final crisis' p reced ing the coll apse of
Marxist conceptions of a socialist economy 31
capital ism, and in sharp c o n trast t h e r u t h less co llect i v i z at i o n o f

agriculture and rapid ind u s t rializat i o n i n t h e U S S R , wh ich made
possible its victory i n the Second World War and i t s post-war
emergence as an ind ustrial and mili tary s u perpower. Seco n d , the
outcome of t h e war was an e x p ansion of the S o v iet for m of
socialism into Eastern E u rope, a s t rong S o v iet i n fl uence on t he
development of socialism i n Cl ma and in some Third W o rld
countries, and i n \ lestern E u n pe a c o n s i d e rable extension of
public ownersh i p , i nc re ased s tate i n t e rven t i o n in t he economy, a nd
an apparent movement towards d e mocratic socia l i s m , t h o ugh t h i �
w a s s o o n checked by a vigorous revival of c a p i t a l i s m aided by t he
M arshall Plan.
By the end o f the 1 940s M ar x i s t c o n ce p t i o n s of a s o c i a l i s t
economy had settled fairly clearly i n t o a p at t e r n i n w h i c h c e n t r a l
planning and state ownership and manage ment o f a wide r a n g e of
ind ustrial e nterprises and financial instit u t i o ns held p r ide of p l ace;
but this began t o c h a nge i n the 1 950s. In Y ugoslavia t he system of
workers' self-management was i n t rod uced , and a 'socialist market
economy' e m e rged . The n, v e ry grad ually, the h i ghly c e n t r a l i zed
economies i n other East E u ropean c o u n tries began t o c h ange, a nd
the p rocess of decentralizat i o n and development of a c o n t rol led
market economy has accele rated rapidly in the past d ecad e .
M arxist conceptions o f a socialist economy have now bec o m e q u ite
d iverse and it is very evident at p resent t h a t n o si ngle view h o l d s a
clearly d o minant p o s i t i o n . The m o re rece nt d e bates and sch o o ls of
t h ought will be d iscussed i n later ch apters, fol l o w i ng an e x a m i n
a t i o n i n the next t w o c h a p t e rs o f t h e v a r i o u s fo r m s o f social ist
planning s i nce the First W o rld War, and the a rg ume n ts against
planning which have been p ro p o u nded by anti-social ist c r i t i c s .
Notes
I . See Porter ( 1 980), c h . 1 6, and t h e refe re n ces g i ve n t h e r e

.
2. On this d e bate see E rl ich ( 1 960) and S p u l be r ( 1 964 ) . Several studen l � ot

this period have n oted that t h e S o v i e t eco n o m i c d e b at e s were p io nee ri n g
atte mpts i n the fie ld o f d eve l o p me n t eco n o m ics w hich only 111 u d1 lal c r.
after 1 94 5 , with the e m erg e n ce of ' d eve l o p i ng cou n t ries ' a n d t h e
u n iversal concern w i t h eco n o m i c growt h . engaged t h l' fu l l a 1 1en 1ion o f
Western e c o n o m ists. As S p u l bc r ( 1 964. p p . ,. ,· i ) note�:
S i nce t h e 1 950s. w h i c h s a w t he e me rge nce of m a n y newly i n d e p e n d e n t

c o u n t ries bent o n r a p i d eco n o m ic gro w t h , p reocc u p a t i o n w i t h m a s s i v e s t a t e
i n te r ve n t i o n i n t he eco n o m y , forced i n d u s t r i a l i z a t i o n . a n d p l a n n i ng h a s
gi\'en r i s e i n t he West t o a w h o l e body o f l i terat u re o n eco n o m ic develop
ment. M a ny o f t he p r o b l e m s under d iscuss i o n i n t h is l i t e ra t u re a n d i n t h e
newly de\'e l o p i n g c o u n t ries were a l ready co n fro n t i ng R u s s i a i n t he
1 920s . . . . The t r u t h is t h at t he S o v iet m i d - 1 920s were tee m i ng w i t h i n te r
est i ng and v a l u a ble ideas.
And as other writers have observed , these ideas, and the Soviet
experience of planned ind ust rialization, became in varying degrees a
model or point of reference for the policies of many developing
count ries after 1 94 5 .
J . C ited i n the ed itorial i n t rod uct ion to the 1 97 1 reprint of Pollock 's book.
3
The experience o f plan ning

since the First World War
The first socialist planned eco n o m y was created in R u ssia a ft e r the

revolution of Oct o b e r 1 9 1 7 . It c o u ld h a rd l y have appeared i n l e s s
fav o u rable c i rcumst ances, i n a p red o m i n a n t ly agrarian and
backward society, d e b i l i tated by t h ree years o f w a r and t h e n by civil
war and foreign interve n t i o n . The Bolshevik lead e rs t h e m se l v e s at ,
least up to the m i d - I 920s, were d ou btful a b o u t t h e i r ability to re t ai n

power, and still m o re about the p o s s i b i l i t y o f c o n s t ru c t i n g a
socialist society without e x t e r n a l s u p p o rt fro m a s o ci a li s t revo l u
t i o n i n o n e o r m o re of t h e ad v a nced i n d u s t rial c o u n t r i e s o f W e s t e rn
E u rope. I n t he eve n t , as t h e rev o l u t i o n a ry wave in E u ro pe s u bsided
or was q uelled , t hey were fo rced i n t o the policy of ' b ui l d i n g
socialism i n o n e c o u n t ry ', w h i c h req u i red a bove all m a s sive a n d
rapid ind ustrializat i o n .
T h e earl i er period o f S oviet eco n o m ic d eve l o p m e n t h a s hee n w e l l
d ocumented i n n u m e r o u s s t u d i e s , 1 a n d here I s h a l l o n l y h r i c l l �
s u m m a rize the p rincipal s t ages . T h e fi rst s t ag e . t h a t o f ' \\<' ; 1 1
C o m m u n i s m ', was la rge ly d e t e r m i ned by t he civil w a r . fo re i g n
interve ntion and t h e res u l t i n g c h a o t i c cond i t i o n o f s ocie t y. A � � l" l '
( 1 969, p . 47) re m a r k s , 'all t h e e ve n t s o f 1 9 1 7 2 1 w e r e . n a t u r a l l y .
d o m i n ated by t h e w a r a n d civil w a r , b y d es t ru c t i o n a n d fi g h t i n g . h y
depleted s u p p l ies a n d pa ralysed t ra n s p o r t , b y t h e n e e d s o f t h e fro n t
a n d p r i o rities o f b a t t l e , a nd l a s t b u t n o t leas t b y t h e l o s � o f ' i t a l
industrial and agri c u l t u ral a reas t o v a ri o u s e n e m i e s '. F o l l o w i n g t h e
nati o n a l i zat i o n and re d ist r ib u t i o n o f lan d , a n d a b r i e f p e r i o d o f
33
workers' control, s t a t e owne rs h i p and cont r ol of ind ust ry and

fi nancial ins t i t u t i o ns were rapidly e x tended , a l o ng with a ban on
private t rade, and t h e whole eco n o m y m o ved t o wards an economy
in kind, a moneyless economy i n large measure no d o u b t as a
consequence of t h e civil war and the prevailing d isorder, but also
t h e o re t ically j us t i fied and ad vocated by B u kharin ( 1 920) and
ot hers . �
B y 1 92 1 ind u s t ri a l production h a d fal len to a b o u t o ne-third ,
agricu l t u ral o u t p u t t o less t h a n two-t h i rd s , o f t he 1 9 1 3 level, and
fo re ign t rade h ad virt u ally collapsed . At this st age, and part icularly
after a series of peasant risi ngs and the K ronstadt sailors' revolt of
M arch 1 92 1 , Lenin concluded that a m aj o r change i n eco nomic
pol icy was necessary, t he first step being the rep l acement of the
confiscat i o n of peasant s u rp luses by a food tax i n kind ( later, i n
1 924, a money t a x ) w h ich w a s s e t at a l o w e r level than t h e previous
req u isitions. The peasants became free to t rade as they wished with
the rest of t he i r produce, p rivate t rade was legalized and then
ex panded rapidly, along with a strong revival of p rivate
manufact uring. This New Eco n o m ic Policy ( N E P), as it came to be
called , was 'a for m of m i xed eco n o my, with an overwhelmingly
private agricult ure , plus legalized p rivate trade and small-scale
private manufactu ring' ( N ove 1 969, p. 86). But at the same time, in
1 92 1 , a State Bank was established , which together with the
C o m m issariat of Fi nance eventually s ucceeded in ending the
m assive infl ation, and stabilizing the cu rrency, a central planning
c o m m ission ('Gosplan') was created, and there was a steady
expansion of st ate t rusts in m a n u fact u ring and trade . By 1 925 both
i nd ustrial and agricultural p rod uct i o n were recovering rapid ly.
This, however, as Preobrazhensky ( 1 926) noted , was only a
restoration of t h e pre-war level o f t he eco nomy, achieved by t he
cons u m ption of fi xed capital and stocks of raw m aterial; in his view
the possi bilities for rationalizing p roduction within the framework
of the old technology were 'approac h i ng exhaustion'. The u rgent
need now was fo r a programme of i nd ustrial ization at the new level,
made possible by rapid tech nol ogical progress, which involved a
higher amount of fi xed capital per worker, and a growth o f
prod uctive capacity t o meet the increased effect ive demand of the
peasantry ( E rlich 1 960, pp. 3 2 - 6). The 'ind ustrializat ion de bate',
which was considered in the prev ious ch apter, co ncerned policies
and method s, not t he goal of rapid ind ustrial ization which was
Plan n ing since the First World War 35
universally accepted , o n both p o litical and eco n o m ic g r o u n d � .
The p o l i t ical c o n s i d e rations we re twofo l d . I n t h e fi rst p l a c e . the

civil war and foreign intervention h ad o n l y rece ntly e n d e d . t h e
S o v i e t U ni o n w a s still encircled by hostile capitalist p o w e r � . a n d
one m aj o r aspect of eco nomic p l a n n i n g necessarily r e l ated t o
military d e fe nce. N ove ( 1 969 .J . 1 3 3) refe rs t o o n e w e l l - k n o w n
example:
A 'st rategic' decis i o n , much d i: cussed a t t h e t i me . c o n c e r ned t h e

so-called U ral-K uznetsk c o m b i n e [act ually be g u n i n 1 9 30 ] . T h i s
was an i m me nse p roj ect l i n k i ng t h e i r o n o re of t h e U r a l s w i t h t h e
excellent c o k i n g c o a l of t he K uzbas, a t h ousa nd m i l e s a w a y i n
Central S i beria. I t was a l o ng-term p roject par excelln1 n'. I t
w o u ld lock u p a great deal o f c a p i t a l . It could n o t b e j u s t i fied h )
rate-of-re t u r n calculations. I t m ight h ave vast e x t e r n a l effects i n
the long r u n . I t w o u ld - it d id save t h e s i t u a t i o n m i l i t a r i l y i n t he
··
event of i n vasi o n by 'imperialist ' powers.
I n a speech d elivered in February 1 93 1 t o lead i ng pers o n nel of

socialist ind ustry, Stalin ( 1 95 5 , p . 4 1 ) o bserved : 'We a re fi fty o r a
hund red years behind the ad vanced countries. We m ust make good
this d istance in ten years. Either we do it, or we shall go u n d e r '. I t
was a n astonishingly accu rate p red iction. The fo rced i nd ustrializa
tion undertaken i n the 1 930s was a maj o r fact o r enabling the S o v i e t
U nion to withstand , and eventually turn bac k , t he massive as s au l t
b y N azi Germany in 1 94 1 , w h i c h i n vo lved fo r t h e rest o f t h e w a r
fou r-fifths of t h e w h o le German armed fo rces .
The second polit ical element in the i nd ustrial izat i o n p rogra m me

concerned the relation between classes. The Bolshev i k s had led a
s uccessfu l 'proletarian revo l u t i o n ' based u pon a very small i n d u s
trial working class in alliance w i t h a ve ry l a rge peasa n t ry , a n d i t w a �
apparent to all of t h e m t hat the e x i stence o f millions o f p e a s a n t
households e ngaged in independent p roduct i o n , along w i t h t h e
growth of private smal l-scale m a n u fact u re and p rivate t rade d ur i n i::
the N E P period , continually recreated the c o n d i t i o n s fo r a rn j \ ;d
of capitalism and constituted a th reat to the dev e l o p m e n t o f ; 1
socialist society even t h o ugh, as B u k h arin a rgued , t h e B o l s h e \ 1 1-.s
.
continued t o occupy the 'co m mand i n g heights' o f t h e eco n o m y .

I nd ustrialization, therefo re, w a s a l s o s ee n as c ru c i a l i n c h a n g i ng t h e
balance of social fo rces by e n l a rging t h e i n d u s t r i a l \\ o r k i ng c l a s s
and increasing its political weight. The p o l icy of forced in

d ustrialization which began with t he First Five Year Plan in 1 928
was then complemented by the fo rced collect ivizat ion of agriculture
t o e l i m i nate, or at least severely rest rict, independent peasant
prod uct ion.
Fi nally, the purely eco nomic consequences of rapid industrializa
t i o n were essential t o achieving t he social aims of a socialist society
by ra ising liv ing standards, ensuring full e m p loyment, and expand
i ng the social services; all of w h i c h depended upon s ustained
economic grow t h . In t hese res pects t he development of the Soviet
U n ion in t he 1 930s cont rasted s t rongly with conditions in the
capitalist world - to such an extent t h at the Webbs ( 1 935)
concluded their generally very favourable account of the Soviet
U n ion as ·a new civilization' by saying t hat this civilization had
been successful and was l i kely t o spread elsewhere . J
There had , of course, b e e n some extensi o n of eco nomic and
social planning in the E u ropean capitalist countries after the First
Wo rld War. The war economy accustomed people to much more
e x tensive state interve ntion and regulation of p roduction, and there
we re many who considered that this experience would lead
grad ually towards a socialist syste m.4 I nitially, too, the R ussian
Revolut i o n gave a fu rther i mpetus to the socialist movement, and
several rev o l u t i onary upheavals in central Eu rope instituted for
brief periods agencies and meas u res of state planning, n o tably i n
H u ngary and Bavaria (where Neurat h , a s I have noted , played a
promine n t part ). W i t h the defeat of the revo lutionary movements,
howeve r, very l i t t le in the way of socialist planning s u rvived outside
the Soviet U n ion. Nevertheless, the ideas of extended state
i n t e rvention, public owners h i p and cent ral planning re mained
potent, and on a l i m ited scale effective. In most European count ries
st ate intervention i n the economy did grad ually increase, mainly
t h rough the growth of expend i t u re on welfare services (unemploy
ment benefits, old age pe nsions, low-cost housing),5 and at a local
level, in m u n icipal i t ies and districts, some clements of socialist
pol icies could be i m p leme ntcd.6 B u t there was l i ttle o r no extension
of public ownersh ip7 and no agencies fo r comprehensive national
planning we re created .
The greatest change came with t he economic depress ion t hat
began in 1 929. In the fi rst place t h is gave a new vigo u r t o t he
socialist criticisms of capi talism, and t o the advocacy of a planned
Plan n ing since the First World Wa r 37
eco n o my t o d e a l w i t h mass u ne m p l oyment and p o v e r t y A c o n .
siderable l i terat u re o n p l a n n i ng develo ped , we l l e x e m p l i f i e d i n

Britain by t h e w r i t i ngs o f W o o t t o n and D u r b i n . W o o t t o n ( 1 9 3 4 )
first e x a m i ned t h e S oviet p l a n ned eco n o m y , t h e n m a d e a fai r l �
detailed comparison between n l an ned a n d u n p l a n ned eco n o m i c � .
a n d concluded w i t h a d iscuss u n of ' t h e cond i t i o n s o f s u ccessfu l
econ om i c p l a n n i : ig', i n w h icl she e m p h as i zed as t he fi rst p re
req u i site ' k n o w ledge and the a l i l ity t o use t h at k n o w l e d g e ' ( p . � (J:\ J
which i n t u rn req u i red t h e c reat i o n of a ge neral p l a n n i n g c o m m i s
s i o n able t o 'd raw u p p l a n s a n d t o s u pervise t h e i r e x ec u t i o n ' ( p .
307). S he t h e n went o n t o c o n s i d e r s o m e 'd i ffi c u l t q u e s t i o n s ' o f
socialist p l a n n i ng, s u c h a s t he degree of d e p e n d e nce o n or i n d e p e n
.
d ence o f, a price m ec h a n i s m , a n d t h e r o l e o f eco n o m i c m o t i ve s i n a

socialist society.s
D u rb i n , in h is essay o n 'the i m p o rt ance of p l a n n i ng' ( 1 9 3 5 .
rep u b l ished w i t h later essays o n p l a n n i n g i n D u rb i n 1 949) , o bs e r v e d
t h at 'it w o u l d be a l m os t t r u e t o say t h at "we are a l l Planners n o w ".
The c o l l apse of the p o p u l a r fai t h i n laissez-faire h as p roceeded w i t h
spectac u l a r rapid ity i n t h i s c o u n t ry a n d a l l o v e r t h e wo rld s i nce t h e
W a r ' ( p . 4 1 ). B u t he t h e n d is t i n g u i s hed t w o k i n d s o f p l a n n i ng: ( a ) as
'mean i n g s i m p l y the intervent ion of t h e Go vernment in a part icular
industry a t a time when the greater p a rt o f the eco n o m y s t i l l
remains i n private h a n d s ', a n d ( b ) t h a t ' w h i c h res u l t s i n t h e general
supersession of individual enterprise as the s o u rce of eco n o m i c
decis i o n s ' ( p . 4 2 ) . I n h i s l a t e r d iscuss i o n h e rej ected t h e idea o f r i g i d
l ong-term p l a n s which c o u l d n o t be q u ic k l y amended t o t a k e
acco u n t of c h a nges i n h u ma n tastes, technical i n ve n t i o n s a n d s o o n .
a n d d e fi ned p l a n n i ng generally a s a n 'e xtension o f t h e s i ze o f t h e
u n i t of m a n age ment a n d t h e c o n seq uent e n l a rge m e n t of t h e fi e l d
s u rveyed w h e n a n y eco n o m ic decis i o n is t a k e n ( p . 44 ) . D u r b i n t h e n
'
considered t h e a i m s o f socialist p l a n n i ng, rep l i e d t o s o m e m a 1 t1 1

criticisms o f p l a n n i ng ( w h ic h I s h a l l e x a m i n e i n t h e n e x t c h a p t e r ) .
e m p h asized t h e i m p o rtance o f cen t ra l i zed m o n e t a r y c o n t r n l . a n d
s ketched t h e i n s t it u t i o ns necessary fo r d e m oc r a t i c s oc i a l i s t p l a n
ning.
A M arxist s t u d y , Britain Without Cap it a lis t s ( 1936). p re se n t e d ; 1
su st ained criticism o f t h e capitalist o rg a n i r n t i o n o f t h e ee o n o m \
and o u t l i ned an eco n o m ic system fo r a S o v i e t B r i t a i n '. t a k 1 11 g a s i h
'
explicit model t h e S oviet eco n o m y . A ft e r c o n s i d e r i n g t h e ec o n o m v

as a w h o le t h e a u t h o rs u nder t o o k a d e t a i l ed e x a m i n a t i o n o f t h e
maj o r sectors of eco n o m ic activity and concl uded with a chapter o n

scie nce a n d ed ucation which is still i l l u m i nating fo r the way i n
which it argues the need fo r re form a n d expansion ( s t i l l today, i n
Britain, o n ly partially achieved). The book att racted q u ite wide
spread attention even from defenders o f the status q uo,q and was a
notable add i t i o n to t he l i teratu re which began to create a c l imate of
o p i n i o n more favo u rable to planni ng.
From this aspect it also i i l ustrated a second consequence of the
economic depression: namely, an increasing awareness of the sharp
contrast between the economic cond itions in the capitalist countries
and in the Soviet U n i o n . While t he former seemed to be in decli ne,
the Soviet U ni o n appeared to be making ( a nd as we now k n ow, was
in fact maki ng, i n many spheres) rapid p rogress, and came to be
regarded by many people, not only t h ose who were its committed
supporters, as a viable and hopeful alternative t o capitalism. Both
Wootton and the Webbs undert o o k a c l ose study of the Soviet
eco nomy, and t he latter, as we have seen, concluded that this 'new
civilizat i o n ' would spread elsewhere. It was undoubted ly the econ
omic cond i t i o ns and contrasts of the 1 930s which p rovided the
stimulus for the growth of the socialist and communist parties in
many of the European capitalist cou ntries, to an extent that became
very evident in the years i m med iately following t he Second World
War.
In fact, the pressu re exerted by the growing socialist movement
was mak i ng itself felt already i n the 1 930s, and there was an
i ncrease i n plan n i ng in several countries. One notable example is
Sweden, where the Social Democratic Labou r Party ( S A P) came to
power i n 1 932, and has bee n almost contin uously i n power ever
si nce. Social democratic rule has not brought extensive public
ownership, but it has greatly i ncreased public sector spend ing and
the degree of state intervention i n the economy, creating grad ually a
very advanced fo rm of 'welfare state'; and more rece ntly the sphere
of public ownership has begun t o be enlarged in an origi nal way,
which will be d iscussed i n a later chapter, through the development
of employee i nvestment fu nds.
Elsewhere there was also a general growth of state intervention
and partial planning, i n a variety of fo rms. In the U nited St ates the
New Deal, as Rooseve lt had ind icated i n his i naugural ad d ress in
M arch 1 933, i nvolved an extension of st ate intervention, first in a
refo rm of the ban k ing system then in a rationalizat i o n of ind ustry,
Planning since the First World W.. r 39
initially t h rough the National I n d ust rial Recovery Act; a re

organization of agricu l t u re (which i n c l uded , as the boldest meas u re
of the New Deal experiment, t he creation of a l arge p u b : ic
corporation, the Ten nessee V alley A u t h o rity); and a n a m b i t i o u s
programme of relief for the u ne m ployed carried out m a i n l y by t he
Works Progress A d m i n istrat i o n , which spent vast s u m s of m o n e y
on public w o r k s of all kinds. I n [,ritain, o n a much s m aller a n d Jess
i m aginative scale, 5tate interve1 tion also i nc re ased , m a i n l y i n the
for m of measures to rationalii e agricu l t u re and so me i n d ustries
( notably iron and steel) and the provision of subsidies ( fo r e x a m p l e ,
t o shipping).
This trend towards greater state inte rve n t i o n a n d regulat i o n , and
partial planni ng, at least i n the sense of rati o n alizat i o n , 1 0 gained
momentum with the approach o f t h e Second W o rld War. I ndeed i t
was o n ly later in the 1 930s, as the war loo med and rea r m a m e n t
p rogram mes w e r e undertake n , that u n e m p loyment bega n t o d e c l i n e
significantly i n m a ny of t he capitalist count ries. G e r m a n y , after
1 93 3 , had what was virtually a war economy, a nd fro m t h e m i d -
1 930s other countries e mbarked u p o n m o re g rad ual a n d l i m ited
rearmament, which involved an extension of state i n t e rve n t i o n and
planning. The war itself brought m assive state regulation o f the
economy, fro m the outset, o n a n even larger scale t h a n d u ring the
First World War, and raised si m i l a r e x pectations that many aspects
of econo mic and social p l a n n i ng would be cont i n ued i n t h e pos t
war period , c reating cond itions fav o u rable to t h e grad ual const ruc
tion of a socialist eco n o m y and fo rm of society i n t h e E u ro p e a n
countries.
In Britain, the advent o f a L a b o u r govern ment i n 1 945 m a d e
possible an extension of public owners h i p by t h e nat i o nali7at i o n of
s o me maj or ind ustries, and an e x p a n s i o n of social s e rv i ces . not a h l �
through t h e creation o f a national health service. E l s e w her e a s a .
result of particular circumst ances, t h e re w a s also an e x t e n s i o n o f

public owners h i p ; in France, where enterprises owned b y c o l l a ho r
ators with the G e r m a n occupat i o n fo rces w e re n a t i o n al i 1 e d . a n d i n
Austria, where m a n y enterp rises which were G e r m a n p r o pert \ ·
d u ring the period of Austria's i nc o r p o rat i o n i n t h e T h i rd R e 1 d1
were c o n fiscated by the A l l ied occupying fo rces and t he n r e m a i ned
in public owners h i p when t hey we re re t u rn e d t o A u s t r i a het ween
1 946 and 1 95 5 . I n Germany itself t h e pol icy o f ' c o -d e t er m i n a t i o n '
created an element o f w o r k e rs ' p a rt i c i p at i o n i n t h e m a n ageme n t o f
p rivately ow ned e n terp rises, and ge nerally i n c reased the i n fl ue nce

of t he t rade u n io n s and the Social Democratic Party. 1 1
The war also e x tended socialist p l an n i ng m o re d i rectly by
est ablis h i ng the d o m i nance of t h e Sov iet U n i o n in Eastern E u rope,
w h e n: new socialist eco n o m ies we re created o n t he Soviet mode1. 1 2
O n e of t hese cou nt ries, Y ugoslav i a , s o o n sepa rated itself fro m t he
rest of E astern E u rope, however, a n d p u rs ued an i ndependent
c o u rse o f development by i n t rod ucing workers' self-management
and a n early fo rm of 'soc ialist market eco n o m y '. 1 .1 But the S oviet
model was also followed by many o f the newly i ndependent
c o u n t ries o f the Th i rd W o rld as t hey e m barked upon p rogrammes
des igned to establish a modern eco n o m i c i n frastructure and basic
ind ust ries, and to ach ieve rapid eco nomic growt h . 1 4
T h e ex perie nce of plan n i ng fro m the First W o rld War to t h e
years i m med i ately fo llowing the Second W o rld War ind icates t h at
t h ree d i ffere nt k i nd s of p l a n n i n g h ave i n fl ue nced the development
of modern societies. First, there is the planning associated with the
war econom ies of the Fi rst and Second W o rld W ars , which, as I
have argued, s h owed the feasibility of p l a n n ing and also p rovided
practical ex perience of the operation of p l a n n i ng mechanisms.
After both wars planning and state i nterve ntion i n the eco n o m ies of
the E u ropean countries conti nued at a h igher level than d u ring the
pre-war pe riod , and this was especially the case after the Second
World War. partly because of the extension o f p l a n n i ng which h ad
already taken place in the inter-war years t o cope with the economic
de pression, and partly because o f the increased strength of the
socialist parties and t rade unions i n E u rope at the e nd of the war.
Seco nd, there is the partial p l a n n i ng, i nvolving rat i o n alizat i o n ,
government su bsid ies, some public owners h i p , and i n general a
greater state i n volvement in the regu lation of the economy, which
developed i n the capitalist count ries ( i nclud ing the U n ited States)
d u ring the depressi o n of the 1 930s and conti nued , especially i n the
West E u ropean countries, in the period of reconstruction after the
Second W o rld War. This co rresponded broadly with what H il fe r
d i ng ( 1 92 7 ) cal led 'organized capitalis m ', and w h at orthodox
M arxist-Le n i n ists later referred to as 'state m o n o poly capital ism'. 1 5
S u bseq uently, the notions expressed in t hese two co ncept i o n s of the
development of adva nced capitalism were me rged to some extent in
the co ncept of corpo rat ism, which I shall consid e r later i n this
chapter.
Planning since the First World War 41
Third , there i� the comprehensive planning, rest i n g on p u blic

ownership of the major means of prod uct i o n , exe m p l i fi e d b y the
Soviet economy and extended aft e r 1 945 lo E aste r n E u r ope , as we l l
as being ad opted a s a model, i n greater o r lesser degree , b y many
Third World countries. This k i nd of co m p rehensive p l a n n i n g h ad
an important influence, i n vari i us ways , on the c h a n ges l a k i n g
place i n capitalist countries afte1 1 94 5 . Thus, in B ritain t he post-war
Labour governmeat introd uced w h at Devons ( 1 970, p p . 6 7 - 8 3 )
referred to a s 'planning b y econ imic s u rvey', p u b l i s h i n g i n 1 94 7 t h e
first annual Economic Survey, which h a d an int rod uctory c h ap t e r
on economic planning fo llowed by an o u t l i n e o f t h ree sets of p l a n s
which t he government intended o r ho ped to i m p l e m e n t . S i m i l a r l y .
in some other E u ropean c o u n t ries , m o re c o m p re h e n s i ve t y pes o f
planning were envisaged and partly i m p l e m e n te d . 1 1· F u r t he r m o re .
a s Tinbergen ( 1 968, p . 1 02) points o u t , ' s o m e n a t i o n a l p l a n n i n g w a s
imposed o n all member countries o f the O r g a n i z ati o n o f E u ro pe a n
Economic Cooperat i o n ( O E E C ) , c re ated t o ad m i n i , t e r t h e E u r
opean Recovery, or M arshall, Plan, which s t a r t e d o p e r a t i o n s i n
1 948'.
While the w a r eco n o m ies d o cl e a r l y fo r m a v e ry d i s t i n ct categor) .
i n spite of s o m e variations betwee n c o u n t ries, t h e c a t eg o r i e s o f
' p a rtial' ( o r 'capitalist') a n d ' c o m p r e he n s i v e ' ( o r ' s o c i a l i s t ') p l a n n i n g
should not, in my view, be r e g a rded as a b s o l u t e l y d i s t i n ct a n d
exclusive. The re arc, in t h e p red o m i n a n t l y c a p i t a l i ' t co u n t ries.
degrees of plan ning which m ay tend , in s o m e c o u n t r i e s a n d d u r i n g
some periods, towards a m o re s o c i a l i s t fo r m o f eco n o m y ; a n d o n
t h e other s i d e it is i n c reasi ngly e v i d e n t t h a t c o m p r c h c n s i Y c l y
planned sociali s t societies m ay u n d e rg o m o d i f i c a t i o n h y t h e i n t ro
d uction of m arket mech a n i s m s a n d a n e n l a r ge m e n t o f t h e s p h e re n f
p rivate enterp rise, while t h e m aj o r p a rt o f ec o n o m i c p ro d u c t 1 n n
re m a ins fi rmly in t h e p u b lic sec t o r .
T h e rest of t h is c h a p t e r w i l l be d e v o t ed t o a n c .x a m i n a t i o n n l t h e
expe rience of, and e x pe r i m e n t s i n , s o c i a l i s t p l a n n i n g s i nce t h e rn d
o f the Second W o r l d W a r . B e fo re e m b a r k i n g o n t h a t , h o w e n: 1 . i t 1 s
necessary to m a ke a fu r t h e r c o m m e n t o n t h e g e n e r a l n o t i o n n f
pl a nn i n g, which c a n n o t a n d s h o u l d n o t h e l i m i t e d " m p h 1 1 1
eco nomic plan n i n g in t h e s t r i c t s e n s e . A l l t he d i\'crse for m s <l f
p l a n ni n g and st a t e i n te rve n t i o n , i n c a p i t a l i s t a n d soc i a l i s t s oc i e t i e s .
a s t h e y ha '!c d e ve lo p e d s i n c e t h e F i rst W o r l d W a r . i m o l \-c h o t h
e co n o m i c a n d s o c i a l p l a n n i n g ; a n d s o c i a l i s t p l a n n i n g w h i c h is
d i rech:d, as I a rgued i n t he i n t rod uct i o n to t h is b o o k , towards t he

creation of a new type of society, necessarily gives an except i o n a l
i m portan ce to the p r o v i s i o n for all citizens, o n a basis o f eq uality,
of those serv ices which e n h ance the q uality o f l i fe - a m o ng w h ich
the most fu ndamental are adeq uate h o u s i ng, u n i versal health care
and ed ucation, efficient p u b l ic transport and co m m u n icat i o n ,
cultural and recreat ional facil ities, and p rotect i o n o f the p hysical
environment . As we shall see, socialist policies h ave i ndeed
emphasized t hese aspects of plan n i ng (except t h at environ mental
p rotect i o n has only rece ntly become a p r o m i nent concern), and can
show maj o r achievements i n most o f t hese fields.
let us begin by considering the plan ned econ o m ies of the S oviet
U n ion a nd the count ries o f Eastern E u rope. I t is generally
ack nowledged that the rapid ind ustrializat i o n o f the 1 930s was the
crucial fact o r enabling the Soviet U n i o n to emerge victorious fro m
t h e Second World W a r a s a m aj o r i nd ustrial power, though it may
be questio ned whether q u ite such breakneck speed in the develop
ment of i nd ustry and the related collectivizat i o n of agriculture was
necessary, and still m o re whether it h ad to be u ndertaken with the
b rutal ity that Stalin i mparted to the whole p rocess ( N ove 1 964) .
E rlich ( 1 960, pp. x x - xxi) s u m s u p the achievement by saying that
'The Soviet eco nomic advance si nce 1 928 has been one of the
dominant facts o f our time. . . . Acco rd i n g to the v i rtually
unanimous view of Western students, the expansion of the S oviet
industrial capacity has proceeded at a rate which is, by any
meaningful stand ard of comparis o n , u n p recedented . ' The excep
tionally high rate of economic growth was resu med after the war, i n
the period 1 950-8, b u t i t h as stead ily decli ned si nce then, and
particularly sharply si nce the mid- 1 970s; further m o re, the annual
rate of growth has always bee n ve ry m uch lower i n agriculture,
averaging only about 3 per cent c o m p ared with 6 o r 7 per cent i n
i nd ustry. ' 7
I n the new socialist cou ntries after 1 945 the imposition o f a
Stalinist type of planning led to the same massive concent rat i o n o f
effort on rapid ind ustrialization a s in the earlier period i n the S oviet
U n ion, at the cost of severely restricting consumption i n favo u r of
invest ment, and establishing d ictatorial and repressive regimes . 1 8
This plan ned ind ustrialization was, for the most part, effect ively
carried out (most successfully i n Cz.echoslovakia and the German
Democratic Repub lic) and as Wi lczynski ( 1 982, p . 2 1 5) comments,
the s hare of the European socialist c o u n t ries ( i nc l u d i n g t h e Soviet

U nion) i n world i n d ustrial o u t p u t :
. . . increased fro m less t h a n 1 0 p e r c e n t i n 1 9 3 8 to a bo u t 30 p e r

ce nt in 1 970, and in 1 978 it was about 3 1 per cent ( b u t , accord i n g
t o some S ocialist estimates, it •v ts 37 per cent). I n t he l e a d i n g
Western n a t i o n s basic i nd ustri; i tz a t i o n took s o m e t w e n t y-five t o
fifty years to a c t ieve, b u t i n t h : E u ro pean S o c i a l i s t c o u n t r i e s t h i �
p rocess w a s c o m pleted i n twel' e t o twenty y e a r s . I n v i e w o f t h t:
semi-feudal c o n d i t i o n s t h at they i n h e rited , t he a bsence o f c o l o n i e s .
t he widespread w a rt i me devastati o n , weste r n bo yc o t t s a n d t h e
st rategic embargo and p ract ically no a i d fro m t h e c a p i t a l i s t w o r l d .
their ach ieve ments can be described by o bj e c t iv e o b s e r v e r s as
spectacular.
This u nifo r m type of p l a n n i n g d id not, h o wever, persist fo r very

long. Y ugoslavia withd rew fro m t h e S o v iet o r b i t i n 1 948 and began
to d evelop its own system of w o r k e rs ' self- m a n age m e n t , and S o v iet
i nfluence in China d i m i nished fro m t h e mid- 1 950s as t h at c o u n t ry
too e mbarked o n a d is t i nctive c o u rse o f socialist d e ve l o p me n t . I n
the Soviet U ni o n and t h e E ast E u ropean c o u n t ries c h a nges i n t he
economic system began to be made after t h e d e a t h of S t a l i n , and
the need for c h a nge became m o re widely recognized as a c o n se
q ue nce o f the slowing d o w n of eco n o mic growth in the late 1 9 50s
and a successi o n o f revolts against t he political rulers i n seve ral
cou nt ries fro m 1 95 3 to 1 980. The main features of t h is process o f
change are the reorie ntation of prod uct i o n towards i nc reasi ng the
supply o f c o n s u m e r goods, and m o re fu nd amentally, a reconst ruc
tion o f the whole e c o n o m ic system involving d ecent ralizat i o n and
the deve l o p ment of elements o f a market economy.
I n the past decade, and especially si nce the access i o n t o p o we r l)f
M r G orbachev in t h e S oviet U n i o n , t h e s peed of ch ange has g rea t l y
increased , a n d i n later chapters t h e maj o r fo rms and projects o f
reconstruction w i l l b e e x a m i ned m o re closely. H e rc it w i l l s u ffice t o
make some general obse rvat i o n s on t h e e x perience o f s oc i a l i s t
planning thus far. The E u ro pean socialist count ries have beco m e
maj o r industrial producers ( C h i n a w i l l und o ubted ly reach t h e s a m e
position w i t h i n a relatively s h o rt t i me ) , a n d the p e r capita G D P o f
m o s t o f t h e m probably l i e s wit h i n t h e ra nge o f 85 p e r c e n t t o 1 2 5
p e r c e n t of t h a t in t he U n ited K i ngd o m ( W i lczy n s k i 1 982. p . 2 1 2 ) .
H ence t hose early criticisms o f cent ral pl a n n i ng, w h ich d e c l a red
t hat it would prove impossible to carry out and t hat t he Soviet

eco nomy would si mply col lapse, were, as we shall see i n t he next
chapter, very wide of t he mark.
The slowing down of eco nomic growth si nce the 1 960s, and more
part icu larly si nce the mid- 1 970s, may be explai ned i n part by the
maturation of the socialist cou n t ries as indust rial societ ies. The
high rates of growth in the earlier stages, on t his view, reflected the
rapid i ndust ralizat ion fro m a low i n i tial level, and many eco n omists
have suggested th at their growth rates will event u ally settle at the
levels characteristic of t he advanced cap i t alist cou ntries (though
perhaps without the same degree of cyclical fluctuation); but
soci alist economists have ge nerally d isputed t his view, a rgu ing t h at
a socialist planned eco nomy makes it possible t o sustain h igher
ave rage growth rates over the lo nge r term.
There is, howeve r, another factor t o be considered i n evaluating
t he rece nt decline in growth rates and the prospects for t he future.
Economic growth in the socialist count ries until the last d ecade was
mainly extensive, t hat is t o say, achieved by bringing into p rod uc
tion add i tional quantit ies of land , labour and capital, whereas i n
advanced indus t rial societ ies i t has become i ncreasi ngly intensive,
brought about by technological progress. The need for develop
ment based upon the application of new technology was, of course,
st rongly emphas ized by Preobrazhensky i n the i nd u s t rialization
debate of t he 1 920s - as 1 noted i n the previous chapter - and m o re
recently by Rich ta and his colleagues ( 1 969), who argued , start i ng
out from M arx's conception in the Grundrisse of an advanced
modern society in which scientific k nowledge and its application
has become t he major prod uctive force, that i n tensive grow t h
would b e more effectively promoted i n the ce n t rally planned
socialist eco nomies than in capitalist eco nom ies. '9 The preoccupa
tion with i n tensive growth in the European socialist count ries is
illust rated by t he promi nence given to the use of the term 'scientific
and technological revolution' i n much social science research and
wri t i ng over the past decade.2° Yet, i n pract ice, tech nological
progress seems to have lagged beh i nd that in most of the major
capitalist count ries (except probably i n the Soviet space p ro
gramme and in defence), notwithstand ing the large resou rces
devoted to science and tech nology; and the current reforms in the
Soviet Union and other socialist count ries are largely designed t o
give a fresh stimulus to eco nomic growt h by encou raging i n no-
Planning since the First World Wat 45
vation and e nterprise ( Be r l i n e r 1 9 8 8 , c h s . 9 , 1 1 and 1 2 ) .

O n e other aspect of social ist p l a n n i ng, w h ich w i l l b e d i sc u s se d
more fully later, s h o u ld be m e n t i o ned briefly a t this p o i n t . A s I h a ve
emphasized fro m t he outset, socialist eco n o m ic p l a n n i n g is not a n
e n d i n itse l f, b u t is i ntended t o establish t h e basis o f a s m : i a l i s t
society, i n which the benefits ( m a t '. rial and c u l t u ra l ) o f r i s i n g l e \ e b
o f product i o n are d istri buted a widely a n d e q u a l l y a m o n g t h e
populat i o n as the gt neral cond i t i ms of t h e t i m e pe r m i t . A b o v e a l l .
this h a s meant i n t h e socialist < o u n t ries t he m a i n t e na nce o f fu l l
employment, t h e e rad icat i o n o f i l l i t e ra<.;y a n d a rapid d e ve l o p m e n t
o f t h e w h o l e educat i o nal syste m , t he p ro v i s i o n o f free, o r v e r y l o w
cost services i n m a n y s p h e res ( h o u s i ng, p u b l i c t ra n s p o rt , rec re a t i o n
al and cultural fac i l i t ies) a n d t h e e x p a n s i o n o f h e a l t h a n d w e l fa re
services. I n their study of social welfa re i n t h e S o v iet U n i o n . w h i c h I
cited in the introduct i o n , G e o rge and M an n i n g ( 1 9 8 0 . p p . 1 6 7 8 l
observe t h at the i n t e n t i o n s o f social p o l icy t h e re a rc m o re c o m
p rehensive and ambitious t h a n i n any welfare c a p i t a l i s t s o c i e t y . "
t hough the achievements may not always match t h e a i m s . l a r g e l y
because o f eco n o m ic constrai nts. I also cited i n t h e i n t rod uct i o n t h e
study o f T h i rd W o rld socialist c o u n t ries by W h i t e , M u rr a y a n d
W hite ( 1 98 3 ) w h i c h s hows t h at t hese c o u n t ries h a v e been m u c h
more successful than n o n-socialist devel o p i ng c o u nt ries i n e r a d i c a t
ing i l l iteracy a n d extend i n g health services t o t h e mass o f t h e
populat i o n , w h i l e a t t a i n i ng b roadly c o m p a ra b l e rates of e c o n o m i c
growt h .
A fter the S e c o n d W o rld War, p l a n n i ng, i n c l u d i n g s o m e c l c m e n b
of socialist p l a n n i ng, w a s also c o n s i d e r a b l y e x t e n d ed i n m a n y
advanced capitalist c o u ntries. I n p a rt t h i s was a n o u t c o m e < • f
wart i me p l a n n i ng and t he n e e d fo r p o s t - w a r rec o n s t r u c t i o n ( as a ft e r
the First W o rld War); b u t it was d u e m u c h m o re t o t h e g r o w t h n l
t h e socialist movement i n W e s t e r n E u r o p e , t o t h e st i l l , . j , i d
memories o f t he p re-war d e p ress i o n and t he d es i re t o reg u l a t e 1 h e
economy i n s u c h a w a y t h at t hese cond i t i o n s w o u l d n o t rec u r . a n d
i n a lesser d egree t o t h e example o f S o v i e t p l a n n i n g . w h i c h h a d
become m o re widely k n o w n and i n fl u e n t i a l i n t h e 1 9 .� 0 s and d u r i n g
the wartime a l l i a nce ( t h o ugh t h i s p roved t o be a s h n rt - l i ' c d
in fl uence, soon d es t royed by t h e C o l d W a r and t h e i d c n l ng 1 c ; i l
redefinition of wo rld p o l i t ics i n t e r m s o f a e o n ll i c t lit> t \\'l'l' ll
'totalitari a n i s m ' and t h e ' free w o r l d '). As I n o t e d a tHwe. t h e p o � t
war L a b o u r G ove r n m e n t i n B r i t a i n n a t i o n a l i 1 cd s o m e s c c 1 <1 r s 1 1 f t h e
economy a n d proposed to i n t rod uce more comprehensive pl a n n i ng,

gu id e d by the annual Economic Survey ( t hough t h is never came
a b o u t ) , and there wen: s i m ilar nationalizat i o n s i n other West
E u ropean count ries. though not i n the U n ited St ates or J apan .
The extension of public owners h i p and a h igher level of govern
ment spending on social welfare greatly enhanced the eco n o m ic role
of the state, and by the mid- I 970s st ate expend i t u re i n t he advanced
capitalist count ries ge nerally ranged between 40 and 50 per cent of
the total G D P ( t hough this, of course, i ncluded rapidly i ncreasing
military expend i t u re, especially i n the U n ited States). In no coun
try , however, d id the publicly ow ned secto r d o m i nate the economy
as a whole. or in most cases , the crucially important financial
institutions; and t he eco nomic system t h at had emerged by t he
1 970s was often descri bed as 'corporatis m ' - a form o f ' m i xed
economy' which was managed and regu lated by negoti a t i o n and
agree ment between the state, the large capitalist corporati o n s and
the trade unions - though M arxists were more i n c l i ned to d efine it
as 'organized capitalism' or 'state monopoly capital i s m '.
The development of t h is system i n Western E u rope represented a
precarious balance ach ieved between t he i ncreased s t rength of the
socialist movement and t he resurrection of E u ropean capitalism
through the M arshall Plan and the economic d o m inance of t h e
U n ited States (Van de Pij l 1 989, pp. 254-8). I t checked t h e
extension of public owners h i p a n d of socialist planning, but at t h e
same t i me involved m u c h more p l a n n i n g of the economy t h an i n t h e
pre-war pe riod , b o t h in individ ual count ries a n d o n a regi o nal o r
i nternational level. The 'march into social ism' seemed i ndeed to
have come to a halt at that 'halfway h o use' which Sch u m peter
( 1 987, p. 422) envisaged as a possible sticki ng p o i n t .
Y e t t h e spread of plan ning is quite e v i d e n t i n m a n y cou ntries. I n
France, for example, a decree of January 1 946 provided for 'a first
overall modern ization and i nvestment plan fo r metropolitan
France and the overseas territories ', and set up plan n i ng machi nery
in the form of a Conseil du Plan and a Com m issariat General
( Seibel 1 97 5 , p . 1 53) . This undoubted ly played a maj o r part i n
French recovery and su bseq uent economic grow t h , in stri k i ng
contrast with Britain where no effect ive cent ral planning machi nery
was ever establ ished .22 By 1 975, however, cond i t i o n s in France had
changed , and as Seibel ( ibid. ) ind icates:
Pla n n ing since the First World Wa r 47
. . . fo recasting met h o d s h a ve i m p r o v e d , t h e � co pe of p l a n n i n g h a �
widened , and p l a n n i ng m ac h ine r y h as bec o m e m o re p ro m i n e n t i n
government departments b u t t he plan i t self h as b e c o m e l e \ � a n d
less i m perative, and a l s o more d i ffic u l t t o fo r m u l a t e . . . . W h a t
started o u t a s t h e ' N a t i o n 's Pl a n ' be c a m e a ' medi u m -te r m g m c rn
ment p rogram m e ' . . . .
Nevertheless, the existence o f h i s machi nery a n d t h e e x pe r i e nce o f

p l a n n i ng faci l i t ated s o m e r e ; u m p t i o n o f n a t i o n a l p l a n n i n g h �
socialist govern ments i n the 1 980s, as w e l l as i n fl u e n c i n g p l a n n i n g
i n the E u ropean C o m m u n ity ( E C ) .
A nother e x a m p l e o f v e r y s uccessfu l p o s t - w a r p l a n n i n g i s t o h e
found i n Japan, where n a t i o n a l eco n o m i c p l a n s h a ve bee n p r e p a red
by the E co n o m ic P l a n n i n g Agency every t w o o r t h re e years fr o m
1 95 5 ( K o miya 1 97 5 , p . 1 89 ) . K o m iya, h oweve r, argues t h a t t h e � c
national plans are not as i m p o rtant as may a p p e a r a t fi r s t . a n d
m u c h p l a n n i ng takes p lace i n o t h e r w a y s . ' T h e J a panese g o v e r n
m e n t i ntervenes widely i n i n d i v i d u a l sect o rs . i n d u s t r i e s . or
regions . . . ( ibid. ), especially t h rough the gove r nm ent o ffi c e s
•
called genkyoku, each o f which s u p e rvises a p a rt i c u l a r i n d u s t ry and

is responsi ble for p o l icies c o n ce r n i n g the i n d u st ry (ihid . . pp. 209
1 0) .B
P l an n i ng i n the capitalist c o u nt ries d i ffe rs c o n s i d e ra h l y . o f
course, fro m that i n social ist c o u n t ries, where t h e plans a rc m o re
comprehens ive, m o re i m pe rative t h a n i n d icative. a n d i m· o l vc d i r ec t
state management of a l a rge part of the eco nomy. as w e l l as h a \ ' i n g
somewhat d i ffe ren t o bjectives i n s o fa r as a h i g h p ri o r i t y i s g i v e n t n
maintaining fu l l e m p l oyment and to the p rovisi o n o f we l fa r e
services. N evertheless, there is some convergence. t h ro u g h t h e
socialist i n fl uence - particul arly s t r o ng i n s o me c o u n t r i e s nn
capitalist p l a n n i n g a n d m o re recently t h r o ug h c h a n g e s i n t h e
economic systems o f the E u ro pean socialist co u n t r i e s . W h a t 1 s
unm istakable is that large-scale pla n n i ng. i n o n e fo r m or a n o t h n .
has bec o me vastly m o re i m p o rtant i n t he a d \ · a n cc d i n d u s t r i a l
countries a n d that i t has p rod u c e d s o m e i m p rc s s i n: re s u l t s .
Tinbergen ( 1 968, p . 1 09) concludes h is d i s c u s s i o n o f l' l' o rw m i L·
plan n i n g i n Western E u rope by saying t h a t
plan n i ng h a s s u cceeded i n a v o i d i n g t h e m a i n i n n1 n s i , t t· 1K y 1 11
u n p l a n ned eco n o m ies of t h e p re - 1 9 1 4 t �· p c . n a m e l y . t h e u n d e r -
u 1 i l i 1 a 1 i o n of p r o d u c 1 i v c c a p a c i l y as a c o n s e q u e nce of b us i n es s
cyc l e s a n d of s t r u c t u ral d i seq u i l i b r i a . It is h ig h l y p r o b a b l e t h a t the
d i s a ppea ra nce o f t h e b u s i ness cycle after World W a r II has bee n
obtained with the aid of macroec o n o m ic p l a n n i n g of t he ty p e
d c s c r i bed i n t h i s article.
It may be added t hat the growth of the West E u ropean econom ies
a ft e r 1 94 5 , with more extensive planning and m uch greater state
i n t e rve ntion, was more rapid and stable than in any other period of
modern history, with a growth rate more than t wice as high as t h at
of t h e period 1 9 1 8 - 3 8 ( Postan 1 96 7 , ch. 1 ) . I n the E u ropean
socialist count ries, as I have noted , t he rate of growth was even
h igher, and in the face of great d i fficu lties most of these c o u n t ries
developed with re mark able speed t he essential fou ndations of an
advanced i nd ustrial society.
From this short historical acco unt of the experience of p l a n n i n g
we c a n reach, I t h i n k , some ini tial tentative conclusions: fi rst, t h at a
t rend towards eco n o m ic and social planning established itself i n the
1 9 30s and became m uch st ronger after the Second Wo rld War; and
seco nd, t hat this extension o f planning had a very s uccessful
outcome in a marked acce leration of eco nomic growth and the
creat ion of 'welfare states ' in much of t he capitalist w o r l d . The
success of planning may also be j udged fro m the other side by
observ i ng that the two least-p lanned capitalist societies - Britain
and the U n ited S tates - are th ose which at p resent confront the
greatest eco nomic difficult ies and show most clearly the symptoms
of decline. At the same ti me, the c o m p rehensively planned socialist
societies have also encountered serious p ro b lems and a re now
engaged in a rad ical rest ruct uring of their eco nomies. We have next
to consider, therefore, the maj o r criticisms of planni ng, especially
socialist planning, before proceed ing t o a m o re detailed study o f the
economic institutions and political framework of a socialist society
i n t he light of recent changes in ideas and p ractice.
Notes
I . Besides the w o r k s by P o l l o c k ( 1 9 29 ) , E r l i c h ( 1 960) a n d N ove ( 1 969 ) ,

mentioned i n t h e p re v i o u s c h ap t e r s e c D o b b ( 1 9 2 8 ) a n d Carr ( 1 9 5 2 ) .
,
2 . See N ove ( 1 969, ch. 3). As was noted in the previous chapter. N e u r a t h
w a s a l s o advocating at t h i s t i me an eco nomy i n k i nd .
3 . S . and B . Webb ( 1 935, p . 1 1 43): ' W i l l this new civil izat i o n w i t h i t '
aband o n ment o f p rofit-making, its e x t i nction o f u n e m p l o y me n t . i t �
planned p rod uction for c o m m u n i ty consumption . . . spre ad t o o t h e r
countries? O u r own reply is: Y e s , it w i l l ". But how, whe n , where . w i t h
·
what mod ifications, a n d w 1ether th rough violent revo l u t i o n or b)

peacefu l penetratio n , o r eve 1 by conscious imitation, are 4 ue�t i o m v. e
cannot answer'.
4. This was the c ase with many of the Austro- M a rxists ( see a b o ve p . 2 3 )
and also, fo r example, the British Labour Party w h ose p o � t - w a r
reconstruct i o n p rogramme, labour a n d t h e Ne 11 · Social OrdN . v. a'
based o n t he ass u m p t i o n (erroneous as it t u rned o u t ) t h at t he wa rt i m e
collectivism was u n l i kely to be aband o ned wh atever gove r n m e n t c a me
to power. But there were many who co ntested t h e l i ke l i h o od o f a
development towards socialism on the basis of wart ime e x p er i e nce .
Thus M ax Weber ( 1 9 1 8 ) a rgued that while 'a grad ual e l i m i n a t i o n o f
private capitalism is t heoret ically possible - e v e n t h o ugh it is n o t s u c h a
t rifling matter as many literat i, who d o not k n ow anyt h i ng about i t .
d ream - it w i l l certainly n o t b e brought about b y t h i s war'; a n d h e we n t
o n to clai m t h a t even if it were ach ieved , far fro m l i berat i n g t h e w o r k e r
it w o u l d m a k e h i m s t i l l m o re dependent o n t he n e w b u reaucra t i c
controllers o f t h e means of p rod uct i o n .
5. I n Britai n , for example, gove r n m e n t expend i t u re a s a p r o p o r t i o n o f
G D P rose fro m a b o u t 1 0 per c e n t befo re 1 9 1 4 to about 2 0 p e r ce nt i n
the 1 930s, and there was a s i m i l a r t rend i n o t h e r c o u n t ries.
6. A particularly good e x a m p le is the socialist ad m i n istration of V i e n n a
(see p. 2 7 ) above.
7. The ex pectat i o n , i n Britai n . that t he coal m i nes and the ra i l w a ys w e r e
desti ned fo r nationalization p roved illusory; in Germany, t h e w o r k ot
the vari ous Socialization C o m m issions establis hed d u ring t he pe r i od
i m mediately fo llowing the end of t he war ach ie ved n o t h i ng : a n d
elsewhere in E u rope there w a s n o significant o r end u ri ng s h i ft t 1 0 111
p rivate t o pu blic ownership.
8 . Woot t o n 's excellent book provides a model i n many res pect s f o r a m· v.
comparative study, i n the very d i ffe rent cond i t i o n s of t h e p rese n t t i m e .
o f plan ned and u n p l a n ned eco n o mics. a s we l l a s m a t e r i a l fo r t h e k i n d
of large-scale study, w h i c h I t h i n k has never bee n a t t e m p t ed t h o u g h 1 t
i s greatly to b e desired , o f t h e h i s t o ry a n d soci o l ogy o f p l a n n i n g .
Another good example of the l i terat u re o n p l a n n i n g is p r o \ " i d e d hy t h e
broads heets publ ished from April 1 9 3 3 , u nd e r t he t i t le 1'/an11in1: . hy a
group of people conce rned about t h e eco n o m i c d i fficu l t i e s of t h e
depression and the need fo r ' reconst ruct i o n ' of t h e B ri t i s h ccon o m � .
9. The Financial News descri bed it as 'decidely s t i m u lating . . . . For

d efe mkrs o f the e x i st i ng social system the book is l i kely to prove one of
t he li nest ton ics that has come their way fo r a long t i me'.
1 0. There is a good critical d iscussion of capitalist rat ionalization in Bauer
( 1 93 1 ).
1 1. M a n y stud ies of eco nomic plann ing in i n d i v i d u a l countries of Western
E u rope were publ ished i n the 1 960s. and t here is also a b rief general
study by Tin bergen ( 1 968) which lists some o f the principal references.
See also the d iscussion by M y rd al ( 1 960).
I �- For a brief ge neral su rvey see M o ntias ( 1 96 8) .
I J. There is a good ge neral account a n d d iscuss i o n of t he Yugoslav system
up to the end of the 1 960s i n Brock meyer ( 1 970).
14. The Soviet model, however, was mislead i n g in ce rtain respects, si nce
the undou bted success of Soviet ind ust rializat ion depended upon
several factors t he existence of an advanced i nd ustrial sector, t hough
on a small scale, before the revo lution, the unchallenged p o l i t ical
dominance of a d isci p l i ned revolutionary party, and t he possession of
substantial natural resou rces i n a large territory which were absen t in
-·
most of the developing countries. Only i n the larger count ries was the
S oviet experie nce valuable as a model of economic development - in
I nd ia (to some extent, and i n a d i luted fo rm) and in China (with many
subsequent mod ificat ions).
1 5. See W i rt h ( 1 972) and the critical evaluations by H ardach and K a rras
( 1 978) and Jessop ( 1 982).
1 6. On France. see Fou rastie and Cou rtheou x ( 1 963); on N orway, see
Bjerve ( 1 959).
1 7. Esti mates of economic growth i n the U S S R and East E u ropean
socialist countries vary considerably between the official figures and
th ose prod uced by Western economists. The d iverse est imates are
d iscussed by Wilczyns ki ( 1 982, pp. 53 -6) and the figu res given i n the
text broad ly follow his conclusions. Buck and Cole ( 1 987, ch. 8)
s uggest rat her lower rates of growth in the S oviet economy, but
nevertheless point out that the Soviet growth rate has been higher, and
more stable, than that of the U n i ted States. H owever, i t has not been
significantly higher than the growth rate of some West E u ropean
count ries, and is considerably lower than that of J apan.
l it There were, of course, substantial differences between count ries;
Czechoslovakia already had an im portant modern ind ustrial sector
and the German Democratic R epublic, which had formed part of an
advanced ind ustrial society, was in a very favou rable situation fo r
rapid ind ustrial growt h. These two count ries, the most prosperous in
Eastern Europe, had both attai ned by the late 1 970s a per capita G D P
higher than that o f the U n ited K i ngd om ( W ilczynski 1 98 2 , p. 2 1 2).
Pla n n ing sin ce the First World War 51
1 9 . I n d iscussing M ar x 's Grundrine else w here ( Bot t omo r c 1 9 X )l . p p . 1 9

2 1 ) I have suggested that h i s v i s i o n of t he fu t u re s oc i c t ) m i g h t be
expressed by add i ng t o his well-know n aph o r i sm 'The hand m i l l gi\t:'
,
you a society with the feudal l o rd , t he steam mill a soc ie t \ w i t h t h e

i nd ustrial capitalist', t he ph rase: 'The a u t o mated m i l l g i � ·es you a
classless society'; his see ms to be t h e sense i n which R ichta and o t h e r '
understand the significance of tec h n o l o g i c a l p rogress. A t a l l e v e n b i t
c a n b e said that automated p r o d u c t i o n and mod e rn i n fo r m a t i o n
technology make central p l a n n i n g a great d e a l eas i e r and i n p r i n c i p l e
more effect ive.
20. See for example the contribut i o n s by Fedo scycv and R i c h t a t o
Scientific- Technological Revulwion: Social A spects ( 1 9 7 7 ) .
2 1 . By 'welfare capitalist societies' is meant pri marily t he s o c ie t i es of
Western E u rope and some Commo nwea lth c o u ntr i e s ( A u s t r a l i a .
Canad a , N e w Zealand). The t e r m d oes n o t apply, i n a n y c o m
p rehensive sense, t o J apan or t he U n ited States. F u r t h e rm o r e . there i ,
now a tende ncy t o erode the welfa re state in s ome W e s t E u ro p e a n
count ries, n o t a b l y i n Britain.
22. The contrast was examined i n a n issue of Planning ( \ o l 2 9 . n o 4 7 5 . 9
. .
September 1 963) on ' French planning: some lessons fo r B r i t a i n '. wh i c h

expressed 'the concern felt about the low rate of g r o w t h i n t h e B r i t i s h
economy d u ri ng the 1 950s, and an increasing awareness t h a t s o m e s o r t
of p l a n n i ng w i l l be a necessary element in a n y p o l icy a d o p t e d to
remedy t h is situation. The French system o f fo ur-year plans provides a
working exam ple of the type of p l a n n i ng that c o u l d be u s ed in B r i ta i n
23. See also M o rioka ( 1 989, p p . 1 50 · 4 ) a nd D o re ( 1 9 8 7 , I n t rod u ct i o n ) .

4
Critiq ues of socialist plan ning
The criticisms o f socialist planning - and b y extension, o f the more

limited types of planning i n capitalist societies - fall into two main
categories: those concerning rational calculation i n a planned
economy, and those concerning bureaucracy, management, i ncen
tives and related questions. I shall d iscuss first the issues that were
raised in the notorious 'socialist calculation debate' of the 1 930s.
The ground of this debate was established earlier, at the turn of the
century, by the Austrian marginalist school, but the members of the
School differed considerably in their attitudes to socialism ; ' and
Wieser in particular, in developing a 'theory of imputation' to
determine the value of means of p roduction i n any economic
system, helped to prepare the way for models of calculation i n a
planned economy. As Landauer ( 1 959, p. 1 624) suggests: 'By
elaborating formulae for the determination of the shares of all
prod uctive agents i n the value of the p roduct, the "Austrian
School" laid the ground for the concept of a national accounting
system in a socialist society. 92
Bohm-Bawerk, on the other hand, was a m o re h ostile c ritic of
socialism, especially M arxist socialism. H is criticism rests upon his
rejection of the labour theory of value and exploitation in favour of
a subjective value theory, expounded in his work o n the theory of
interest ( 1 884 and later ed itions) and his essay ( 1 896) o n the third
volume of Marx's Capital (to which H ilferding [ 1 904] wrote a
notable reply).3 The core of his argu ment was that socialism would
52
Critiques of socialist planning 53
not achieve all that socialists hoped for, because it would face
similar problems to those in a capitalist economy, ari � i n g from the
scarcity of resources and time-consuming round abo u t methods of
production , one consequence of which is that a socialist eco nomy
would also requin a p ositive rate of interest. Bohm-Bawerk d id not
assert, however, that a socialist economy would be unworkable,
and i t w as only l ater, after the R ussian Revolution, that this k i nd of
argument became central, its most fervent and intrn nsigent ex
ponent being M ises.
I ndeed it was Mises ( 1 920, 1 922) who i nitiated the 'calculation
debate', in which H ayek and R o b bins on one side, Lange , Lerner
and Dickinson on the other, subsequently participated . The core of
his argument was t h at in a developed complex economy, economic
(i.e. monetary) calculation with respect to the production of h igher
order ( production) goods as well as lower order (consumption)
goods is only possible in a free m arket which establishes the
exchange value of all goods:
. . . as soon as one gives u p the conception of a freely established

monetary price for goods of a higher order, rational prod uction
becomes completely i m p ossible. Every step that takes us away
from p r iva t e ownership of the means of prod uction and from the
use of money also takes us away from rational economics. ( M ises
1 920, p. 1 04)
This argument w as elaborated in two d i rections. First, M ises

emphasized that in a free market economy the system of compu
tation by value is employed by every individual m e m ber, both as a
consumer who establishes a scale of valuation for consu m p t i o n
goods a n d as a p roducer who p u t s g o o d s of a higher o r d e r t o s u c h
u s e a s brings t h e highest retur n . But t h i s system , h e claimed . ' i s
necessarily absent fro m a socialist state', i n w h i c h the ad m i n is
tration can determine what consumption good s a re most u rge n t l y
needed b u t cannot establish a p recise valuation of the m e a n s o f
prod uction. Taking t h e example of b u i l d i n g a new r ailw a y h e .
concluded that t h e decis i o n , i n a social ist society. 'would d e pend a t

best upon vague estimates; it w o u l d never b e based u p o n t h e
found atio n of an exact calculation v a l u e ' (ihid. , p p . 1 07 9 ) .
Second , M ises d rew a contrast between a static cond i t i o n of
society, i n which economic calcu l a t i o n m ight be d is pensed w i t h ,
a n d a d y n a m ic cond i t i o n ( t he real l i fe s i t u a t i o n o f a m o d e r n
society), i n w h i c h eco n o m i c c i rc u mst ances a r e c o n s t a n t l y changing
and ·we have t he spectacle o f a socialist eco n o m ic order flo u nd e r i ng
in the ocean o f possi b le and conceivable eco n o m ic c o m b i nations
without t he c o m pass of economic calc u l a t i o n · (ibid. , p p . 1 09- 1 0) .
H is a rg u m e n t concluded w i t h t h e s uccinct d eclarat i o n t h at ' W h e re
t he r e is no free market, there is n o pricing mec h a n i s m ; w i t h o u t a
p ri c i ng mecha n i s m , t h e re is n o eco n o m i c calculat i o n ' ( ib id. , p . 1 1 1 ) .
I n t h i s essay M ises c o n fi ned hi mself fairly st rictly t o e c o n o m i c
a nalysis. b u t i n l a t e r w r i t i ngs he broade ned the s c o p e o f h i s
criticism and w a s l e d by his detestation o f t h e w h o l e socialist
movement into w i ld e x agge rations, as i n the conclusion t o h i s b o o k
o n socialism ( 1 922, p . 5 1 1 ) . where he w rote:
I f t he i ntellectual d o m i n a nce o f S o c i a l i s m re mains u ns h a k e n , t h e n

i n a s h o rt time t h e w h ole co-operative system o f c u l t u re w h i c h
E u rope has b u i l t u p over t h o usands o f years w i l l be s h a t te red . For
a soci a l ist o rder of society is u n realizable. All effo rts t o realize
Socialism lead only t o the destruction of society. Fac t o ries, m i nes,
and railways w i l l come t o a standstill, towns will be deserted . The
population of t he ind ustrial territo ries will die o u t o r migrate
elsewhere . The farmer will ret u r n t o the self-su fficiency of the
c l osed, domestic economy. W i t hout private owners h i p i n the
means of prod uct i o n there is. i n the long run, n o p rod u c t i o n o t h e r
t h a n a h a nd-to-mo u t h p rod uct i o n fo r o n e 's own need s .
We need not describe i n detail t h e c u l t u ral and p o l i t ical con se-
4 u e nces of such a transformati o n . N o mad t r i bes fro m the Eastern
steppes would aga in raid and p i l lage Eu rope, swee p i n g across it
with swift cavalry. W h o c o u ld res ist them i n t h e t h i n ly p o p u lated
l a nd left defenceless after the weapons i n herited from the higher
tec h n iq ue of Capitalism had worn out?
The reality, as we have see n , was very d i ffe re nt fro m this fan t asy,
and it was an i m portant fac t o r i n the grad ual erosion o f the
calculat i o n debate itself. M ea n w h i le, h o weve r, a n u m be r of socialist
eco n o mists responded t o the critical s t u d ies by M ises and others,
and propou nded a theoretical defence of central planning.
Lange, i n the c o u rse of his l i fe , pro posed several d i ffe re nt models
of a socialist economy ( K o w a l i k 1 987a), but the one fo r w h ich he is
best k n own is that of market socialism e x p o u nded i n t w o articles
( 1 936, 1 937) which we re then incorporated in a b o o k , with ad d i-
t i o ns and mod i ficat i o n s (arising m a i n ly fro m c r i t i c a l co m m e n t � by

A . P. Lerner), together w i t h an essay by Fred M . T a yl o r ( L a n ge a n d
Taylo r 1 93 8 ) . Lange rej ected M ises' m a i n ' c o n t e n t i o n that a
socialist e c o n o my c a n n o t solve t h e p r o b l e m of rat i o n a l a l l oc a t i o n
of i t s reso u rces' as b e i n g ' b ased o n a c o n fu s i o n con ce r n i n g t h e
n a t u re o f p rices':
As W i c ksteed h as poi nted o u t , t h e term ' p rice' h as t v. o m e a n i ngs.

I t may mean p rice i n the o rd i n a ry sense. i.e. the e x c h a nge rat i o o f
the two c o m mod ities on a market, o r it may h a v e t he generali7.ed
meaning of 'terms on which alternat ives are offered ' .
. . . I t is o n l y prices in the general i zed sense which arc i n d ispem
able t o solving the problem of allocation o f resources . . . . To
solve the problem t h ree d at a a re need ed : ( I ) a preference scale
w h ic h guides the acts of choice; (2) k nowledge of t h e 'terms on
which alternat ives a re offered '; and ( 3 ) k nowledge of t h e a m o u n t
of resou rces a v a i l a b l e . . . . N o w it is o b v i o u s that a s o c i a l i s t eco n
omy m a y regard the d at a under I and 3 a s g i v e n , at least i n as
great a degree as they are given in a capitalist economy. The data
u n d e r I m a y either be given by the demand sched ules of
i n d ivid uals o r be established by the j u d gment o f the a u t h o rit ies
ad m i nistering the econ o m ic syste m . The q uest ion re mains whether
the d at a under 2 a re access ible t o the administrators of a socialist
economy. Professor M ises d e n ies this. H owever, a careful study o f
p rice theory and of t h e theory of production convi nces us t h a t , the
d at a u n d e r I and u n d e r 3 being given, t h e 'te rms o n which
alternat ives a re offe red ' a re determined u l t i mately by the tech n ical
poss i b i l i t ies of t ransformation of o ne com mod ity into another. i .e .
by the production fu nctions. T h e a d m i n i s t rators o f a socialist
economy will h ave exactly the same k n owledge, or lack o f
k n owledge, o f the prod uction fu nctions as the capitalist e n t re
p rene u rs have. ( 1 938, p p . 59-6 1 ) 4
After d iscus s i n g what he called t h e ' m o re refined fo r m ' g i v e n t o

M ises' a rgu m e n t by H ayek and R o bbins ( t o which I shall ret u rn
later), and the determination o f eq u i l i b ri u m o n a c o m pe t i t i ve
market, Lange o u t l i ned h i s conce p t i o n of h o w a socialist eco n o m y
would fu nct i o n :
I n t h e socialist system a s described w e have a g e n u i n e ma rket ( i n

t h e institutional sense o f t h e word ) fo r c o n s u m e rs ' goods a n d fo r
the services of labour. But there i s no m a r k e t fo r c a p i t a l good s
and p rod uc1 i ve res o u rces o u 1 s i d e of l a b o u r . . . [ a n d ! h e i r p rices]

arc t h us prices i n the ge nerali1ed sense, i . e . mere i nd ices of
a h e r n a 1 ives a v a i l a b l e , fi xed fo r acco u n t i ng p u rposes. {p. 73r
La nge we nt on to argue that, 'j ust as in a competitive ind ivid ualist

regi me'. the determination of equilibrium i n a socialist system
consists of two parts. First, on the basis of given ind ices of
alternat ives { market prices in t he cases of consumer goods and
labour services, acco unting prices in other cases) both ind ivid u als
as consu mers and as owners of labour services and the managers of
prod uct i o n {assu med to be public officials), make decisions accord
ing to cert a i n pri nciples. Second , both market and accou n t i ng
prices are determi ned by the cond i t i o n that the q uantity of each
commod ity demanded is equal to the q u antity supplied . There is
also a fu rt her cond ition concerning i ncome d istribution, now
d i vo rced fro m ownership of prod uctive reso urces (except labour)
and determi ned in part by social pol icy. The managers of produc
tion are no lo nger guided by the aim of maximizing p rofit, but by
rules i m posed on them by a Cent ral Plan n i ng Board ; one rule
req uiring the choice of a combination of factors which m i n i m izes
the average cost of prod uction, a second rule ( i mposed on managers
of individual plants and of whole ind ust ries) req u i ring that output
is fi xed so that margi nal cost is equal to the price of the product
( p p . 74 - 6 ) .
Following this d i scussion of t h e theoretical determination of
eco nomic equilibrium in a socialist society, Lange considered the
act ual fo rmat ion of prices by a method of t rial and error, as
described in Taylor's essay (pp. 5 1 -4), and concluded that 'account
ing prices in a social ist economy can be determined by the same
process of trial and error by which prices on a competitive market
are determ i ned ' (p. 87). Finally, he reviewed briefly the ad vantages
and d i sadvan tages of a socialist system. The main advantages are,
fi rs t . that 'only a socialist economy can d istri bute i ncomes so as to
attain the max i m u m social welfare', (p. 99), and sec o n d , that a
social ist economy would take acco unt of all the alternatives
sacrificed and realized i n prod uct i o n , includ ing the social overhead
costs. thus avoid i ng 'much of the social waste con nected with
private enterprise' as well as the fl uct uations of the busi ness cycle
( pp . 1 03 - 6). A m ong the disad van tages of social ism he mentio ned
the possi ble arbitrariness of the rate of capital accu m u l a t i o n , and
the problem of the efficiency o f p u b l i c o ffic ials c o m pared w i t h

p rivate e ntrepre n e u rs a s managers o f p r o d u c t i o n ; ' t h e n: a l d a n ge r
of socialism', he concl u d ed , 'is t h at o f a burea ucrat i z a ti on of
economic life ' ( p . 1 09).
After the Second W o rld War, h o wever, Lange became mo re
critical of market socialism and those he called t he 'socialist frec
marketers' ( K owdlik 1 987a, p. 1 28); towards the end o f h i s l i fe he
became preoccupied with the q uest i o n whether socialism would be
m o re successful t h a n capitalism in e ns u r i n g rapid tec h n o l o g ic a l
p rogress. I n a letter written i n 1 964 he s a i d , ' w h at is re a l ly of p r i me
i m portance is t h at of i ncent ives fo r t h e growth of p rod uct i v e fo rces
( accu mulation and progress in tec h n ol ogy). Th i s is the t r ue mean
i n g of, so to say, "rationality " ' ( K o w a l i k 1 987b, p . 1 3 1 ) . This
q uestion, as we shall see, h as become a maj o r issue i n recent
d ebates .
Lange, as I noted earlier, d iscussed t h e ' m o re refi ned fo r m ' o f
M ises' argument develo ped b y H ay e k and R o b b i n s , w h i c h , h e
claimed , aband o ned the esse ntial p o i n t m a d e by M i s es in so fa r a �
t h e theoretical possibility of a rational allocati o n o f reso u r ce s i n a
socialist eco n o my was n o lo nger d e n ied , and o n l y t he pos s i b i l i t y o f
a practical s o l u t i o n of the problem w a s ques t i o ned . T h u s H aye k
([ 1 93 5 ] 1 948) i n the seco nd o f his essays o n socialist calculat i o n
ad mitted that it 'is n o t a n i m p ossibility in t h e sense t h at it i s
logically cont radictory' to determine, i n a socialis t s oc ie t y . ' t h e
values a n d q u a n t ities o f the d i ffe re n t commod ities to b e prod u ced
. . . by the application o f the apparatus by w h i c h t h e o ret i c a l
eco n o m ics e x p l ains the fo rmation of pri c es and the d i rec t i o n of
prod ucti o n in a compet itive system' ( p p . 1 5 2 1 ) . Rut he t h e n w e n t
o n to a rgue t h at the p ractical i m p leme n t a t i o n o f t h i s p roced u re
w o u l d be i mpossible because o f the l a rge mass o f d a t a i n v o l ved . I n
the fi rst pl ace the collecti o n o f these d ata ' i s a task bey o n d h u m a n
capacity', a n d e v e n i f t h i s d i ffic ulty c o u ld b e ove rc o m e . t h e n e x t
step, o f w orki ng o u t the p ractical d ecisi o n s , w o u ld i n v o l ve d e t e r m i
n i n g h u n d re d s o f t h ousands o f ' u n k n o w n s ' a n d hence so l \·i n g t h is
nu mber of equations, 'a task w h i c h , with any o f t h e means k n o w n
at p rese nt, c o u l d not b e carried o u t in a l i fet i me ' ( p . 1 5 6 ) . R o b b i ns
( 1 934, p. 1 5 1 ) d e p icted t h e problem i n st i l l m o re d ra m a t i c t e r m s :
O n paper w e can conceive t h e i r p r o h l e m t o b e s n l \"cd by a scric�

of mathematical calculations . . . . B u t i n p ract ice t h i s s o l u t i o n i s
4 u i t e u n wo r k a b l e . It w o u ld necess i t at e t h e d ra w i n g up of m i l l i o n s
o f e 4 u a t i o n s o n t he basis o f m i l l i o ns o f s t a t i s t i c a l d a t a based o n
m a n y m o re m i l l i o n s o f i n d i v i d u a l c o m p u t a t i o n s . B y t he t i me t he
c 4 u a t i o n s w e r e so lved . t h e i n fo r m a t i o n o n w h ic h t hey were based
w o u l d h a w bec o me o bs o l e t e and t hey w o u l d need t o be c a l c u l ated
a nc: w .
L a nge repl ied to these a rguments in h i s exposition of the method of

t ri a l and error, based on the essay by Taylor; a n u m be r of other
economists, especially after the e x perience of wartime p l a n n i ng,
also rej e c t e d the v iew that national planning would be a p ract ical
i m poss i b i l ity. Thus Devons ( 1 970, p . 97) wrote:
. . . i n t h e I 9 J O s a g r e a t d e a l o f t h e p l a n n i ng d e ba t e i n t h e West
was about t h e system o f e q u a t i o n s that would need t o be s o lved i n
a p l a n n ed eco n o my . . . . B o t h W e s t e r n a n d R us s i a n e x p e r i e nce
have d e m o n s t rated that t h is t he o re t i c a l a rgu m e n t i s , a t p rese n t

( a nd . 1 w o u l d a rgue. a s fa r a s w e c a n see ahead i n t h e fu t u re )
l a rg e l y i rre l e v a n t t o t h e p ro b l e m s o f p l a n n i ng i n p ractice.
Schum pete r ( 1 954, pp. 988-9) also rejected the H ayek - R obbins
argument that the solutions of the equations req u i red for socialist
planning could not be achieved in p ractice, and took the position of
Taylor and Lange that they could be realized by the method of trial
and error.
I n the t h i rd of his essays on socialist calculation H ayek ([ 1 940]
1 948) examined critically the mechanism proposed for a socialist
economy by Lange, and in a similar form by Dickinson ( 1 939),6
which he called the 'competitive solution'. After suggesting that
'much of the original claim fo r the s u pe riority of planning over
competition is abandoned if the planned society is now to rely for
the d i rection of its ind ustries to a large extent on competition' (p.
1 86), he expounded his objections to the method of trial and error
a s a way of determining the accounting prices of p rod ucer good s .
First, h e argued that, while such a method might w o rk i n a world
where eco nomic d ata re mained constant over long periods, it would
be greatly inferior to market mechanisms i n the real world of
continual change where reaching the desirable equilibrium depends
on the speed with which adj ustments can be made ( p . 1 88); he also
raised questions about the periods for which the central planning
body would fix prices. Second , he deplored the vagueness of both
Lange and Dickinson about the act ual o rganizat i o n o f t h e v a ri o u �

ind ustries a n d prod uct i o n u n its, a n d went o n to pose t h e 4 u es tion
of how the central planne rs would e n s u re t h at t h e i r r u le � conc e r n
ing the determ i n ation of p rices w e r e effect i vely i m p le m e n te d \fo re
.
generally, he considered some of the p roblems t h at m i g h t a r i s e in

the relat ions between the 'socialist m a n agers of i n d u s t ry ' and t h e.:
plan n i ng authoritie� ( p . 1 97). Finally, H aye k raised the i s s u e . w h i c h
became central i n his l a t e r work, of the p reservat i o n of pe rson a l
and political freed o m i n a planned eco n o m y . e x p ressi n g the d ou bt
that consumers' c h o ice would be a n adeq u ate safeguard against
what he called 'arbit rary decis i o n s ' taken by t h ose who e ffective l y
controlled the economy.
The 'calculation debate' then s u bsided , partly, as I h a ve
suggested , because of the wartime experience of plan n i ng, p a r t l y
because of the revelat i o n d u ri ng and after the war of the e m e rgence
of the S oviet U ni o n as a maj o r i nd ustrial power. M o re rece n t l y ,
however, i n the new c l i m ate t h at has deve l o ped i n some Western
capitalist countries, emphasizing ind ivid ual e n t e rp rise and t h e
supremacy of the market, an attempt has been made t o revive t h e
debate. Lavoie ( 1 98 5 , p. 4) a rgues that the protago n ists i n the
original debate d id not seem 'to comprehend t h e fu n d a m e n t a l
paradigm of their adversaries', so that both s i d e s c o u ld c l a i m
victory, fo r o r against c e n t r a l pla n n i ng, and the 'stand a rd acco u n ts'
of the debate h ave perpetuated the co nfus i o n . H is o w n a i m is t o set
out more rigorously the theoretical parad igm o f the Aust rian
school, especially M ises and H aye k , and fro m t h is stand p o i n t t o
show that their central a rguments against socialist plan n i ng h a ve
not been refuted . Lavoie focuses o n the n o t i o n o f eco n o m ic rivalry,
and i nterprets M ises' challenge to socialism 'as an argu ment fo r t h e
necessity of a particular k i nd of rivalry i n ord e r to achieve c o m p l e x
social prod uct i o n ' ( p . 2 3 ) . A fte r a critical d iscussi o n of M a r x \
socialism, a restatement of M ises' c h alle nge, and a n e x a m i n a t i o n o f
Lange 's respo nse in terms of t h e 'trial a n d error' met h o d , h e g o e � o n
to consider t h e later Austrian rej o i nder, a n d t o c o n c l u d e t h a t M i s l· �
had the advan tage of the argu ment i n s h o w i ng t h a t ' t h e fu n c t i o n o l
this rivalry is to d isperse dece n t ra lized i n fo r mati o n a n d t h e n
'
marshal it, th rough m a r k e t p rices, fo r t h e p u r p o s e o f o\·e ra l l

eco nomic coord i nation ( p . 1 80); whereas t he t r i a l a n d e r ro r
• " "
p roced u re red uced the choice problem t o p u re l y ro u t i n e hc h a , · i or .

avoid i ng all the problems of alertness t o n e w o p p o rt u n i t i e s . o f
fu t u rity, a nd of k nowledge d ispersal' (p. 1 82). Finally, he q uotes

a p p rov i n gly H ayek 's ([ 1 935) 1 948, p. 1 79) content ion that 'nobody
h a s y e t demonstrated how planning and compet ition can be
r a t i o n ally combi ned ' ( p . 1 8 ) ) .
I s h a l l ret u rn in d ue course to various aspects of Lavoie's thesis,
o f w h i c h I h a v e given a pre l i m i nary critical account i n a review
essay ( 8011 omore 1 986 · 7), after considering the second maj o r type
o f i:r i t i c i s m o f socialist planning: namely, that it is l i kely to bring
a h o u t a c o n d i t ion o f stagnat ion through the bu reaucratizat ion of
economic l i fe. and more widely of social l i fe i n general. M ax Weber
( 1 9 1 8 ) . i n h i s lect u re on socialism, was among the fi rst to argue that
t h e c h a ng e s i n modern society ind icated an advance t owards the
'd i c t a t o rs h i p of the official' rather than the 'dictatorship o f the
p r o l e tari a t' and ' i f private capitalism were e l i m i nated the state
,
b u r e a u c racy would rule alone'. M ises ( 1 920) also gave a prominent

p l ace t o t h e problems of bu reaucracy i n his criticism of socialism,
and declared indeed that 'it is now unive rsally agreed that the
e x c l u s i o n of free init iative and individ ual responsibility, o n which
the successes of pri vate enterp rise depend , constitutes the most
s e r i ous menace to socialist economic organization' (p. 1 1 6); while
Lange. as we have see n, concl uded that 'the real danger of socialism
i s t h a t of a bureaucratization of economic life'. Schumpeter ( 1 942,
p . 206). however. took a very d i ffe re nt view
. . . or t h a t Bu reaucrat i 7 a t i o n o r Economic L i re which const i t utes

t he t h e m e o r so m a n y ant i-soc i a l i s t h o m i l ies. I fo r o n e c a n n o t
v i s u a l i 1 e , i n t he c o n d i t i o ns of m o d e r n s o c i e t y , a soc i a l i s t o rga n i za
t i o n in any fo rm o t h e r t h a n t h a t o f a h uge a n d a l l-e m b racing
b u reaucrat ic apparat us. E very o t h e r poss i b i l i t y I c a n c o n ceive
w o u l d s p e l l fa i l u re a n d bre a k d o w n . B u t s u re l y t h is should not
horrify a n y o n e w h o re a l i zes h o w fa r t h e b u reaucrat i z a t i o n o f
eco n o m i c l i re of l i fe i n g e n e r a l even has gone a l ready . . . . We
shall sec i n the next part t h a t b u reauc racy is not a n o bs t a c l e to
d e m oc racy but a n i ne v i t a b l e c o m p l e m e n t t o it. S i m i l a r ly i t is an
i ne v i t a b l e c o m p l e m e n t t o m o d e r n eco n o m i c devel o p m e n t and it
w i l l be m o re t h a n ever esse n t i a l in a s o c i a l i s t c o m m o n we a l t h .
N evertheless he recogn ized that bureaucracy gives rise to various

problems; in particular its often 'depress ing influence on the most
act ive minds', fo r which there is no simple remed y, and the need fo r
some k i nd of i ncentive (beyond 'reli ance on a purely altru istic sense
of d uty') fo r the efficient perform ance of fu nct i o n s , which he

thought might be provided partly by monetary reward � . h u t
increas i ngly b y the conferment of social prest ige .
M any o t h e r social scientists, both socialists and t h e i r o p p o n i: n t � .
have contri buted to the d e bate a b o u t socialism a n d b u reaucracy
among them M ichl : s ( 1 9 1 1 ), Dj ilas ( 1 95 7 ) , A ro n ( 1 9 60 . 1 96 5 ) .
H eged us ( 1 976) - b u t it h a s t o b e said , I t h i n k , t h at m u c h o f t he
d iscussi o n h as been at least as confused as t h e 'calculat i o n d e b a t e '.
with the participants ad hering firmly t o d i ffe re n t t h e o ret ical con
ceptions. In order t o clarify the issue it is necessa ry t o make a
number of d istinctions. B u reaucracy may be conceived , i n t he fi rst
place, following Max Weber, as a s u peri o r - m o re rat i o n a l and
efficient - means of ad m i n ist rati o n . In t h i s sense it is o ne of t he
principal elements i n t h at p rocess of rational izat i o n of modern
societies which was a central theme in Weber's social t he o ry
( Lowith 1 93 2 , Brubaker 1 984). B u t Weber also conceived b u r
eaucracy, i n a narrower sense, as a type of d o minat i o n , having i n
m i n d particularly the r o l e of h igh state officials i n I m perial
Germany; a n d , as we h ave see n, one of his criticisms o f socialism
was t h at it would carry such d o m i n ation to its extreme l i m i t , where
'the state b u reaucracy would rule alone'.
In considering the significance of bureaucracy in t he socialist
count ries we have t o d isentangle t hese various senses. The general
extension of rat i o n al ad m i n istration which is co m m o n to a l l
modern societies p resents n o u n ique p roblems i n a socialist sys t e m .
except t h at the S oviet U n i o n and some o t h e r count ries h a d t o face
i n itially the d ifficul ties i n he rited fro m p reced ing ramshackle fo r m s
of ad m i n istrat i o n ; although this was only o n e p ar t o f the much
wider problem of c reating an ed u cated and efficie n t labo u r fo rce a t
all levels. I t was fro m t h i s aspect of the deve l o p ment o f r a t i o n a l
ad ministration t h a t S c h u m peter e x p ressed his largely favo u ra b l e
view of bureaucratic c o n t r o l o f the eco n o my, w h i c h I q u o t e d
earlier.
The quest i o n of bureaucracy as a type o f d o m i n a t i o n raises o t h e r
issues. Weber thought of i t i n terms o f d o m i n ation b y h i g h o ffi c i a l s
in the s t a t e ad m i nistrat i o n who had u s u r pe d . o r we re u s u r p i n g . t h e
fu nctions of politicians, and although he was m a i n l y conce rn ed
with the somewhat e xcept ional c i rc u m s t a nces of I m pe r i a l
Germany, t he degree of independent p o w e r and i n n u e n cc w i e l d ed
by the 'ad m i nistrat ive elite' has been w i d el y d i sc u s sed in o t h e r
con1ex1s ( Botto more 1 964) . Bui the type of d o m i nation - autocratic

nr 1otalitarian which developed i n the S oviet U n i o n , and afte r
1 94 5 i n 1he o l her socialisl count ries of Eastern E u rope, was
domination by a party whose leaders co ncent rated all political
power in their own hands, and in d ue cou rse i n the hands of a single
i nd ividual, rather than by an ad ministrative elite. As t h is kind of
reg i me became establ ished , however, and after the savagery of
Stalin's rule had ended , there emerged a system characterized by the
d o m i nance of party and state officials who constit uted , i n the view
of some crit ics, a 'new class ' ( Dj ilas 1 957, Konrad and Szelenyi
1 979). The evolution of the communist parties i n t he socialist
co u n t ries exemplifies indeed the p rocess which Weber termed the
'routin ization of charisma', as well as the oligarchical tendencies
descri bed by M ichels, and it was this process, along with the vast
expansion of bureaucratic ad ministration to implement central
planning, i n societ ies where public criticism and any kind of
opposition we re rigo rously suppressed , which prod uced the stagna
t i o n . i nefficiency and corruption that h ave become the pri ncipal
targets of cu rrent pol icies of eco nomic and political reform.
In the 1 940s and t h roughout the post-war period , the critique of
socialist planning came to concentrate much more upon the lack of
freed om and the totalitarian regulation of all aspects of social life
than upon the d i ffic ulties of economic calculation, and many
socialists, as well as their opponents, elaborated fund amental
criticisms of the Soviet model of a planned society. Thus H ilferd ing
( 1 940, 1 94 1 ) argued that the Soviet U n ion was a 'totalitarian state
economy' and pointed to the d angers resulting from the great
increase in the power of the modern state and the extension of its
act ivit ies into all spheres of life, which led to 'the subject ion of the
economy by the holders of state power'. This theme of the merging
of eco nomic and political power, and its concentratio n i n the
act ivities of the state, became pre-eminent i n the later d iscussions,
and most innuenti al in the writi ngs of conservative critics.
H aye k ([ 1 940] 1 948) in the course of d iscussing Dick i n s o n 's
( 1 9 39) book raised , as 1 noted , the q uestion of perso nal freed om i n
a ce n t rally planned society. I n ad d i tion t o making frequent refer
ences to what he al ways describes as the 'arbit rary' decisions of the
econ omic plan ners - th ough why these should be considered
arbitrary, or more arbit rary than the decisions made by many
governments in other types of society, is never made clear or even
exami ned - he went on to critic ize particularly D i c k i n so n \ \ l a t c

ment t h at ' i n a social ist society t he d istinct i o n , alway� a rt i fi c i a l .
between eco n o m ics a n d p o l itics w i l l b reak d own; t he eco n o m i c and
the p o litical machi nery o f society w i l l fuse i n t o o ne', c o n c l u d i n g
that ' t h i s i s , o f c o u rse, ' recisely the a u t h o ritarian d oc t r i n e p reached
by N azis and Fascists' (p. 207 ) . Later, in w h at became a very
influential t ract, The Road to Serfdom ( 1 944), H ayek e x p ressed h is
oppositi o n t o socialism and central p l a n n i n g i n s t i l l st r o nge r t e r m s .
a n d he has c o n t i n ued , u p to h is m o s t recent work ( 1 98 2 ) , t o
advocate a 's p ontaneous' o r 'self-generat i ng' o rder o f society i n
which t h e p o wers o f government would b e strictly d e l i m ited and
confi ned .
Aron, i n a s i m i l a r t h o ugh m o re restrai ned fas h i o n . ana lysed t he
S oviet U ni o n as a totalitarian regime i n which a si ngle party h as a
m o n o p oly of p o l itical act ivity, an official state ideol ogy is i m p o se d
by coerc i o n and persuas i o n , and most eco n o mic and p rofessional
activities are s u bject t o the state, o r eve n , i n a way, part of i t ([ 1 96 5 )
1 98 8 , c h . 1 5) ; and i n several essays ( notably [ 1 950) 1 98 8 , c h . 6) h e
cont rasted t h e ' u n ified e l i t e ' i n t h e S oviet U n i o n with the p l u ra l i t y
of r i v a l e l i t e s i n the capitalist d e m o c racies.
In the p ost-war years, t h e refo re , a broad agree ment seemed t o
emerge a m o n g social scientists about t h e nat u re of the polit ical
regi me i n t h e S oviet U n i o n and i n the c o u n t ries o f Eastern E u rope
(exclud ing Y ugoslavia), altho ugh there were many d i ffe re nt
nuances i n the critical assess ments, and t h ese became m o re p ro
n o u nced as the S t a l i n ist e ra receded . But there was much d isagree
ment about the rel a t i o n between central p l a n n i ng, or t h e s oc i a l i s t
p roject as a whole, and p o l itical d ictat o rs h i p . Some, l i k e H ay e k .
argued that cent ral p l a n n i n g a nd the merging of the eco n o m ic a nd

political s p h e res necessarily led t o an a u t h o ritarian polit ical syste m
and the l oss o f pers o n a l freed o m . Others, howev e r , s a w t h e Sm iet
d ictators h i p as the o utcome, rather, o f the absence o f d e m oc r a t i c
trad i t i o n s and experience i n s tead o f which t here pers i s ted a
trad i t i o n o f a u t h o ritarian rule ( and the idea of the 'good t s a r ') : o f
the forced ind ustrializat i o n o f t h e 1 9 30s i n s p i red in p a rt h y the fe a r
o f capitalist e n c i rclement and the d a nge r o f m i l i t a ry i n t e r \ c n t i o n : o f
'
t h e Cold W a r i n t h e post-war period which revi ved e a r l i e r fe a rs :

and perhaps, m o re ge nerally, o f the tende ncy o f all revo lutions ( as
we ll as counter-revolutions) to instit ute, fo r l o n ge r o r s h o rt e r
period s , h ighly a u t h o ritarian regimes. Fro m t h is pe rs pect ive i t was
possible to envisage a grad ual democrat ization of Soviet society

a nd of the East European societies, in the long term; a process
which evidently began after the death of Stalin and has accelerated
notably i n rece nt years.
The main concern of this book is the organization and fu nction
ing of socialist eco nomies, though I shall ret urn later to an
examination of the relat ions between t he eco nomic and pol itical
regimes; and in the economic sphere I t h i n k it is possi ble, at this
j u ncture. i n the light of the criticisms so far considered , to construct
a preliminary balance sheet of the achievements and fail ures of
socialist p l a n n i ng. In the first place, it can be said that t he main
objections brought forward i n the calculation debate greatly
exaggerated the d i fficu lties, whether theoretical o r practical, of
plan ning; and they seem to have even less validity in the age of
super-comp ute rs. Nevertheless, two iss ues arising fro m that debate
are still important. One relates to the complexity, especially in
terms of the immense variety of goods and services supplied , of
modern prod uction; in this context many critics have argued that
while central plan n i ng may be effective where there is a single
clearly defi ned aim to be achieved - for example, rapid ind us
trialization or the co nstruction of a war economy, accompanied in
both cases by severe constraints on ind ivid ual consumption, choice
of occupation, and so o n , which are more or less willingly accepted
by, or imposed upon, the population in order to attain the goal - it
is less effective in developing the prod uction and d istribution of the
great range of consumer good s and services characteristic of a
modern society.
Such crit icism is also relevant to two other matters. First, it is
clear that central plan n i ng and the organization of large-scale
prod uction have been generally far less successful i n agriculture
than in ind ustry, and that an effective agricultu ral policy i n many of
the socialist countries has still to be wo rked out. This relative
failure is con nected , in part, with the ve ry high rates of i n vest ment
in ind ustry which have contin ued up to the present time; but it also
requires, and is now receivi ng, a thorough reassessment of the kind
of economic regime most appropriate to agricultural prod uction
(which would i nclude ind ividual cultivation and small part nersh ips
or cooperatives, as well as state farms) and to the d istribution of the
prod uct. Second, the quality as we ll as the quant ity and variety of
goods and services in many of the socialist count ries is notoriously
unsatisfactory, and this is c o n nected partly w i t h t he abse nce fro m

t h e central p l an n i ng mechanism of ad equate q u a l i t y i n s pect i o n
(except, a s is generally recognized , i n t h e privi leged s p h e res o f t h e
space p rogramme a n d mil itary product i o n ) , partly w i t h fai l u res of
management, and partly, as free-market crit ics would i ns i s t , w i t h
t h e lack of alterriative s o u rces of s u p p l y a n d of some degree o f
compet i t i o n between p rod ucers. These critical reflec t i o n s raise a
host of q uestions about m a n age ment and i ncent ives, about b u r
eaucratic regulat i o n , and about the pl ace of market mec h a n i s m s in
a socialist econ o m y , which w i l l be e x a m i ned i n some d e t a i l i n the
fol l o w i ng t w o c hapters. There is a second issue, h oweve r, related t o
a l l of these, a n d q u ite cent ral to t h e revived calcu lat i o n debate.
which s h o u ld be considered at this point; namely, t he capacity fo r
i n novat i o n i n socialist econo mies. Lavoie ( 1 98 5 ) , as I n oted earlier.
has claimed that the later socialist argu ments agai nst M ises and
H ayek ignored 'all the problems of alertness to new o p p o rt u n i t ies.
of fut u rity, and o f k n o wledge d ispersal' which are 'crucial t o a n y
analysis o f choice i n the real world ' ( p . 1 8 2 ) , and a n u m ber of o t h e r
writers h ave e m p h asized the i m p o rt ance of t h i s p r o b l e m i n t he
Soviet economy. Berl i n e r ( 1 98 8 ) , fo r example, in essays written i n
the 1 970s, d iscusses t h e quest i o n o f ' b u reaucratic creativity', p a rt i
cularly of the ' p l a n n i ng b u reaucracy ', w i t h respect t o tech n o l ogical
i n novati o n , and while recogn izing that 'the syste m has been effec
tive in generating an e n o rmous v o l u me of new tec h n o logy' ( p . 20 I ) . 7
o bserves t h at there a re many fact o rs i n h i biting i n novat i o n , above
all the conservatism o f the planning b u reaucracy and a n avers i o n t o
e xcessive risk-taki ng, so t h a t n e w tec h n o l ogy is less rapid ly a n d less
compre hensively i n t rod uced than would be desirable. In a later
essay (pp. 246-66) he considers the p rospects fo r tech n o logical
progress i n the context of the s harp decline i n the rate o f e c o n o m i c
growth which became apparent in the 1 9 70s. and n o t es t h e
conclusion of most Western research that i n the post-war p e r i od
technol ogical progress in the S oviet U n i o n was c o n s iderably less
rapid than in the ad vanced capitalist count ries, where tec h n ological
advances became a much m o re i m p o rtant s o u rce o f g ro w t h t h an
increases in labour and capital in puts ( p . 249) .
T h e S oviet eco n o m ic system of ce n t ra l i zed p l a n n i ng. w h ich
Berliner d escri bes as 'a reasonably successful st ruct u re ' that attain
ed i n the fi rst t h i rty-five years of planning 'an i m p ress i ve rate of
economic and i nd ustrial growt h ' ( p . 246) . see ms n o lo nge r e n t i re l y
approp riate to the new cond itions and the recognition of this
situation underl ies the p resent d rive for economic 'rest ructuring' in
t he S o \'iet U n ion and other socialist count ries, which was fo re
shado wed by the ' P rague S p r i ng' of 1 968 (see especially the
d iscussion of a t ransition from extensive to intens ive growth, and o f
the ro l e o f k nowledge i n p roduction, in R ichta 1 969) a n d b y the
H u ngarian 'New Economic M echanism' introd uced i n that same
year.'
Overal l . it may be concluded , central planning has been
successful in most of the E u ropean socialist countries in achieving
fast and sta ble eco no mic growth ( Buck and Cole 1 987, ch. 8) and
t ra nsforming them i nto maj o r ind ustrial p rod ucers who now
account fo r about o ne-t h i rd of the world 's ind ustrial output, but it
has not yet raised per capita i ncome and living standards, except in
one o r two cases, to the level of the advanced capitalist countries,
and si nce the 1 970s the rate of growth has declined (though this has
also happened i n most of the capitalist countries, and it is a widely
held view that eco nomic growth is likely to be slower i n mature
eco nomies). M ost important, perhaps, is the fact that the introd uc
t i o n of new technology seems to be more sluggish in the Soviet
U n ion and other socialist countries than i n many capitalist coun
tries. but this may be explained in part at least by the more recent
'maturation' of the socialist economies and in consequence a later
recog nition of the need to move towards intensive, tech nology
based , growt h.
Two other considerations should be borne in mind in assessing
the results of socialist planing thus far. First, as has occasionally
been noted , the eco nomic achievements of the Soviet Union and
some other socialist countries would have appeared still more
impressive if the development of capitalist economies after the
Second World War had reprod uced the conditions of the inter-war
years, i nstead of entering upon a period of unpreced ented ly rapid
growth. The post-war successes of capitalism, in spite of consider
able fl uctuations which have become more frequent in the 1 980s ,
are therefore a major element in the com parison between capitalist
and socialist economies, and they deserve some more systematic
expl anation than has yet, to my kn owledge, been attem pted . H ere,
without pretend ing even to sketch any kind of general ex planation
which would require a study on the scale of Schumpeter's ( 1 939)
work on busi ness cycles -- I would simply observe that these
successes have occu rred alongside massive i n c reases i n � l a t e

interve n t i o n and expend i t u re a n d a c o n s id e r a b l e e x t e n s i o n o f
national eco n o mic planning i n a variety of fo r m s ; and t h a t a b r o ad
view of post-war development s uggests t h at t he ad vanced cap i t a l i � t
countries which h ave h ad more co mprehensive nat i o n al p l a n n i n g ,
and in s o me cases m o re extensive p u blic o w ne r s h i p of i n d u � t r y .

have been m o re s uccessful t h a n o t l . c: rs (two good e x a m p l e s b e i n g
the contrast i n eco n o m ic perfo r m a nce between J a p a n a n d t h e
U nited S t ates and between France and Britai n). I n the l o n g t e r m , a�
I shall argue i n m o re detail later, not o n ly d oes a fa i r l y h i g h l e \ c l of
'
econ o m ic planning seem l i kely t o be advantageous e v e ry w h e re , but

socialist eco n o m ies, i n a context of refo rmed polit ical and e c o n
omic institutions, offer greater hope for sustained and s t a b l e
growth , i n ad d it i o n to their other ad vantages (such as L a nge
emphasized) in the k i nd o f d istri b u t i o n o f wealth and income t h at
they establish, and m o re generally i n what may be s u m ma ri l y
described as t h e i r pursuit of 'the greatest good of the greatest
number'.
H o wever, a second p o i n t t h at we have to consider is t h e nat ure
and consequences of i n novation and growt h . Many people i n the
capitalist countries ( and , fo r t h at matter, increasingly in s o m e
socialist c o u n t ries) have become u ncomfo rtably a w a re t h at
technological p rogress is not an u n m ixed bless ing, and share t h e
d oubts expressed b y G abor ( 1 970) about 'co m pulsive innovation'
and 'growth add iction'.9 From this aspect, the slower rate o f
innovation i n socialist societies, if such is the case, may not be
altogether a d isadvantage . B u t this is not the main issue. The
question is rather: what kinds of new tech n o l ogy and eco n o m ic
growth are li kely to add most to the s u m of human ha p p i n e� s a n d
t o t he q u ality o f life? T h i s q uestion can o n l y fi n d a part i a l
reso lution - a n d always, I would t h i n k , i n a t e ntative a n d c o r ri g i h l c
way - w i t h i n a clearly d e fi ned social pol icy. T h u s , i n prese n t -d ay
Britain, it would be ad vantage o u s , and t o j u d ge by o p i n i o n po l l s i s
seen by a maj o rity o f the population t o be advantage o u s , t o t ra n s fe r
resources fro m the increase of p u rely p rivate wealth to the i mpnH 'c
ment of the national health service and educat i o n , t h e p r o t e ct i o n of
the environment, and a general e x p an s i o n o f p u b l i c a m e n i t i e s ; a n d
t he rece nt emphasis by t h e EC o n a ' s oc i a l E u rope ' s u gge s t s t h a t
such a view is becoming more w i de s p re ad . I n pri n c i p l e , a s o c i a l i s t
society is better eq u i pped . t h r o u gh the m a c h i n e ry o f ce n t ra l
pl a n n i ng and i n terms of its basic doctrine, to move along such a

path; and now that the phase of rapid i nd ustrialization and growth
has been comp leted i n many of the European socialist societies, it
should be ex pected that they will develop i n a more d iscri minating
fas hion with regard to both i n novat ion and growt h, and with the
advan tage of having already a solid i n frast ruct u re of p u b l icly
prov ided services.
:"lcverthelcss. in spite of the undoubted achieve ments and
po tentialities o f the developed socialist eco n o m ies, there is a fai rly
ge neral recog n i t i o n that they are now faci ng serious problems,
w h i c h are i ncreasi ngly seen to arise, not so much from d i fficulties of
economic calculation. as from bureaucratic rigid ities and conserva
t i s m . i nadequ ate i nce ntives fo r efficient production, the excessive
ce nt ralizat ion of power and decision-making, and a correspond i ng
frustrat ion of the exercise of initiative, choice and critical judge
ment by i nd ividuals and associations whose actions and relation
s h i ps constit ute the tissue of social life. I t is these problems and the
reforming policies which are bei ng i mplemented , o r are proposed ,
i n order to deal with them which have to be exami ned more closely
in the fo l l o w i ng chapters.
Notes
I . W iese r was a m o d e r a t e c r i t i c of soc i a l i s m a n d , i nd eed , q u ite sympathetic

t o s o c i a l d e m oc r a t i c i d e as ( H utchison 1 98 1 , p . 207); B o h m- Bawerk a
m u c h m o re c o m m i t ted o p p o n e n t ; and M ises the most ve hement c r i t i c o f
all.
2 . S e e a l s o S c h u m pe t e r ( 1 954, p p . 986 - 7 ) .
3 . Bo h m Baw e r k s a n d H i l fe r d i n g 's texts a r e p u b l ished together i n a
- '
vo l u me e d i ted w i t h a n i n t ro d u c t i o n by Paul Sweezy ( 1 949).

4 . L a n g e (p. 60) cites W i c k s t e e d ( 1 9 3 3 ) t o t h e e f fe c t that p rice i n t h e
n a r ro we r s e n s e o f t h e m o n e y fo r w h i c h a good o r service c a n b e
o b t a i ned i s s i m p l y a s pec i a l case o f p rice i n the w i d e r sense, and he n o tes
t h a t S c h u m pe t e r ( 1 908) s i m i l a rl y u s ed the term 'exchange rat i o ' in t h i s
wider sense.
5 . To s i m p l i fy t h e p r o b l e m L a n ge a ss u m ed that a l l means of pr o d uct i o n
a re p u b l i c l y o w ned , b u t n o ted t h a t ' i n any actual soc i a l i s t c o m m u n i ty
t h e re must be a l a rge n u m be r o f m e a n s o f prod uction privately owned
( e . g. by fa r m e r s , a r t i s a n s , a n d s m a l l sc a l e e n t repreneurs)' (p . 73 ) .
-
Critiques of so cia lis
t pla nning 69
!
6 . Dick nson 's w o r k , p raised by H a ye k as 'a boo k o f great d i s t i ncti o n '.
�
p rov1 es a v � ry clear a � co � nt of h o w a s oc i al i st c r n n o m y m i g h t be
o rganized , with a c o m bmauo n of c o n s u me r c h o ice a n d c.: r n t r a l p l a n
n i ng, reviewing d i ffe rent o p t i o n s a n d v a r i o u s o bj ect i o n s . I n m o s t
respects it is c l o s e to the model p roposed by T a y l o r a n d La nge . t h o u g h
i t s e e m s t o rest rict m o re stringently the s p h e r e of p r i v a t e e n t e r p r i s e .
,
7 . I n connecti o n w i t h S oviet tec h n o l ogical ach i e v e m e n t w h i c h i s o ft e n
den igrated b y thl m o re e x t reme Western c r i t i c s , i t i s i m p o r t a n t t o d r a w
,
atte n t i o n t o a reas of conspicuous s u cc e ss fo r e x a m p l e . i n t h e s p a L· c
p rogramme, but also i n t h e work of various i n s t i t u t e s of t e c h n o l og) .
,
The Pat o n I ns t i t u te i n K iev, fo r e x a m p l e is well k n o w n as a ce n t re o f
high tech nology which revo l u t i o n i zed t a n k c o n s t r u c t i o n d u ri n g t h e
Second W o rld W a r by the d evelop ment of a u t o m a t e d weld i n g t e c h
niq ues (making possible t he m ass p rod u c t i o n o f t h e o ut s t a n d i n g S o v iet
T-34 tank) and has c o n t i n ued to in novate i n ind ust r ial tec h n o l ogy w h i c h
is u s e d by m any Western count ries, incl u d i ng B r i t a i n ( for e x a m p l e , fo r
t h e pipeli nes which b r i ng N o rth Sea oil ash ore).
8 . The social ideas and m ovements of the late 1 960s were among the most
encouraging and in novative of the post-war era, and , after their decline
o r s u p p ression, world pol itics entered a sord id and depre ss i n g p hase
fro m which they are only now beginning to emerge, largely as a re su l t o f
the transfo r m at i o ns tak i ng p l ace in the socialist count ries.
.
9 . See my d iscuss i o n of some of these issues i n Bottomore ( 1 9 7 5 , ch. 1 2 )
5
The state, bureaucracy and

self-management
T h e eco no mic role of t h e state h a s been greatly extended i n all

modern societies, and most of all i n the socialist planned societies,
where the process gave rise to all the familiar, and quite j ustified ,
criticisms of totalitarianism and d ictat o rs h i p . B u t there is not a
necessary c o n nect ion between the expansion of the state's econ o m i c
activities and the emergence of political d ictators h i p o r a u t h o ritar
i a n rule. Everyt hing depends upon the nat u re of the polit ical
system . I n the S oviet U n ion and E astern Eu rope it was the
m o n opoly of pol itical power by a s i ngle party, i n the context of
other factors which I d iscussed earlier, t h at prod uced totalitarian,
and subseq uently authoritari a n , regi mes of greater o r lesser h arsh
ness. What may plausibly be argued is that cent ralized c o n t ro l of
the eco n o my, and i n some d egree a mergi ng of the eco n o m i c and
polit ical syste ms, creates conditions i n which a 'unified elite ', o r a
new d o m i n a n t class, can m ore easily emerge . But t h i s is not bound
to happe n; n o r, o n the other h and , is it the case that societies i n
which private enterp rise prevails a n d there is little central planning
i nvariably escape such conditions. There are, and h ave been , plenty
of exam ples of polit ical d ictators h i p and auth o ritarian rule i n such
societies.
The q uestion of government i n a socialist society h as to be
tack led d i rectly by considering what pol itical institutions this k i nd
of society, i n which the maj o r p rod uct ive reso u rces are public
property and the class re lations of capitalist society n o l o nger exist,
70
The sta te, burea ucracy and self-managem en t 71
might have. Debate on this s u bject was fo r many decades h a m p c r c d

or excl uded by the prevale nce of a particular i n t e r p r e t at i o n o f
M arxist t h o ught , acco rd i ng t o w h i c h t he re could b e 1 1 0
fundamental d isagreements o n matters of social and eco n o m ic
policy i n a society where the working class rep rese n ted by iH
party, or in d ue c o u rse by the party leaders w a s i n p o w er and ,
where the eventual 'withe ·ing away' of all polit ical power could b e
envisaged , even t h o ugh the repressive power o f t he state w a s . i n
fact, being c o n t i nually i nc reased . This d octrine, t h o ugh h a rd ly t h e
p ractice, c o u l d fi nd some support i n M a rx's o w n ideas, t h e U t o p i a n
element i n which is not far removed fro m William M o r r i s 's v i s i o n
of a society w h o se affairs are cond ucted e n t i rely b y v o l u n t ary a n d
spontaneo u s cooperat i o n . B u t the harsh experie nce o f p o l i t i r n l
despotism and terror, and m o re rece ntly the slow i n g d o w n of
eco n omic growth , h ave p rod uced a grad ual mod i fication of the
d octrine ( i n conditions, both i nternal and external, which d i ffe r
rad ically from t hose of the period from the 1 920s t o the 1 950s).
which n o w shows a greater affi n ity with t he m o re p rag m a t i c v i e w s
often expressed by M arx and E ngels themselves, as well as by some
later M arxists, to the effect t hat the precise characterist ics and
instituti ons of a socialist society could not be fully d e fined i n
advance, and t here w o u ld be much learning t o be d o ne 'after the
revolution '.
It remains the case, h o wever, that many M a rx ist and o t h e r
socialist t h i n kers, belonging t o d i ve rse schools, took for granted
that an o rganized w o r k i ng-class party would rule t h e n e w s o c i e t y .
more o r less u n c hallenged , at least d u ri ng a period of trans i t i o n
w h ich might be q u ite prolo nged , and their ideas were re mote fro m
those n o w being e x p ressed i n the d iscuss ions a bout ' p o l i t i c a l
pluralism'. S u c h pluralism - that is to say, elect o ral r n m pe t i t i o n
between candid ates rep resent i ng diffe re nt g r o u p s o r p arti es a n d .
greater freed o m for t h e activities of vari o u s social m o v e m e n t s t h e

fi rst steps towards which are being taken in some of t he s oc i a l i s t
cou ntries, and most boldly i n Poland and H u ngary. is i n t e n d ed t 11
extend public debate and choice in t h e sphere o f ec o n o m i c a n d
social policy, a n d to d i m i n is h fu rt h e r t h e s c o p e o f a u t h o r i t a r i a n
rule; and it is evidently conceived not s i m ply as a p r oc es s o f
'de m ocratizati o n ' b u t as an essential element i n t h e refo rm a n d
rei nvigorat ion of the economy.
Befo re turning t o that ce n t ral issue o f t h i s bo o k , i t i s i m p o r t a n t t o
consider some of t he wider implications of political pluralism. No

one can be sure i n advance how the current changes will evolve, or
what policies will emerge from the new structure of politics. It is
poss i ble, t hough perhaps not very likely i n the foreseeable future in
most of t he socialist countries, that competition for political
leadership on an extensive scale will lead to the emergence of
influential pro-capitalist forces tendi ng towards a restoration, or
partial restoration of capitalism. The possibility of such an outcome
clearly poses fu ndamental questions about socialist, and more
specifically Marxist, conceptions of social development, i n which
t he attainment of socialism is seen as being, in a stronger or weaker
sense, a determined and i rreversible stage in a progressive move
me nt of h istory. Certai nly there was no place in Marx's theory for
the idea of a reverse transition from socialism to capitalism, or to
some third, unimagined form of society. Yet the future develop
ment of the advanced industrial societies does now appear more
open, less determined and predictable, than many socialist thinkers
have been inclined to recognize, and there is correspondingly an
urgent need to re-examine, in a fundamental way, our conceptions
of the political forms of socialism.
Such an exercise is beyond the scope of this book, but there are
still some other aspects of the relation between state power and
central planning that need to be considered . The idea of political
pluralism should not be confined , as it often seems to be, to the
subject of free elections and competing parties. Just as important is
the decentralization of political power by enhancing the role of
local and regional government within nation states (and this is
relevant also in the case of some capitalist countries, notably in
Britain, where the powers of local government have been steadily
reduced by an increasingly authoritarian central government), and
the working out of electoral systems which allow the widest possible
representation of diverse interests and of preferences in social
policy. It was never reasonable to suppose that i n a socialist society
all conflicts of interest or d iversity of aims would disappear, even
after the abolition of major class differences (which, for that matter,
may reappear in new forms), and it may well be the case in the
future that political power i n socialist societies will not only be
more decentral ized , but will frequently be exercised by coalition
governments which change their complexion and orientation from
time to time as circumstances change.
The state, burea ucracy a n d self-management 73
But there is still another element of vital i m p o rtance in a

pluralistic system ; n a mely, the development of a great variety of
active assoc i ations i n civil society. S uch associati o n s - occupat i o n
al, economic, c o m m u nity-based , environmental, o r c u l t u ral - while
being independent of the state, m ay h ave a significant i n fluence o n
social p o licy a s irimary sources of the i n d i v i d ual's capacity t o
choose, i n n ov ate and participate i n m a k i n g d e c i s i o n s o n matters
d i rectly affecting the quality of his o r her l i fe . The ideas of
'participatory democracy' and 'self-management' both express the
i m mense i m portance of this d e nse network of no n-state associa
tions as the s u bstrat u m and c o n d i t i o n of effective democratic
pluralism .
Finally, h o wever, w e should n o t b e led i n t o ass u m i ng t h at t h e
nation state, even when it is d e e p l y involved i n ce ntral i zed econ
o m ic pl anni ng, is the o n ly serious t h reat t o i n d ivid u al l i berty (or as
it would be p referable t o say, t o the specific and particular l i berties
of individuals and social groups). It is well to bear i n m i nd here, in
considering the political i nstitutions of social ist society i n relation
to its economic organizati o n , the d iscussi o n of the state, democracy
and citizenship by that exemplary l i beral sociologist L. T.
H obhouse, who sagely remarked that 'there are other enem ies of
l iberty besides the State, and it is in fact by the S t ate t h a t we have
fought the m ' ( H obhouse 1 922, p . 83).
The aspect of the state in a planned socialist society t h at has
attracted most attention and criticism ever s ince M a x Weber w rote
of the 'dictatorship of the official' is the growth of bu reaucracy and
its consequences. This h as both a political and an eco nomic
d imension, and i n the following d iscussi o n I shall concentrate on
the latter, since, as I h ave already argued , the q uestion of political
power and the emergence of a new d om i n a nt class or elite in
socialist societies requ i res an analysis of the nature of the state, and
of the monopolization of power by a si ngle party, rather than of
bureaucracy in its most general sense. To be s u re . there h a s also
grown u p a party b ureaucracy w h ich has a significant role in t he
economy, and its i n fluence will be considered i n the relevant
contexts, but I shall begi n by exami n i ng the b u reaucratic phenom
enon as it manifests itself i n the planning and regu lat i o n of
econ o m ic life by state officials and managers .
A usefu l starting point is to be found i n the d iscussion by Berl i ner
( 1 988, ch. 8), who d istinguishes two levels of bu reaucracy in the
Soviet syste m : a 'planning bureaucracy ' which is 'interposed

between t he firms and the Par t y leadership' and comprises the
e c o n o m i c m i n is t r i e s , organizat ions dealing with t he planning p ro
i.:ess and fi nance, and segments of the Party bureaucracy; and the
m a n ageme n t bureauc racy i n ind ivid ual fi rms, which is comparable
with t h a t in c apit a lis t corporations and hence referred to as the
' c o rp o rat e burea ucracy'. Berliner then goes on to consider the
i.:o nserva t i s m or creat ivity of these two bureaucracies, i n relation to
t h e problem of motivation, and notes that they tend to make 'those
decisions which contribute to a higher score o n the stand ards by
which their own work is eval uated . In some cases, this leads to
creative behaviour; i n others to co nservative behaviour. The crux of
the issue is the stand ard of evaluation. ' (p. 1 93) But there is also a
general obstacle to creativity: namely, the lack of satisfactory
q uantitative ind icators of the relat ive value of commodities as
i m plied by the preferences of the party leadership, since the 'shadow
prices' which express the relative values are not i n fact known by
the central planners, the plann i ng bureaucracy, or the firms (p. 1 95).
The outcome is that the whole bureaucratic system tends to be
conservative rather than creative, and although the system 'has
been effective in generating an e normous volume of new
technology' this is not the same as efficiency, which 'refers to the
relationship between the magnitude of the results and the
magnitude of the effort and resources invested ' (p. 20 1 ) . In general,
there is little doubt that the rate of technological innovation and of
prod uctivity growth (which reflects greater efficiency) has been
unsatisfactory, 1 and since the 1 960s a succession of maj o r reforms
and minor changes have been int rod uced , revised , and sometimes
reversed agai n, in an effort to improve efficiency and increase the
rate of economic growth ( Berliner 1 988, ch. 1 2). What has changed
most fu nd amentally is the conception of cen tral planni ng. Whereas
the Stalinist leadership, as Berliner (ibid. , p. 280) remarks, had
great faith in the abi lity of the central planners, who h ad after all
ach ieved the transformation of the Soviet U n ion into a great
industrial power, to d i rect the economy i n every detail, 'that naive
optimism has long si nce vanished ' and t he aim of all the subseq uent
refo rms has bee n to fi nd a way of decentralizing local decisions in
the fra mework of a central plan.
So far, howeve r, the internal structure of fi rms has changed
relati v ely little in the Soviet U n ion, although the organizational
The sta te, burea ucracy a n d self-management 75
structure above the level of the firm h as u nd e rgone considerable

c h a nges , s o t h at, as Berliner (ihid. , p . 275) o bserves, ' t he b u r
eaucracy t h at stands between e n terprise d i rector and h i s m i n i ster is
m u c h more complex t h a n i n the p re-war period '. Elsew here ,
notably i n Y ugoslavia fro m t he 1 950s a n d i n H u ngary s i nce 1 968 ,
t here h ave been m o re fundamental c h anges i n e nterprise st ruct u re .
as well as i n the econ o m ic system ge nerally, with the development
o f d i ve rse forms o f 'market socialism'; and the c u rrent policy of
restructuring the economy in the S oviet U ni o n p o i n ts in the same
d i rect i o n . The aim is to create new o p p o rt u n ities and i ncenti ves fo r
efficient m anagement, lead i ng to m o re rapid tech n o l ogical i n no
vation and higher prod uctivity, less wastefu l use of resou rces, and
the e l i m i n ation o f all k i n d s of bottlenecks i n the supply of materials
t o prod uctive enterprises and i n the d istribution of c o ns u mer
goods, both by l i berat i ng e nterprises fro m detailed cent ral regu l a
t i o n and by i n t rod u c i ng an element of competiti o n .
O n e c onsequence o f deregulation a n d t h e greater auto n o my of
e nterprises is quite clearly a red uction i n the size o f the b u r
eaucracy, w h ic h itself represents a conside rable saving of res o u rces .
N ut i ( 1 988) n otes 'the d rastic personnel red uct i o n o f the Central
P l a n n i ng C o m m iss i o n ' ( p . 377) i n the Soviet U n i o n , and also the
s u bstantial red u c t i o n i n the n u mber of mi nistries responsi ble fo r
i n d ustrial sectors, which i n H u ngary and Poland have bee n
replaced by a s ingle M inistry for I nd ustry and Trade ( p . 3 7 8 ) . The
achievement of s m aller, m o re efficient b u reaucracies responsi ble
for t he general m anagement o f the econ o my, by d ismantling central
p l a n n i ng in the form of detailed physical c o n t rol of enterprises and
sectors, would be a considerable gain, both eco nom ically and
p o l itically, fo r m a ny of the socialist count ries; but the q uest i o n of
the nature of central plan n i ng and its relation to markets in the new
economic system is far fro m being reso lved , and, as N u ti ( ihicl. . p.
382) s uggests, the s uccess o f the restructu r i ng process may mean
that 'the trad itional problems of centrally plan ned eco n o m ics w i l l
h ave been alleviated o r perhaps so lved , b u t a t t h e cost o f i n t ro
d ucing at least some o f the pro blems of capitalist eco n o m ies '.
This d i fficult issue will be exami ned in the next chapter; mea n
while it is necessary t o look at the d iverse structures of i nd ividual
e nterprises and the changes they arc undergo i ng i n t he socialist
countries, i n relation to bu reaucracy and to eco n o m ic performance.
The first maj o r b reak with the Stalinist system took place in
Y ugoslavia. with the i ntrod uction of a new eco nomic and social
pol icy based upon the self-management of enterprises and other
social and cultural i nstitutions. The Yugoslav eco nomy can be
characterized briefly by saying that property is managed d i rectly by
the workers the mselves, in a system of social ownership which is
cont rasted with state ownership i n other socialist countries. 2 The
latter separates the means of prod uction from the prod ucers in a
n e w way and creates new dominant groups of party officials,
bu reaucrats and managers; whereas social ownership approaches
more c l osely the co nception of a 'society of associated producers',
fo rmulated abstractly by M arx, but influenced by the experience of
cooperative factories i n the n inetee nth century.
In a system of state ownership, the coord ination of the economy
as a whole is assured by some central authority - the central
planners and the party leadership - as has been the case in the
Soviet U n ion and other socialist countries until quite recently; but
where enterprises are in principle autonomous and self-managed ,
the relations between them have to b e established i n a different way,
namely th rough the market and exchange, though in an economy
which is still planned and subject to a general regulation by the
state. The economic advantages of this system were seen as being
that the prod ucers are no longer d i rectly subordinated to external
political authorities, that incomes are determined by output and
prod uctivity i nstead of by ad ministrative decisions, and that the
independence of the prod ucers provides greater incentives for
eco nomic development. But the restructuring of the Yugoslav
economy also had the wider aim of encou raging the full participa
tion of citizens in determining their social life and achieving
responsible self-government in a genuine socialist democracy.
The initial achievements of Yugoslavia under the new regime
were impressive, with very high growth rates and a high level of
accu mulation and investment, and they attracted widespread atten
tion. But unemployment remained high, resulting in large-scale
em igration of labour, mainly to West Germany, and econ omic
disparities between regi ons tended to grow, as d id income differ
ences generally. More recently, economic performance has greatly
deteriorated , the country is burdened with massive external debt,
and the economic failures along with the continuing disparities
between regions have exacerbated cultural and political tensions
within this multinational state. As a result, criticisms of the existing
The sta te, burea ucracy and se/f-managemen r 77
self-management system, which were a l ready v o i ced i n t h e late

1 960s, h ave multiplied both inside and outside Y ugoslav i a . J
T h e maj o r problems of self-management seem t o b e t h e fo l l o w
ing. First, economic efficiency varies considerably, fo r d ivcr�e
reasons, betwee1' enterprises, and this res ults in sign ificant d i ffe r
ences in income and social benefits between t he wo rkers in t hese
enterprises. It also raises the q uest i o n of whether the least effi c i e n t
enterprises should be allowed to go bankrupt and , i n t hat case .
what becomes of their employees and of socialist p o l icies of fu l l a nd
stable employment. Beyond this, acco rd i n g t o s o me crit ics, t h e re
h as d eveloped i n t h e m o re successful enterp rises a 'grou p-eg o i s m '.
and the property relations that h ave been establis hed could m o re
accurately be d escribed as 'group owners h i p ' rather t h a n 'social
ownership'.
Second , t h e ful l participation of e m p l oyees i n self-man age m e n t i s
rarely achieved . Just as i n self-managed associations o f v a r i o u s
types in o t h e r societies (fo r example, v o l un t a ry associat i o n s c reated
for charitable and ed ucational p urposes), most membe rs are pass i ve
supporters, whereas t here is always an active m i n o rity o f
individuals w h o a r e ready , o r eager, t o t a k e o n ad m i nistrative tas k s
and exercise s o m e auth o rity. I n Yugoslavia the level of participa
tion i n management varies c onsiderably between enterprises and
regions, and in t h e most fav o u rable cases may attain some 40 per
cent of the work force; b u t it is generally much lower than t h i s . and
i n the view of some critics a n 'oligarchy' o r 'me ritocracy ' has
developed both within enterprises and in the p o l i t ical / ad m i n is
t rative system. Nevertheless, i t may be argued that the Y ugoslav
system has demonstrated its feasi b i lity over a fa i rly long peri o d .
a n d a s S zell ( 1 98 8 , p. 1 1 3) observes, ' i t h a s p roved t h a t s i m p le
workers are able, w i t h o u t bei ng experts, t o r u n c o m p a n ies a n d
social institutions, and that t h is society therefo re p rovides s o m e
h o p e t h a t pol itical apathy w i l l b e overcome'.
Third , i n a n economy i n which the basic product ive u n i t � a rc
i ndepend e n t self-managed enterp rises, t he c o o rd i n a t i o n o f e c o n
omic activity as a w h o le is e ffected p a rtly by market re l a t i o n s .
partly b y central a n d regional p l a n n i ng, giving r i s e t o a m aj o r
problem concern ing t h e relat i o n s h i p between t h e a u t o n o m o u s
activity of product i o n collectives a n d rat i o n a l ec o n o m i c p l a n n i n g
(Supe k , cited by S ze l l 1 988, p. 1 08 ) . T h i s is the m a i n s u bject of t h e
following chapter, and here it w i l l be e n o ugh t o p l ace the q ue s t i o n
i n t h e b ro ad e r c o n t e x t of an assessment of t he ach ievements and

d i ffic u l t ii:s o f the Y ug o s l a v project . The i nt e n t i o n of t he struct u ral
l· ha nges i n the Y ugo s l a v eco nomy and society, which have been
s t e ad i l y d e v e l o p e d o v e r a period of almost fo rty years now, was, as
I h a v e s a i d . t o a p p r o a c h more closely t he cond i t i o n of a mature
s o c i a l i s t s o c i e t y . conceived as a 'society of associated prod ucers '.
U n d o u b ted l y , t h e c h a nges have brought substantial achievements.
T h r ou g ho u t t h is p e r i o d , until the very recen t wave of liberalizati o n
i n m u c h o f E astern E u rope, Y ugoslavia h a s bee n a far more o p e n
s o c i e t y than any o f the o t h e r socialist count ries, a n d i n the 1 960s
e s p ec i a l l y , the fu ture prospect loo ked exceptional ly bright, above
a l l in s o fa r as eco nomic development was co ncerned . The extent of
these achievements can be judged from one aspect by the fact that
the Y ugoslav system became to some extent a model, t h o ugh not to
be fo l l owed i n every detail, fo r other socialist countries in Eastern
Europe and also fo r Chi na, when t hey embarked upon a maj o r
rest ruct uring of t h e i r economies.
A pri ncipal feature of the new Yugoslav economy was what came
to be called 'market socialism', though a better term might be
'soc i a l i s m with markets', as has been suggested by Tomlinson (in
H i ndess 1 989), and this has become a fashionable phrase in recent
stud ies and debates. In the Y ugoslav case, however, it was only a
part of the overall p roject to create a socialist society, the main
pillar of wh ich was to be the self-management of enterprises and
institutions as a way of i nvolving t he whole population i n the
determ ination of economic and social policy and countering the
growth of new elites. But t hese two elements were inseparably
connected , for the autonomy of enterprises necessitated the
development of market relations among them, within a framework
of regulation which i ncl uded national economic planning, the
protection of consumer i nterests, and the provision of general
infrastructural and welfare services. M oreover, market relations
and competition among independent prod ucers were seen as valu
able i n themselves i n so far as they promoted greater economic
efficiency and higher growt h rates.
What is evident fro m the Yugoslav experience, however, is that
the attainment of socialism as a 'society of associ ated prod ucers' is
an infi n i tely more d i fficult process than was ever imagined by
earlier socialist thin kers, or by those who s u bseq uently
endeavo ured to achieve it i n the wake of social revolutions. On one
The s ta te, burea ucracy and self-management 79
side, central planning i m pleme nted by a si ngle p a r t y w h i c.: h c .:l a i m s a

monopoly of power as the maker of the rev o l u t i o n fac i l i l a l t: ' t h e
growth of a new d o mi n ant and privileged gro u p i n s oc i e t y , a n d t h e
planning itself may be less effective o nce the i n i t i a l p h a se o f r a p i d
ind ust rializat i o n h as been completed , a n d the p l a n ners t h c m s c l vt:s
become i ncreasingly con ·er ned with the p r o m o t i o n o f t h e i r o w n
sectional i nterests . On the o t h e r s i d e , a s h as been see n i n c o n s i d e r
ing t he Y ugoslav syste m , self-manage ment m a y a l s o g i v e r i s e t o n e w
secti o nal i nterests, of t he enterprises t hemselves, and res u l t i n
growing inequalities of income and d i ffi c u l t i e s i n c o o rd i n a t i n g
economic develop me n t a s a w h o le.
A m aj o r study of t h e p roblems i n Y ugo s l a v i a by H o rv a t ( 1 9 82 )
proposes personal taxat i o n as a means of red ucing i n c o m e d is p a r
ities (as h as now been u ndertaken i n H u n g ary) , t he e x c l u s i o n o f
culture , educat i o n and h e a l t h fro m the market, a n d a restruct u r i ng
of the funct i o ns of government. There is a l s o n o w a n a n i m ated
d ebate throughout Eastern Europe on the establ ishment of a m u l t i
party system , already partially i mpleme nted i n H u ng a ry a nd
Poland , or at t he least a system in w h i c h various groups, not
formally constituted as parties, can co ntest elect ions and e x p ress
public criticism of eco n o mic and social pol icies; and development
along t hese l i nes seems q u i te l i kely i n Y ugoslavia and the Soviet
U ni o n itself. These polit ical c hanges, which are very w i d e l y
recogn ized as being a crucial element i n the p rocess o f eco n o m ic
restructuring and re newal, will be d iscussed fu rt h e r in later
chapters, but we h ave yet to consider another vital a s p e c t o f t h e
eco n o m ic problems and c hanges i n t h e socialist c o u n t ries.
Markets, pace t h e champions of laissez-faire, a re not a u n i ve r s a l
panacea for eco nomic ills, as t h e citizens o f capitalist count ries h a ve
long k n o w n and as t h ose in some socialist count ries have bee n
red iscovering; and t hey ce rtainly d o not o ffe r a royal road t o
social ism. Compet i t i o n a n d markets m a y b r i n g benefits to c o n
su mers, increase the efficiency of producers, a n d st i m ulate e c o n
omic growth ( t h o ugh t h i s i s n o t always, a s t he case o f B r i t a i n
shows, t h e k i n d of gro w t h w h i c h is sustai nable o r most be n e fic i a l i n
the med i u m o r l o n g term); b u t a t t he s a m e t i m e t h ey a rc l i k e l y t o
bring greate r instability and eco n o m ic i n e q u alit y . a n d p e r h a p s a
deteriorat ion of co llective provision and t h e sense o f co m m u n i t y . I n
a socialist society t hese problems, as I h a ve i n d i c a t e d i n d i s c u s
s i n g the Y ugoslav system o f se l f- m a n age m e n t a n d m a r k e t s , a rc
considerable, and have become the subject of inte nse debate, and
t hey arc compounded by a further element which dese rves
part icular atte n t i o n . W i t h the development of markets and the
greater i ndependence of enterp rises, many socialist count ries have
become i ncreas i ngly i nvo lved in the capitalist world market and
he nce ex posed to the economic cycles characteristic of capitalism.
With the recession i n the capitalist countries i n the 1 980s, some of
t he E ast E u ropean socialist count ries have faced maj o r p roblems of
ad verse fo reign t rade balances and large external debts, the latter
result i ng from ill-adv ised large-scale borrowing at a time when
Western banks were only too ready to lend their massive cash
res ou rces all over the world . At the prese nt time, Poland, H ungary
and Y ugos lavia are particularly affected by t hese conditions, and
we shall need to consider later how far the most recent policies of
eco nomic reform, and especially those in the Soviet U nion, will be
able to avoid this kind of dependence. The u nderlying factor is
undoubted ly the continui ng relative weakness of the socialist
eco nomies, des p i te their considerable achievements. N o socialist
country or group of cou ntries has yet become economically power
fu l enough to have a determining influence o n the world economy,
and alt hough there is not, i n my view, a single world system, as
some have argued , there is certainly a still d ominant capitalist
system, confronted by an alternative socialist system, which is
eco nomically weaker and as yet incapable of exerting so powerfu l
a n influence.
I n later chapters I shall consider how far the p resent economic
reforms i n socialist count ries are likely to change this situation,
which is simi lar, on a world scale, to that which has been noted in
respect of the attempts to move towards socialism i n the capitalist
wo rld itself, where a si ngle country, or even a small group of
countries, seems generally doomed to fai l u re in a confrontation
with the power of i nternational capitalism sustai ned mainly, at least
until rece ntly, by the U n ited States .4 Clearly, the cond i t i ons would
be greatly changed by a rev ival of the socialist economies i n Eastern
E u rope, and there are already signs that the new p o licies t h e re are
begi n n i ng to have an effect , with an i ncrease i n the rate of economic
growth to 4 per cen t in 1 988 and a significant rise i n foreign trade.s
But a rapid and sustai ned improvement i n economic performance
depends crucially upon how successfully the restructuring of these
economies is carried out, and the central issue, to which I shall now
The state, burea ucracy a n d self-management 81
t u rn, is unquestionably t h at of creating a system w h i c h s u ccessfu l l y

combines central (plus regional a n d local) p l a n n i n g w i t h m a r k e t s i n
a socialist economy.
Notes
I . See also the c o m ments by N ut i ( 1 98 8 , p p . 37 3 -4 ) : R esea r c h and

'
development have tended to be academically oriented and detached

from the needs of both ind ustry and teach i ng; the i n novat ion d e c i s i o n
h a s remained by and large an ad m i n istrative decision; long i n vestment
gestation has led to intolerable delays i n the i n t rod uction o f nc\\
tech niq ues. W hat is wo rse, several reasons appear t o provide a p o s i t i v e
d isincentive fo r enterp rise man agers to in novate . ' N ut i goes on to l i st
some of the maj o r d isi ncentives and concludes: ' I t is not s u rp rising.
therefore, t h at R & D and productivity t rends have been q u i te
d isappointing outside a few sectors such as space and m i l itary i n d u s
tries . '
2. F o r more detailed accou nts of t h e Yugoslav syste m sec B r o c k m e y e r
( 1 970) and Sze I I ( 1 988, pp. 1 04- 1 1 ).
3 . See, for example, Stoj a n ovic ( 1 973) and Szell ( 1 988, pp. 1 1 2 2 3 ) .
4. See the d iscussion i n H olland ( 1 983) o f the need to rest ruct ure t he West
European economies i n a joint effo rt by t he EC c o u n t ries.
5 . U nited Nations Economic Com miss i o n fo r E u rope, Economic Survey
of Europe in 1 988- 9.
6
Plan and market
Ever s i nce the debates about central planning and socialist calcul a
t i o n i n the 1 930s, and more particularly si nce the formulation by
Lange and Dickinson of what H aye k called the 'competitive
s o l u t i o n ', acco rd ing to which p rices and the allocation of prod uc
tive resou rces were to be determi ned by a combination of market
mechanisms and central planning, there has been continued d is
cussion of the ways i n which planning and markets can be
successfu l ly integrated i n a socialist society. The d i scussion h as
been especially intense in Y ugoslavia, where critics have si ngled out
as a maj o r problem the relation between self-managed enterprises
ope rating in a market situation and the requirements of rational
economic planning (see above, p . 77); and i n recent years, with the
new wave of eco nomic reforms, it h as spread widely t h roughout
Eastern Europe. But the general quest ion is one of great com
plexity, which has many d iffere nt aspects, and we should begi n by
d istinguishing some of the separate issues involved .
Fi rst, there is a great difference between those societies in w h ich
the greater part of prod uctive resou rces are publicly owned and
ce nt ral planning has a maj o r role in the economy, and on the other
hand , the societies i n which there is only l i mited public ownersh ip
and planning and the construction of a socialist economy involves
some extension of planning in d iverse forms, along with restrictions
on market mech anisms. I n this chapter I shall be concerned with
82
Plan and mark e t 83
the former group of c o u n t ries, and pri marily w i t h the East E u r

o pean socialist societies, defe rri ng u n t i l a later chapter a d iscussion
of the second group, mainly in Western E u rope, where at vari o u s
t i mes - a n d i n s o me cases o v e r fairly long period s , as fo r e x a m p l e i n
S w e d e n - the c o untries concerned have moved towards a m o re
socialist fo r m of society. But w i t hi n t h e gro u p of ex isting social ist
countries itself there are i m p o rtant d i ffere nces, arising from d i s
t i nctive economic, social and cultu ral conditions, w h i c h are
revealed i n the very d iffe rent course of post-war development i n , fo r
example, the S oviet U n i o n , Y u goslavia, H u ngary, t he G e r m a n
Dem o c ratic R e p u b l i c a n d Poland . S o it is not to b e ex pected t h at
precisely t h e same solutions w i l l be tried in every country , although
there will certainly be some c o m m o n policies and a co n t i n u at i o n of
t h e exchange of ideas and e x perie nces such as has alread y been
taking place; hence it will be necessary to look also at the specific
problems and reforms in particular countries.
Second , t h e restruct uring of t h e socialist econom ies raises q ues
tions not only about the scope and nature of central planning, but
also about the forms of owners h i p of product ive resources, and in
particular the extent to which private ownership will be permitted
or encou raged . This is not a new issue in socialist debate, and very
d iverse views h ave been expounded about the ownersh ip of pro
perty in a socialist society. A clear d istinction was always made
between personal pro perty - w h ich would only be affected by the
transit i o n t o socialism to the extent t h at a greater equal ity bet wee n
ind ividu al s became establis hed - and owners h i p of productive
reso u rces; the d ivergences of view conce rned essentially the latter
kind of property, above all in the basic spheres of economic act ivity
and w h e re owners h i p was h ighly concentrated in the h a n d s of small
groups of people through the development of large corporations in
i ndustry and fi nance. M arx's legacy - the co ncept ion of t he
'associated prod ucers' - seemed to imply a very wide extension of
social owners h i p , and a virtual extinction of ind ivid ual ownersh i p .
but as we saw i n the c a s e o f K autsky, t h ose early M a rxists w h o
gav� a n y attention to t h e practical o rganizat ion of a socialist
economy were quite ready to envisage very diverse fo rms of
ownership, includ ing a sphere of individual ownership and p r i v a t e
prod uction. F u rthermore, there was from the begi n n i ng, am � ng
M arxists and other socialists, a powerfu l cu rrent of th o ught which
favoure d relatively independent s e l f- m a n aged enterprises, while
opposing centrally planned and managed state i nd ustries; and such

ideas not only persisted but e nj oyed frequent revivals, as i n the
councils movement and i n t he Yugoslav system. 1 From t h is pro
t racted de bate and accumulated p ractical experience it is evident
t hat the st ructure of a socialist economy still remains an 'u nsettled
quest i o n ', to which different answers may be given i n d i ffere nt
count ries and in changing historical circumstances .
Third , the debate about p roperty ownership is intimately con
nected , as I have ind icated , with the question of central planning
and state i ndust ries. M any socialists, and writers o n socialism, h ave
recognized that a socialist economy cannot simply be equated w i t h
ce ntral plan ning. H ayek ([ 1 935] 1 948, p . 1 30), for example, d is
tinguished between 'socialism' as a description of ends and 'plan
n i ng' as a method, and argued that 'it is possible to h ave much
plan n i ng with little socialism or little planning and much socialism'.
I n the writings of some of the U topian socialists it was assu med o r
hoped , a s in t h e case of M o rris, that a spontaneous o rder would
emerge from the activities of responsible, cooperative individuals,
without any elaborate machine ry of government, ad ministration or
economic management, though other U topians, like Bellamy,
envisaged a powerful central authority w h ic h would regulate social
life. The suppo rters of workers' councils and self-management, in a
less extreme way, advocated the autonomy of prod uctive enter
prises on the basis of social ownership, but they did not consider i n
detail h o w the diverse economic activities would b e coord inated ,
and , as we have seen, the self-management system implies the
existence of markets and , i n practice, creates difficult problems of
the kind that I d iscussed earlier, i n particular the specific problem
of a symbiosis between plan and market.
At all events, in the mainstream of socialist thought and practice
the co ncept of planning came to be closely identified with socialism,
and as Dickinson ( 1 939, p. 9) wrote:
T h e defi n i t ion of soc i a l i s m t h a t was ge nerally accepted d u ri n g t h e

half-ce n t u ry between 1 875 and 1 925 is 'soc i a l owners h i p o f the
means of prod uct i o n '. S i nce t h at t i me t h e p h rase ' p l a n ned p r o d u c
t i o n ' has b e e n t e n d i n g to take i t s p l ace. There is a close c o n n e x i o n
betwee n t hese t w o defi n i t i o n s . . . . O n e fu n d a m e n t a l d i ffe re nce
between socialism and capitalism will be t h e e x i s t e nce o f a n a u t h
o r i t y a b l e t o v i e w t h e ec onomic system as a w h o l e and w i t h power
Plan and mark e t 85
to make decisions i n volving the system as a whole.
A nother half-century later the q uestion of planning h as become

much more complicated and the subject of renewed c o n t roversy .
On one side, the continued develop ment of 'organized capitali s m "
h a s enlarged the s phere of p l a n n i n g a n d the r o l e of the state in
capitalist eco nom .es, particularly i n the most dynamic societies,
such as Japan. On the other side, c o m p rehensive ce ntral planning in
the socialist countries seems to have run into serious difficu l t ies,
and to be less effective i n a m ore complex advanced i nd ustrial
society than it was i n the earlier stage of rapid i nd ustrializat i o n .
Hence the present m o re rad ical policies of reform a n d rest ruct u r
i ng.
Before examining the content and i m plications of these reforms it
is necessary to emphas ize again t h at t hey are occurring i n societies
which are socialist i n their structure and aims and are l i kely to
remain so for the foreseeable future. By socialist I mean, i n the first
place, the kind of society defi ned by Dickinson ( 1 939), pp. 1 0 - 1 1 ) as
. . . an eco nomic organizat i o n of society in which the m aterial

means of production are o w ned by the w h o le com m u n i ty and
operated by organs represe ntative of and responsible t o t he
co m m u n ity accord ing to a ge neral eco n o m ic plan, all members of
the c o m m u nity being e n t itled to benefit fro m the res ults of such
socialized plan ned prod uct i o n o n the basis of eq ual righ ts.
The definition is i ncomplete i n certain respects, si nce it d oes not

refer to t h e cultural aims of socialism w h ich G ramsci cal led the
creation of a 'new civilization'; and , as Dickinson himself noted . it
also leaves vague two i mportant points: namely, how (in what
i nstitutional fo rms) society is to work the prod uctive eq u i p m e nt
that it owns, and exactly h o w (accord i ng to what criteria of service
or need , individual or col lective c o n s u m p t i o n ) the social p rod uct i s
to be d istributed . But it will s u ffice as a starting point fo r t he
present analysis which co ncent rates u p o n t he eco n o m i c a s pecb o f
socialism a n d the o rganization of prod uct i o n . O n l y in o n e res pect
would I make an i n i t i a l m o d i ficat ion by saying that i t i s t he maior
means of p rod uction ( l and and natu ral resou rces, large-scale t rade
and industry, transport and c o m m u nication) which need t o h e
socially owned , leaving room fo r p rivate i n d i v i d u a l o r fa mily
prod uct i o n in many s p heres.

We c a n n o w tum t o t h e r e fo r ms t h a t a n: t a k i n g p l ace at p resent
in t he socialist c o u n t ries and to an examination o f the various
p r oj e c t s fo r combining central planning wit h markets i n eco n o m ies
w he re most of the material prod uctive fo rces arc, and w i l l c o nt i n ue
t o be if t hese societ ies re main socialist, socially owned . A preli m i n
ary o bserv a t i o n s h o u l d be made here: namely, t hat the ec o n o m ic
reforms a re necessarily bound up with polit ical reforms, i n the sense
t h a t , as in o t he r societies, economic renewal can only be s u ccess
fu l l y acco m p lished if t here is freed o m to criticize p o l i c ies and the
ac t i o ns of public o fficials, and if political leaders at all levels of the
s o c i e t y enj oy t h e freely expressed confidence o f a m aj o rity, o r at the
w o rs t a large part, of the population. The significance of these
p o l i t ical cond itions will be exami ned i n t he next chapter, but their
importa nce should be kept in m i nd throughout the following
d iscuss i o n .
T h e cu rrent reforms a r e , in a broad sense, an extens i o n o f those
which were im ple mented i n Y ugoslavia i n the 1 950s, but i n the
interi m there have been many changes i n the world economy, the
Yugoslav system itself has encou ntered serious d i fficulties, and the
prese nt refo rms i n the socialist world are being undertaken i n
societies which d i ffer profou nd ly among themselves i n size,
resources, history and c u l t u re. The fu ndamental re-examination of
the nature of a socialist economy and socialist planning is proceed
ing, therefore, i n the midst of widespread controversy. In what
follows 1 shal l not attempt to describe in detail the c i rcu mstances
and policies of each particular socialist country, but shall concen
trate on the principal ideas of the reformers and the theoretical
models proposed fo r a restructu red socialist economy, illustrating
t hese ideas and models from the experie nces of d i ffere nt countries.3
An appropriate starting point is the ex perience of Y ugoslavia,
which was the first socialist country to i n t rod uce m aj o r i nno
vations, through an alternative conception of social owners h i p , a
decentralization of the econo my and especially of management, and
the development of market relations. The fi rst phase of this new
system, up to the early 1 960s , was one of considerable ach ievement
i n economic growth and rapid ind ustrialization, and i n the l i be r
alization of social and cultural life; but in the view of its crit ics (see
especially Golu bovic, 1 986) its fu rther devel opment was com
promised by u n resolved cont rad ictions in its ideological heritage
Plan and market 87
between the idea of self-management, w h i c h bec a m e i n cre a si n g l y

confi ned to the eco nomic sphere, and the Le n i n ist v i e w of t h e
'lead i ng role' of t h e C o m m unist p arty i n a one-p a r t y s t ate . I n � p i t e
of the reforms of 1 965, w h i c h establ ished a l e g a l fra m e w o r k fo r a n
extended market system ( S i ngleto n 1 9 88 p p . 24 1 4 ) , th e eco n o m i c
,
situat i o n deter: Mated rapidly fro m t h e m id - 1 9 7 0 s . p r o fo u nd l y

affected by the rise i n o i l p rices and the eco n o m ic recess i o n i n t h e
West, and has reached crisis proportions i n t h e last fe w y e a r s w i t h .
low o r zero growth , rap i d l y i ncreas i n g u ne m p l o ym e n t h i g h ,
i nflati o n , a n d a massive external d e b t w h ich now d o m i nate�

eco nomic p o l icy. The p rocess of l i beralizat i o n w as a l s o ha lted i n a n
effort to re-establish the autho rity of the C o m m u n ist party i n t h e
face of radical students' and workers' moveme n t s , and t he
emergence of nationalist moveme nts, altho ugh at t h e same t i me t h e
ruling party itself became m o re fragmented as t h e p o w e r o f the
national states within the Y ugoslav federat i o n i n c reased .
The eco n o m ic problems of Y ugoslavia have given r i se t o a
vigorous d e b ate about future p o licies i n which very d ivergent v i e w s
have appeare d . The esse n t i a l q uestions co ncern the regi me o f
property owners h i p , the benefits a n d d isadvantages of soci alism
with markets,4 and the approp riate p l a n n i ng mechanisms in a
rest ructu red socialist economy, b u t at the same time they a re closely
related to political issues and h ave p rovoked widespread d iscussion
of 'political pluralis m ' as a means by which citizens can exercise
greater i n fl u e nce and contro l i n the fo rmulation and i m plemen
tation of economic and social p o l icy. These q uestions have now
been clearly posed , i n a broad ly similar w a y , i n all the E u rope a n
socialist societies, a s wel l as i n C h i n a , a n d a variety of solutions
have been p roposed and partially i m plemented . Fi rst , let u s
consider p roperty owners h i p . I n all the socialist countries s o m e
degree of private owners h i p of productive resou rces h a s al ways
ex isted , in agriculture and i n small-scale manufact u ri ng, t rade and
services, though it varied considerably i n extent fro m one co u n t ry
to another. The maj o r productive res o u rces, h o wever, a rc p u h l icly
owned i n several d i ffere nt fo rms, as state i n d ustries, col lect ive
farms, cooperatives, or self-managed enterprises. The latter, as we
have seen, were intended to replace state owners h i p . w h i ch c o n ce n
trates eco n o m ic p o w e r a n d effect i ve possess i o n o f res o u r c e s i n t he
hands of the lead e rs and officials of the ru l i ng Co m m u n i st party,
and in the view o f many crit ics creates a n e w d o m i n a n t c l a ss
88 The Socialist Econ omy
( K onrad and Szeleny 1 979), by a system of social ownership i n

w h i c h workers and emp loyees would effectively participate. H ow
ever, Golu bovic ( 1 986, pp. 23 -4) argues that, in Y ugoslavia, the
state has retai ned its prerogatives to d ispose of the means of
production and social prod uct, so that ' "social p roperty" oscillates
between st ate usage , which has no legal j ustification, and "grou p
property " a t t h e level of t h e enterprise a s a visible form of t h e
fragmentation of social property'. As a consequence of t h i s and
other factors workers feel that they have Jess and less say i n their
e nterprise s policy making (p. 20).
'
The recent reforms in socialist countries have not generally

moved towards self-management of the Yugoslav type, but h ave
concent rated upon two issues: a possible extension of private
ow nersh ip, and greater i ndependence i n the management of enter
prises by relaxing central planning controls and permitting the
development of market relations. As to the first of these issues, it
should be noted that in the Soviet Union proposals are being
considered for an e xpansion of p rivate agriculture through the
lo ng-term leasing of land from collective farms - whose import ance
would thereby be dimi nished - to individuals and families; i n
Poland , t h e Solid arity Citizens Committee included i n i t s pro
gramme fo r the parliamentary elections, held i n June 1 989, a
commitment to establish a legal basis for the privatization of state
property; and in H ungary, si nce the i ntrod uction of the New
Economic Mechanism in 1 968, there h as been a considerable
extension of private economic activity, and this 'second economy' is
not only accepted but in some sectors encouraged by the state
( R ichel 1 98 1 , pp. 34-5). The most recent reforms i n H ungary which
allow the formation of new political parties may well give a further
impetus to the second economy.s
The expansion of private production, trade and services, has
various consequences and implications which I shall examine at a
later stage . I n the present context its main significance is that it
represe nts one fo rm i n wh ich a greater autonomy of enterprises and
individual economic agents can be achieved . I n short, it is a way of
decentralizing economic decision-maki ng, for prod ucers and con
sumers. Clearly, however, decentralization can also be brought
about in other ways , by giving greater independence to p u bl icly
owned enterprises and extend ing the sphere in which market p rices
determine t he levels and types of production and consumption;
Plan and market 89
from a socialist standpoint it is t hese alternative rou tes which are

more i nteresting and important, all the m o re so be c a u �c p riva te
production and market mechanisms, when t hey are p r ed o m i n a n t ,
themselves create massive economic and social proble m s .

What w e h ave to examine, therefo re, are t h e models o f a
decentralized socialist economy which h ave been worked o u t , and
to some extent, i n H u ngary and Y ugoslavia part icularly,
implemented i n economic reforms. The start i ng point fo r t h e
reforms i n Eastern Europe has bee n descri bed by R ichet ( 1 98 1 , pp.
24-5) in the following terms:
Accord i ng to the central ised conce p t i o n o f eco n o m i c m a n ageme n t .

t h e dynamic behaviour of t h e economy is governed b y t he
accumulation process, and this in t u r n is d i rected by the ce n t r a l
authorities ( t he government and the central planners) act i n g
through a vertically structured organisational system ( b ranch
m i n istries, d i rectorates or associations, and enterprises). In t h is
system the 'central will' largely d isp laces horizontal regu lation
through the market mechanism. The res ulting p rocess of develop
ment relies on extensive growt h of the economy and req u i res fo r
its operat i o n only fairly rough and read y eco nomic meas u res and
ind icators . . . .
R ichet goes o n to say t h at this h ierarch ically organized struct u re

'may well be the most appropriate one when the m a i n tasks o f
economic policy are concerned w i t h t h e early stages of acc u m u la
tion', but it seems less suitable when the economy is m o re ad vanced .
development becomes more i ntensive, and 'a m o re e fficient syste m
of i nformation and control is needed '.
Two socialist countries have so far undertaken a fu ndame n t a l
a n d comprehensive restructuring o f the eco n o m y - Y ugoslavia
(where the phase o f centralized manage ment was very b rief) and
Hungary (since the changes initiated i n 1 968) - and their new
economic systems have been influential models fo r many o f t h e
more recent refo rms. I have already given some acc o u n t of t h e
Y ugoslav self-management syste m, and critical eval u a t i o n s of i t .
and now turn to examine m o re specifically the relation b e t wee n
planning and markets which it e m bod ies or is s u p posed t o e m b od y .
The theoretical relationship h a s bee n clearly fo rmu lated b y H o r v at
( 1 982, c h . 1 2) who, after reject ing t h e eclect icism o f a ' m i xed
economy ', conti nues:
W e "" i s h w p reserve es s e n t i a l c o n s u m e r s o vereignty because

s o c i a l i s m is based o n t he preferences o f the i n d iv i d u a ls w h o c o n
s t i t u t e t h e s oc i e ty . We a l s o w i s h t o p reserve t h e a u t o n o m y o f
p ro d u c e rs , s i nce t h i s i s t h e p reco n d i t i o n fo r self- m a n ageme n t .
W h e n t h ese are t a k e n toge t h e r w e need a m a r k e t . B u t n o t a
l a isse1-fa i n: m a r k e t . We need a market t h at w i l l perfo r m t h e t w o
fu nct i o n s j u s t s t ated , n e i t h e r less n o r m o re . I n o t h e r w o r d s , we
need the mark et as a planning device i n a s t r i c t l y d e fi ned s p h e re of
p r i o r i t ies . . . [ a n d ] planning as a precondition for an efficient
murk et . . . in order t o i n c rease the eco n o m i c w e l fa re o f the
c o m m u n i ty . (p. 332)
A c c o rd i ng 1 0 t h is m o d e l , planning and markets are complementary,

not c o n t rad i c t o ry , and H o rvat goes on to consider the basic
fu nctions of a social plan, beyond the formulation of actual plans
w h i c h h ave e x pert and social (normative) components: as a fore
c as t i n g i n s t r u m e n t , as an instrument for coord inating economic
d e c is i o ns and fo r guid i ng economic development, and as a n
o b l i g at i o n fo r t h e b o d y that h a s adopted it a n d a d i rective for its
o rg a n s (pp. 3 3 3 -4). Having outlined the functions of planning in
t h i s way, H o rvat t hen considers the regulatory mechanisms t h at
w i l l be needed, the behaviour of worker-managed firms, the
o p t i m u m rate of i nvestment, and the basic i nstitutions required for
macro-economic organization, comprising a planning bureau, a
national ban k , a development fund and an arbitration board for
incomes and prices.
But the i nstitutions and mechanisms to create an effective
con nect ion between planning and markets, as envisaged by H orvat,
have not been establ ished in Y ugoslavia, and , i n the view of
Golubovic ( 1 986, p. 25), 'Y ugoslav society i s constantly caught in a
d i lemma between the plan and the market, which not only reflects
the u nclearly defi ned princi ples and aims of economic policy, but
also is a manifestation of the actual balance of forces i n society';
that is to say, of the clash between advocates of centralized
bureaucratic planning and those who uphold the absolute validity
of market l aws. I n the present economic crisis, with soaring
inflation, very low growth rates , falling real i ncomes and an
i ncreasing polarization into rich and poor, the clash between rival
doctri nes and policies has become more intense, and it is com
pounded by national rivalries within the Yugoslav federation.
Plan a n d market 91
The q uestion to be e x p l o red , which is t he s u bject of very d i v e rse

i nterpretations, is whether the Y ugoslav experience d e m o n st rates
that there are formidable, even i n s u perable, d i fficult ies i n ac h i e v i n g
t h e integration of planning a n d markets i n a n y regime of p u b l i c
ownership, o r more broadly, i n a socialist society. I n c o n s i d e r i n g
t h i s q uesti o n , we s h o u ld remember first that for two d ecades t h e
Yugoslav system fu nct : o ned q u ite effectively, p r o d uci n g h igh rates
of economic growth and an i m p ressive d evelopment o f social and
cultural life . The t u rn i ng p o i n t came with the oil price rises and t h e
Western recession of the early 1 970s, w h ic h also affected other East
E u ropean countries. I t may be argued that the s u bseq uent econ
o mic decline is d ue i n large measu re to t he fail u re of plan n i n g to
deal effectively with the consequences of these events, and i n
particular with the massive growth of external ind ebted ness, which
has also notably affected the Polish and H u ngarian economies. I t is
certain that the economic deve l o p ment o f Y u goslavia and other
socialist societies h as been adversely affected i n some respects -
whatever the i n itial advantages may h ave bee n , o r seemed to be by -
their close l i nks, in foreign t rade and i nvestment, with the capitalist
world, and by the fai l u re o f policy-makers to take d ue account of
the cycle of growth and recession i n capitalist eco no mies which is,
after all, at the heart of M arxist economic analysis.
This fail u re may itself be attributed i n part to the weak ness of
political leadership, i n c o n d i t i o ns where , accord ing to G o l u bovic,
self-management has been largely s u b o rd i nated to b u reaucratic
control and is more an ideology than a reality, and there is a
consequent loss of ent husiasm, a general stagnat i o n in which no
clear concept i o n o f l ong-term development has been formu lated .
What is evident so far is that the eco nomic situat i o n has deterior
ated more rapidly since the extension of market relations, alt h o ugh .
as I have said , there were also powe rfu l external fo rces at w o r k .
Some critics of the p resent syste m, at the o p p osite p o le fro m
refo rmers such as G o l u bovic, nevertheless consider th a t a s o l u t i o n
o f t h e d i fficulties lies i n a fu rther extens i o n of m a rkets: h u t
although t h i s might perhaps stimulate s o m e k i nd s o f eco n o m i t·
growth, it would also almost certainly i n c rease the d i s p a r i t y
between rich and p o o r a n d perpet uate h igh levels of u n e m p l o y
ment, as has happened in many capitalist c o u n t r ie s of Western
E u rope. The altern ative, as H o rvat proposes, is to c re a t e m o re
soph ist icated , clearly defi ned , and efficient p l a n n i n g in s t i t u t ion s
.
y
92 The Socialist Eco n om
st im u l us to se lf- m a n ag �
. -
. ne w
o g i ve s o me
a n d at t h e s a m e 1 1 m e t ion m
to se l f-g ove r n m e n t and d e mo cra tiz at
me n t . o r m o r e gene ra 1 1 Y . v e the d ev e l o p me n t
a l l s p he n:s , w h ic h s e e ms u
n m i s t a k a· bl Y to inv o l
p l u ra l i s t i c p o l i t ic a l syst
em.
of a des has bee n
The ex pe r i e n c e of H u nga ry ove r t h e p as t. two d eca
e New Eco n o m i c
. . .
s i m i l a r m s o me respe c t s t o
t h at of Y ugo s l av1 a. Th
.
e mto fo
. rce m J a u a ry 1 968 . aft e r t h re e
.
M ec h a n i s m w h i c h c· a m ent rali ze
preh m
·
mary ?
rese arc h ' was m t e n d e d to dec
·
ve a rs o f c a r e fu l a r k e t
f m
�c o n o m ic d ec i s i o n- m a k i ng
and to int rod uce elem ents o
c o m pe t i t i o n . T h e mai n feat ure of the refo rm was
i e t - t y p e p roce d u res �f o p e r
its a b o l i t i o n o f t h e s t a n d a rd S o v
no l o nger to rece1 � e an>:
;1;i�c a n n u a l p l a n n i ng. E n t e r p rises were
i n d i c a t o rs from h i g h e r levels of the p l a n n i ng h1er
c o m p u l s o ry
still to be formu lated
an:hy . Five-y ear a n d annua l plans were
w i t h i n the c e n t r a l a g e nc i e s . . . but a n n u a l plans would n o l o n ge r
_
b e i m p l e m e n t e d by m e a n s of d i rect instruc tions
to e n terpris es.
I ns t e a d plans were i mp le m e n t ed i n d i rectly by means
.
� o the so
.
environ
cal led econom ic regu lators, which i n fluenced the fi n a ncial
m e n t w i t h i n w h ic h e n t e r p r ises operated . Enterp rises themselv es
were s u p p osed t o re spond to m arket signals, essentiall y the p rice
syste m . i n o r d e r to maxim ise their profits. ( H are, R ad ice and
Swain. p . 1 4 )
But, i n 1 97 1 , an element of labour d i recti o n was introd uced , and i n

1 974 central control over i n vestment plans was s t re ng t h e ned ,
because t he release of market forces led to problems i n t h e m a r k e ts
fo r labour and investment; and i n later years t h e re were fu rther
measures of re-ce ntralization, mainly, as H are et al. ( p . 1 5) n o t e , ' i n
response t o t h e economic effects o f t h e d ramatic rise i n t h e price o f
oil and other raw materials i n 1 974-5, coupled with t h e Western
recession [which] led to a serious deteri o ration i n the terms o f t r ad e
and the balance of payments '.
The reform po licy, however, was o n l y te m p o rarily interrupted ; i n
January 1 980 much of t h e origi n al mechanism w a s reinstated , and
si nce then fu rther rad ical changes have been undertaken , i n c l u d i ng
monetary and fiscal reforms which introd uced personal i n c o m e tax
and value added tax, and most recently the fi rst steps i n t h e
developm ent of a multi-pa rty pol itical syste m . The H u ngarian
reforms, however , have not fo llowed the Y ugoslav model o f
wo rkers' self-ma nageme nt; on t h e contrar y, t hey a r e m u c h m ore
Plan and market 93
individualistic and market-o rient ated i n t h e i r approach . As I n o ted

earlier, the 'second economy' is already a m aj o r c l e me n t in econ
o m ic life, and the economic refo rm plan ad o p ted i n 1 9 8 8 e n v isages
the development of a 'ge n u i ne market eco n o my' in which t he share
of the p ri vate secto r might rise to some 30 per cent; there would be
more extensive sharehold ing ( i n state enterprises t o o , t h o ugh in a
collective form) am1 a m o re widely fu ncti o n i n g stock exchange,
closer to the Western capitalist model, w o u l d deve l o p . The i nt ro
d uction of pe rsonal income tax was i tself a n ' i n d i 'v id u a l i z i n g '
measure, p artly i n respo nse to the g r o w t h of i ncome i nequality
resulting fro m p rivate e nterprise i n the second economy, and i t was
strongly o p posed by critics ( n o t necessarily advocates of m o re
centralized planni ng) who saw it as a substantial d e p a rt u re fro m t he
values of a socialist society.
I t is too early yet t o j ud ge the economic results of the H u ngarian
reforms. H are, R ad ice and Swain ( 1 98 1 , p . 20) refer to their
'apparently l imited i mpact' o n eco n o m ic p e rformance, b u t go o n to
say t h at 'without the reforms performance m ight have deteriorated
substantially '. But it is evident, i n any case, that so far H u ngary has
not d one notably better than some other socialist countries ( and
especially the German Democratic Republic)6 which rely to a much
greater extent upon central p l a n n i ng, and the modest i m p rovement
i n the socialist eco n o m ies i n 1 988 was not m o re marked i n H u ngary
than elsewhere.
In China, the economic changes s ince 1 976 have been much m o re
sweeping than i n the East European countries, and , in the view o f
s o m e commentators and socialist critics, can be regarded as t he fi rst
stages i n a p rocess o f ' restoring capital i s m '. 7 The main elements in
this p rocess have been the rapid development of market mecha
nisms which p rofoundly m o d i fy the social o bject i ves of the p l a n
ning system and result i n g r o w i n g i nequal ity, a 'deco l lect iviza t i o n ·
o f agriculture which i nc reasi ngly fav o u rs rich private farmers, and
the 'open d oor' pol icy with rega rd t o fo re ign c a p i t a l , i n the fo rm o f
joint ventures and extra-territorial 'special eco nomic zones '. w h ich
promotes deve l o p ment above all in the fo reign t rade sect o rs o f t ill'
eco nomy. The outcome so far of these eco n o m i c cha nges is unclear.
China is still going th rough a period of eco nomic t u rm o i l , i n which
eco nomic growth decli ned sharply fro m 1 9 79 t o 1 9 8 1 , b u t has
recovered si nce then, though it is still not as h igh a s i n t he period
1 96 5 - 7 8 . 8 Clearly, the eco n o m i c situation of C h i n a (and o f o t h e r
Third W o rld socialist count ries) d i ffe rs greatly fro m that in the
co u n t r ies o f E as te rn E u rope which are, in vary i ng d egrees , ind us
t r i a l ly d e v d o p e d societies; and the present Chinese reforms can be
v i e wed t o some extent a s a tempo rary expedient s i milar t o the N E P
i n the S oviet U n ion i n the period 1 92 1 - 7 .
A t t he s a m e t i m e there are s o m e general s i m ilarities i n the
economic reforms now being i m p leme nted i n most of the socialist
co u n t ri e s ; a nd it seems u n l i kely, fo r example, that the C h inese
vers i o n of N E P will be fol lowed by a period of Stalinist-type
p l a n n i ng To put the matter i n another way, 'socialism with
.
markets' seems to be here to stay, and it is welcomed by most

socialist t h i n kers as well as by the overwhelming maj o rity of the
population in socialist countries. But it is not without its own
problems and d u bious aspects, as the preceding d iscussi o n h as
ind icated , and it will be useful now to attempt a provisional
summary of the main issues.
First, the question of markets has to be d istinguished clearly
from that of the ownership of means of prod uction. The markets we
are talking about, in a socialist society, are markets in w h ic h
socially owned enterprises are maj o r participants. W i t h o u t social
ownership on an extensive scale there can be, i n my view, no
socialism. But this still leaves a large sphere i n which small-scale
private production can flourish - i n the arts and cultural activities
generally ( i ncluding book publishing), in services of all kinds to
cons u mers, in local trade, and in some areas of agriculture. The
case of agriculture is particularly i nteresting because there seems to
be a fairly widespread agreement that the economic reforms should
begin with agriculture,9 and that this involves to a greater o r lesser
extent a privatization of agricultural product i o n . But this question
needs careful examination. I n the fi rst place, s mall-scale private
prod uction is not necessarily more efficient; for example, in
Poland , where most agricultural prod uction is in private hand s, it is
not notably efficient and i ndeed seems to be afflicted by the same
confusion and malaise as the rest of the Polish economy. Second ,
while state col lective farms may be i nefficient in the S oviet U ni o n
they are n o t s o in Czech oslovakia, a s s o m e in ternal crit ics of aspects
of the reform process have poi nted out; and m o re generally it
should be pointed out that the su pply of basic, and not so basic,
foodstuffs in ad vanced societies in fact depends upon large-scale
product ion, as is shown by the devel opment of agri-busi ness in the
Plan a n d mark (• t 95
capitalist wo rld , which in t u r n depends very m uch u p o n the supply

of i nd ustrial products. The refo r m of agr i c u l t u re i n s o c i a l i � t
cou ntries therefo re req u i res, above all, m o re e ffi c i e n t management
of collective farms, the decentralizat i o n of decis i o n -m a k i n g and t he
int rod uction of elements of self-management, together with a better
supply of modern machinery (which of c o u rse depends u p o n the
s uccess of the reforms i n i n d ustrial production); but this still leave�
an i m p o rtant area in which prod uct i o n by i nd ivid uals, fam i l ies and
small- o r med i u m-size cooperatives is appropriate and desi rable.
A second maj o r point is that markets i n a socialist s o c i ety s h o u ld
be conceived, i n H o rvat's sense, as a 'planning device' within a
general economic plan, and hence regu lated i n acco rd ance w i t h
social objectives. T h e problem is h o w t o accomplish this regulation
effectively. There is, accord ing t o Ellman ( 1 989, p . 8 1 ) who cites
,
studies relating t o the H u ngarian reforms, a 'regu lation i l l u s i o n '

which consists i n ' t h e i d e a t h at enterprise behavio u r c a n e a s i l y be
controlled by the planners by manipulation of certain regulators
(e.g. p rices, taxes, laws, etc.)', which t u rns out to be more d i fficult
than was imagined, for several reasons: 'enterprises react to a whole
complex o f economic, social and political factors ', 'it is impossible
to develop a completely watertight system o f rules and regulat i o n s ',
and 'the goals of the e nterprises [may be] other than those hoped
for by the planners', lead i ng to unexpected reactions. Ell man (ibid.)
then suggests that the critique of the regulat i o n illusion is
'analogous to the rat i onal ex pectations critique of the Keynesian
belief i n the easy controllability of the economy'. W hat can be
concluded fro m this is that regulation in modern, complex, rapidly
changing econo mies, either cap italist o r social ist, is d i fficult and
imperfect; and it remains to be seen whether the c u rrent refo rms i n
t h e socialist c o untries w i l l achieve s o m e less i mperfect regulatory
system. I n principle, this s h o u ld be possible give n the existence o f a
more comprehensive planning system, and it is certa i n ly d e s i ra b l e
i n order to attain the overall social objectives and to counter t h e
well-known ad verse co nseq uences of a market eco n o m y .
Two particular issues a r e cl osely c o nnected wit h t he d e ve l o p m e n t
of greater e nterprise autonomy, market competition a n d a m o re
indirect system of planning and regulat i o n . One is t h a t of i m p rov
ing management efficiency, and more widely of e n c o u ragi ng a k i nd
of socialist entrepreneurship which would bring a b o u t m o re rapid
technological i n n ovatio n . 1 ° In this respect, as with other fea t u res of
t he economy, there are considerable d i fferences between social ist

c o u n t r i e s . and in the G DR the q u ality of ind ustrial manage ment is
a l re a d y h i g h by i nternational stand ard s . 1 1 No d o ubt, cultural and
h i s t o r i c a l fact o rs play an i mportant part i n these d i fferences , but i n
general t he q u a l ity o f management depends o n i ncent ives (not only
o f a pe c un i a r y kind) and on careful p l a n n i ng ( o f trai n i ng, career
st ructures, etc . ) . H owever, manage ment efficiency is not the o nly
fact o r in rais ing prod uctivity, i ncreasi ng the rate o f i n novation and
p romoting more rapid econ o m ic growt h , and a second issue
co ncerns t he respo nse, and the attitudes, of workers. H ere, too,
i nce nt ives of various k i nds are required , among them opportunities
fo r greate r participation in decision-making t h rough reforms w hich
may tend towards an effective system of self-managed e nterprises.
N ot all the socialist societies are moving towards a self-manage
ment system (which has, as we have seen , its own problems), but
there is an u n m istakable des i re fo r, and growth of, participat i o n at
all levels of society. Thus, there is a third issue involved i n the
present reforms: namely, the development of a greater 'openness' i n
society accom panying the restructuring of t h e econ o my a n d now
widely regarded as being crucially i mportant for the success of the
whole reforming process. The economic changes, it is recognized ,
req uire a new political climate in which the populatio n can have
greater confidence in their leaders, express their wishes and
criticisms more freely and effectively, and take a larger part in the
determination of social policy; for it is o n ly i n such a climate that a
new enthusiasm, animation and read i ness to i n novate can flourish.
The speed of political change varies from one country to another,
but in most of them there is now greater freedom of express i o n , and
in some, freer elections have been held o r are to be held . The
emergence of various social movements and political groupings has
been tolerated or fu lly recognized i n seve ral countries, and there is
widespread d iscussion of the creation of a multi-party syste m ,
which i s already far ad vanced i n H u ngary. A l l these changes
d i mi n ish the absolute power of the Communist party, which has
ex isted in the Soviet U n ion si nce 1 9 1 7 and in most other socialist
countries si nce the end of the Second W orld War; and they p o i n t
perhaps towards an eventual socialist polit ical syste m i n which
coalitions of various independent parties are a normal feature of
government, while other parties fu nction effectively as a critical
opposition. Some characteristics of such a system are i ndeed
Plan a n d market 'J'l
already appearing. B u t the greater ' o penness' of the socialist

societies involves much more t h a n j ust t h e fo r m at i o n of new
poli tical parties. I t rep rese nts, as s o me obse rvers have noted , a
recreation of 'civil society'; t h at is to say, a revival of t h e net work of
autonomous associations of all k i n d s i n which cit izens can p u rsue
their interests, express their ideas and co nstruct a style of l i fe , free
fro m government i nterve n t i o n and regu lation ( w i t h i n t he l i m it s set
by law) . And this development of c i v i l society is also of v i t a l
i m p o rt ance for renewing t he active involvement o f c i t i ze n s i n t h e
w h o l e p rocess of reform.
Need less t o say, the p resent rad ical c h anges in the economy and
society are not p roceed ing e n t i rely smoothly, or w i t h o u t p rod u c i n g
some u n welcome side-effects. The greater freed o m fo r n e w p o l i t i c a l
movements, which h a s b e e n welcomed a s a m e a n s of i ncreasi n g
public participat i o n i n a n d d emocratic control over p o l icy-ma k i ng.
h as stimulated the growth o f nationalist movements i n so m e fed eral
states ( notably i n Yugoslavia and , to a lesser extent, i n t h e Sov iet
U n ion), and t hese may become extremely d isruptive, w i t h o u t
m a k i n g any significant contribution to eco n o m i c renewal. The rise
of nat i o n alism is n o d o ubt con nected with economic d issat isfac
tions (as has been the case in Western capitalist count ries: fo r
example, the Quebec i ndependence movement i n Canada in the
1 960s), but it also has a very strong c u l t u ral component which is
o n ly d istantly related t o the main i ntentions of the cu rrent reforms
and is often backward-looking. From another aspect, h o weve r. the
nationalist movements i llustrate a more general phenomenon.
which is the u navoidable proliferat i o n of special interest gro u ps i n a
more open society. These interests, d e pe n d i ng o n the con text, may
be provincial, national, regional, occu pational o r cult u ral, or s o m e
combination of them; and it is already evident that among t he
interests at work are t hose of the old -style b u reaucracy. Ove r a l l .
there fore, the process of c h a nge i n the socialist cou ntries is l i kely to
be a turbulent one, and th ose who are comm itted to reform - to the
creati o n o f prosperous, d e m ocratic socialist societies - can only
hope (with a certain degree of confidence indeed) t h at w h a t i s n o w
t a k i n g p l ace w i l l t u rn out to be, in Schumpeter's p h rase. · a g a l e o f
creative destructio n '.
It is too early as yet to pronou nce any k i nd o f d e fi n i t i ve ve rd ict
on the merits o f a more market-o rientated socialist eco nomy. The
p reced ing d iscussion shows that there arc still many d i fficult ies to
be res o l ved , a nd t h ere

are also sharply contras t i ng ex perie nces w i t h
reg a rd t o t he scope o f c e n t r a l plann ing and m a r k e t s res pectively;
fo r e x a m p le , between the G D R a n d H u ngary. Certainly we a re s t i l l
\er) f a r fro m possess i ng a convi ncing t heoretical m o d e l , l e t alone
a n y fu nct i o n ing practical example, of an 'ideal', o r even greatly
im pro ved socialist eco nomy. Nevertheless, I t h i n k some tentative
conclusions can be reached at t h is st age - d rawing o n the d iscussi o n
i n t h is and e a r l i e r chapte rs - a b o u t t he results of cent ral planning 1 2
and its lessons fo r the fut u re development o f socialist economies
with markets, befo re proceed ing i n t he next chapter to study m o re
closely the maj o r problems of socialism at p resent.
First, it should be clearly st ated that centrally planned socialist
econom ies have undou btedly been successful i n several important
respects: in mobilizing resources for development, especially rapid
industrialization, and in some periods attaining very high rates of
growth, as well as ach ieving greater economic stability than is the
case in capitalist countries. But t hey have not caught up with, let
alone su rpassed , the maj o r capitalist countries which, in contrast
with the inter-war period , have been remarkably successfu l since
t he Second World War - inexplicably perhaps, u n less one takes
into acco unt the more extensive economic planning and regulation,
and greatly increased public expend iture, which they also h ave
introd uced . And si nce the mid- I 970s the socialist countries h ave
gone through a period of stagnation, or even decl i ne , which is the
proximate source of the reform movement.
The main objective of all the reforms is to decent ralize economic
decision-mak ing by giving more freedom and responsibility t o
managers and workers, in order t o increase efficient u s e of
reso urces, stimulate technological innovation, raise p rod uctivity
and especially improve the supply of consumer goods and services.
This necessarily involves the growth of market relations, in which
enterprises and other agencies negotiate their own contracts with
other bodies. It does not, howeve r, necessitate any considerable
ex pansion of private prod uction, si nce socially owned enterprises
can operate perfectly we ll in a market situation; and the scale of
private prod uction is a matter to be determined on other criteria, as
I argued earlier, and as many socialists h ave long recognized .
On the other hand , the extension of market relations needs also
to be regulated with i n the framework of a general planning process,
in order to preserve the benefits of economic stabil ity and l o ng-term
Plan a n d market 99
p rojects for i nvestme n t a n d growt h , a n d also t o c o u n t e r such i l l

effects o f market forces a s growing i n e 4 u a l i t y o r t he s p read o f a n
u n b rid led acquisitiveness. The maj o r problem, t h e n , i s t o d e v i se a
new and m o re sophisticated p l a n n i n g mac h i nery, a t a s k w h i c h
s h o u l d be much easier in the i ntellectual c l i m a t e of d e b a t e a n d
criticism w h ic h is n o w e merging. The fu ndamental i ssu e s t h a t need
to be considered for m the s u bject of the next two chapters.
Notes
I . See the d iscussion in Chapter 2 above, and also S zc l l ( 1 98 8 , sect i o n 2 ) .

2. I have d iscussed t h e theory o f 'organized capitalis m ' a n d t he related
theory of 'state m o nopoly capital i s m ' i n B o t t o m o re ( 1 98 5 , ch. 5 ) .
3 . A general economic history of Eastern E u rope is i n c o u rse o f
publication by the Clarendon P ress, and vol. I l l , edited by M . C . K aser
{ 1 986), provides a good acco u n t of institutional c h a nges in t hese
planned economies up to 1 975. There is also m u c h valuable infor
mation i n the m o n ographs published by the Research Project 'C rises in
Soviet-type systems', and I shall refer to individual m o nographs at
relevant points. In add ition, there is, of c o u rse, a large and growing
literat u re o n individual cou ntries upon which I shall d raw in the
appropriate contexts.
4. In the following d iscussion I shall use the term 'socialism with markets'
suggested by To mlinson (see above, p. 78) which see ms t o me a m o re
accurate description of a socialist view of the role of markets t h a n t h e
more c o m m only used ' market socialis m '.
5 . Accord ing to the 'appro x i m ate and incomplete d a t a ' asse m bled by
Gabor and Galasi { 1 98 1 , pp. 48-9), t h i s second eco n o m y was a l ready
very large by the end o f the 1 9 70s, absorbing the labour of about one
million people out of a n eco n o m ically act i ve population of 5.2 m i l l i o n .
6. Accord ing to E l l m a n ( 1 989, p . 6 7 ) : ' I n the m i d 1 980s t he G D R w a s a
stable welfare state with the h ighest living sta n d a rd s in t h e C M F A . I t s
macro-economic performance was m a rked b y steady growth a n d s t a b le
prices, at any rate as meas u red by o fficial statistics. These s t a t i s t ics
overstated its actual performance. Nevert heless, c o m p a red t o t h e o t h e r
C M E A count ries, i t s achievements w e re rea l a n d i m p ress i \'e . ' S p e c i fo:
historical and c u l t u ral factors h a ve affected t he d e ve l o p m e n t o f t h e
G D R , b u t t h e experience s t i l l shows t h a t rat i o n a l ce n t ra l p l a n n i n g ca n
be very effect ive in an adva nced i n d u s t ri a l society.
7. Sec especially Chossudovsky ( 1 986).
8. C h o s s u d o v s k y ( 1 986, p p . 1 2 7 - 8 ) .
9 . S e e E l l ma n ( 1 989, p p . 76 - 7 ) .
1 0 . T h e n: latively l o w rate o f tec h n o l ogical i n n ov a t i o n i n t h e S o v i e t
eco n o m y has bee n a n i m po r t a n t fact o r i n t h e e c o n o m i c s t a g n at i o n o f
t he past d ecade. S e e t h e d iscuss i o n i n C h a p t e r 5 , and the studies by
( 1 98 8 ) c i t ed t h e r e .
Be r l i ne r
1 1 . See G ra n i c k ( 1 9 7 5 , p . 2 1 5) and t h e d iscuss i o n by E l l ma n ( 1 989, p . 67).
1 2 . See a l s o t he d i scuss i o n i n E l l m a n ( 1 989, c h . 1 0).
7
Problems of socialism today
The idea of 'burying socialism' is a fantasy of some conse rvat ive

politicians, mainly i n Britain and the U nited States. In the wider
world there are many socialist or socialistic 1 societies, of d i verse
k i nds, which for the most part functi o n adequately and in some
cases very well.2 Like all forms of society, however, t hey have
evolved historically and continue to evolve, encou n tering fresh
problems at every stage. In the preced ing chapters I have d iscussed
the socialist proj ect from its formulation i n the ideas particularly of
the U topian t h i n kers and the M arxist socialists, t h ro ugh the
debates about central planning i n the 1 930s and the expe rience of
planning i n the Soviet U nion, t o the re newed d iscussions a n d
experiments of the post-war period , i nvolving above all the re
st ructuring of socialist economies to encom pass both planning a n d
markets. Against this background I propose n o w to consid er some
of the fu nd amental p roblems which need to be resolved , i f t h e
socialist re naissance of the past d ecade is act u ally to lead t o w a r d s
the creation of a new civilizat i o n .
Some pre l i m i nary comments are i n o rder. First, i t i s neces s a ry t o
d istinguish between t h e k i n d s o f society wh ich 1 h ave c a l led
'socialist' and 'socialistic', the fo rmer group c o m p r i s i n g the SO\ i c t
U n ion and the count ries of Eastern E u ro pe, C h i n a a n d some Th i rd
World countries, the latter includ i ng t h ose c o u n tr i e s m a i n l y i n
,
Western Eu rope b u t also in the Th i rd Wo rld , w h i c h h a ve h a d fo r

longer or shorter periods soci alist or s o c i a l d e m oc ra t i c g o v e rn m e n t s
101
c o m m i lted to an extension of p u b l ic ownership, a high level of

p u b l i l· e x p e n d i ture a n d s o m e degree of central p lanning. The
.
p r o b le m s co n fr o nt i n g these two groups of countries are d i ffe rent in

nature and w i l l be t reated separately. It will also be necessary, as we
p roceed . to define more closely the basic characterist ics of t he two
g r n u p s . as w e l l as any major variations within them.
The socialist countries
fi rst, in the fundamental sense which has been

T h e y a re s oc i a l i s t ,
the d is t i n c t ive
feature of the whole socialist movement since its
beg i nn i n g s : namely, that the major means of prod uction (other
than hu man labour) are socially owned. But t hey are also socialist,
in a second and later sense, in being 'planned ' societies. l Third, t hey
began with the aspiration to create a broad economic and social
equality among their citizens and to li berate the i nd ivid ual human
being, o r as M arx and some later M arxists expressed it, to 'end
alienation'; but in these res pects they failed signally (though
Y ugoslavia was an exception) d uring the Stalinist period and less
blatantly i n the fol lowing decades until the recent reforms were
initiated .
The importance of social ownership is that it embod ies one of the
ce ntral values of socialism; the attainment of a practical form of
collective self-determination in which a community of free and
equal citizens decides consciously and deliberately upon the general
framework of its economic and social life, and is n o l onger
dominated by a particular class - the owners of capital. But the
actual realization of this value - which has been expressed in
diverse forms, from M arx's 'associated prod ucers' to 'self-manage
ment' and 'participatory democracy' - encounters, as the historical
experience of socialism in the twentieth century should teach us,
immense and fundamental difficulties. I n the first place, individual
citizens or groups o f citizens may want very different things which
are, to say the least , difficu lt to reconcile. Second , it is im possible
that a community of several million people, such as even the smaller
modern nations are, should decide and act collect ively i n a d i rect
and immediate way; he nce some kind of representative system must
necessarily be created (th ough i t may take many forms, with
Problems of socialism today 1 03
varying degrees of participat i o n ) . A rep resentative system not o n i y

gives e xpressi o n to e x i s t i n g particular i nterests , b u t a l s o prod uces
new interests and d ivisions o u t of which there may emerge eithe r a
compromise negotiated between d iffe re nt gro u p s o r an a u t h o r i
tarian s o l u t i o n i mposed by a particular gro u p .
These a r e the problems, l o n g fam i l iar i n polit ical p h i losophy, o f
t h e 'general will', o n w h i c h H o b ho use ( 1 9 1 8 , p . 1 26), with a clear
awareness o f sociological realities, c o m me nted t hat 'the real objec
tion t o the term is that i n so far as i t is will i t is not ge neral, and in so
far as i t is general it is not w i l l '.4 The same problems have bee n
restated i n a d i fferent way by H ayek i n the c o u rse of his l o ng
sustained critique of socialism, and m ost fully in his recent work
( H ayek 1 982), where he expounds his ideal of a 'spontaneous ord e r '
as the only for m of society that can p r o v i d e the cond ition o f
freedo m , 'in which each can u s e his k n owledge fo r h i s p u rposes'
(vol. II, p . 56), i n opposition t o the vision of a rat ionally planned
society which has as its goal the ach ievement of social j ustice. The
l atter, he argues, i s d o o med to fai l u re since 'society, in the st rict
sense i n which it must be d isting u ished fro m the apparatus of
government, i s i ncapable o f acting fo r a specific p u rpose' (vol. I I , p.
64), precisely because it d oes not have a 'general will' o r a ge neral
consciousness i n which the d ispersed knowledge and pu rposes of
ind ividuals can be brought together. I t is o n t hese gro u nds t hat
Hayek, in his m o re strictly economic writi ngs, always refers t o t h e
decisions o f central planning agencies as 'arbit rary '. 5
I shall argue later that a socialist society in which there is social
owners h i p o f the m aj o r means o f production d oes not need to rest
upon the n o t i o n of a general will o r s o me k i nd of un iversal
consensus; but before e m barking o n that subject it is necessary t o
consider t h e role of central planning, which h as become t h e second
principal feature o f socialist eco n o m ies, and equally a principal
target o f anti-socialist criticis m . The idea o f pla n n i ng was i m p l ic i t
in a lmost all socialist t hought fro m the e n d o f t he ni netee n t h
century,6 a n d necessarily so, beca use it was ( o r a ppeared t o be) t he
o n ly alternative to capitalist m a r kets as a mechan i s m fo r c o o rd i nat
ing the economic system as a whole. But it was o n l y a ft e r t he
creation in 1 9 1 7 of the first socialist society that cent ral p l a n n i ng
came to occupy a m aj o r place in the defi n i t i o n o f socialism and t h at
the idea of a 'planned society' began t o be widely d i ffused , as
Durbin ( 1 949) and many others recogni7.ed . From t he 1 930s
o n wards socia lism became v i rtually identified with ce n t ral plan

n i ng , a n d plann i n g itself acq u i red a new significance as the main
e l e me n t i n t he p r oject o f cre a t i n g a ' rat ional society' i n which the
i n s t a b i l i t y , w as t e , frust ra tion and inequality of a capitalist eco nomy
w o u l d be o\'ercome. H ayek ( 1 982) is right, t here fo re, i n tracing one
i m portant s t ra n d i n twent ieth-ce n t ury socialist thought to the
s p r e ad o f a r a t i o n a l i s t view of the world, aided by the rapid growth
o f t h e n a t u ra l sciences; to which he opposes his own conception of
the evo lution of human society as a largely unconscious p rocess. 7
We are n o t concerned here with the wider q uestions of social
theory r a i sed by H aye k 's critique of a rational and planned society,
b u t o n l y with what we can learn fro m this and similar critiques, as
w e l l a s from histo rical experie nce and the more recent socialist
debates, about the problems and l imitations of planning.8 Some of
these issues have been examined i n the previous chapter, among
them the growt h of bureaucracy, which may res ult, on one side, i n
t h e diffus ion of a cautious and conservative outlook and t h e stifling
of enterp rise and i nnovation, and o n the other, i n the emergence of
a new privi leged stratum which domi nates society; and also the
difficulties experienced by the kind of central planning which
attempts to control directly, and i n detail, the activities of
ind ividual enterprises in an advanced , complex and rapidly chang
ing economy.
But there is still a more general q uestion to be examined which
concerns both social ownership and planni ng, and takes us back to
the ideas of the ni neteenth-century socialists, i n a period when the
act ual instit utions and mechanisms that would need to be created i n
a socialist economy had scarcely begu n to be considered . In
discussing Uto pian thought in t h e n ovels of Bellamy a n d M orris
(see Chapter 1 above), I observed that their vision of the function
i n g of a new society presupposed a rad ical transformation of
human nature, as a result of which the senti ments favourable to
peaceful cooperation, social responsibil ity and n on-acq uisitiveness
would come to predominate in shaping human behaviour; and fo r
all the d isclaimers that were made, U topian ideas also profou ndly
affected the views of M arx and later M arxists, as well as other
socialists. Not the least of the consequences was that the establ ish
ment of a social ist eco nomy was regard ed , at least tacitly, as a
relatively simple and uncompl icated process, and with rare excep
tions was not seriously discussed until the 1 920s.
Problems of socialism roday 105
The idea of a transfo rmed h u m a n n a t u re s t i l l plays an i m po rt a nt

part in socialist t h o ught tod ay, although i t is very rarely s u bjected
to any profo u n d analysis.9 From o ne aspect it may b e c o nceived as
the statement of 'an ideal end which gives a sense o f d i rect i o n to
human self-c reat i o n in h i story' ( M a r k o v i c 1 98 3 , p . 2 1 7 ) , and in thi s
for m it re mains an esse n t i a l and i ne x p ugnable e l e ment i n the
moveme n t towards socialis m . 1 0 B u t i t is sheer fo l l y fo r soc i a l i s t s to
embark u p o n t h ' construction of a socialist eco n o m y and society as
i f t h at ideal end had a l ready been attai ned . H u m a n n a t u re as it
actually exists is c o m p lex, its b o u n d s and poss i b i l it ies s t i l l obscure
and very d iversely i nterpreted , and at the same t i me so o b v i o u s l y
and y e t s o frequently d is regarded - e x t re mely v a r i a b l e between
ind ivid uals, although it is also histo rically m u t a ble and there i s no
absurd ity in s u pposing that in a socialist society w h at may be called
'average' h u m a n n a t u re w o u ld eventually m a n i fest itself in m o re
cooperative, less aggressive fo rms of behav i o u r . A realistic fo rm of
socialism, o r w h at Nove ( 1 983) has termed 'feasible social i s m ',
cannot beg i n , however, fro m the u n real presu m p t i o n t h at in a
socialist society - as it might exist i n any fo reseeable fu t u re - all
i n d ividuals, o r even a substantial m aj o rity of t h e m , w i l l be devoted
to t h e public good , t h at t h e re w i l l be no i nd ivid u als w h o single
mindedly and ruthlessly seek p o wer, wealth and privi lege, o r t h at
no c l as hes of i n d iv i d u a l o r gro u p i nterest will occ u r and req u i re
med iation.
These rat h e r general and abst ract considerat i o n s h a v e a very
d i rect and p ractical bearing o n the p roblems of the e x is t i ng socialist
societies, for it has been a constant theme i n the crit icisms ( bo t h
i nternal and external) of t h e i r eco n o m i es i n the p a s t few d ecades
that they are relatively inefficient in t he i r use o f res o u rces.
insufficiently enterprising and i n novat ive, and have not moved
rapidly enough fro m 'exte nsive' to 'intensive' developme n t . The
cu rrent reforms a re i n tended to overcome these d e ficiencies. a bo ve
all by a d ecentralizati o n o f eco nomic decision-m a k i ng, so t h a t
managers and workers i n ind ivid ual enterp rises have greater inde
pendence and res ponsibility, and also more incent i ves ( w h i c h n e e d
n ot be exclusively monetary) to p rod uce e fficie n t ly. S uch a d ec e n
tralized economy i mplies the existe nce of a m a rket , and an c l e m e n t
of competition among p rod ucers, which it sel f would be a s t i m ulus
to greater efficie ncy.
Such wide-ranging and fu ndamental cha nges a rc bound to
p rod uce d i ffi c u l t ies of t h e i r own: u ncert ainty, a degree of con

fu s i o n . a nd re s i s t a nce fro m so m e ind ividuals and groups whose
p a r t icu l a r i n t e n: s t s a re threate ned , as well as specific p roblems of
u n e m p l oy me n t and t he development of new kinds of inequality.
T h e d i ffi c u l t i e s can only be countered by the retention of an
effect i ve p l ann i n g system, which w i l l , however, assume a d i fferent
c h a ra c t e r , so t h a t 'greater use is to be made of i nd i rect financial
" levers " such as prices, taxes, and cred it, i n place of detailed output
a s s i g n m e nt s and input authorizations enfo rced by central alloca
t i o n o f s upp l ie s ( Bornstein 1 973, p. 8). 1 1 There is a particular need

'
fo r central planning in respect of invest ment, and as M arschak

( 1 9 7 3 , p. 58) comments, 'whatever t he defects of a centralized
scheme fo r determ i n i ng the volume and composition of the econ
omy's investment, at least only one agency has control over the
scheme and can mod ify it if it appears to perform badly'. The
op t i m u m mix of planning and markets is not something that can be
determi ned by reference to a developed theoretical model o r
bluepri nt, because t h a t d oes n o t exist a n d is perhaps unattainable i n
cond itions of imperfect knowledge o f all t h e relevant d ata, a n d i t
c a n therefore only b e approached through a pragmatic strategy and
continuous learning process. This is the course that seems to h ave
been generally ad opted in the socialist countries, producing d iverse
types of reform measures; and some time must elapse before its
resu lts can be properly assessed . There is no reason to suppose,
however, that the problems encountered by the new-style socialist
economies will be any greater than those (which are wel l k nown) of
capitalist eco nomies. I n my estimation they are likely to be less
serious and more easily resolved , though there will be considerable
diffe re nces between countries in their degree of success, j ust as there
are amor;1g capitalist cou ntries.
The issue of decentralization, expanded market relations and a
new type of plann ing (which will also, of course, embrace local and
regional planni ng) is quite separate from that of public or private
ownership of eco nomic resources, although the two things have
freq uently been associated , or strictly con nected , in the arguments
of anti-socialist crit ics (for example, M ises). Pu blicly or socially
owned enterprises 1 2 can operate perfectly well in a system of market
relations with ce ntral planning, and the questions which may be
raised about them are basically of two kinds. First, what can or
should be the extent of private prod uction of goods and services in
a socialist econo my? I h ave a l r e a dy m a d e c l e a r my v ie w , w h i c h i s

that of many socialists, i n c l u d i n g M a r x i s t s s uc h a s K a ut s k y t h a t
.
private production will have an i m p o rt a nt p la ce i n a n y r e a l i s t i c a l l y

conceivable socialist economy ( as i t has d o n e i n p r a c t ice i n t h e
existing socialist societies) . Its advantages s e e m e v i d e n t as a n
adj u nct to l arge-scale ind ustrial a n d ag r i c u l t u r al p r o d u ct i o n , t h e
ad m inistration of p u blic utilities, and the p r o v i s i o n of i n fra
structural services such as health and e d u c at i o n . In m a n y s p h e r e s
(small-scale trade, restaurants, market gard e n i ng, b o o k s h o p s . s o m e
publishing, s m a l l-scale building and r ep a i r w o r k , a n d s o o n ) p r i v a t e
prod ucers can probably res pond more q u i c k ly t o c o n s u m e r n e e d s
and provide m o re conve n i e n t services, and t hey m ay a l s o h a v e a n
i m po rtant role as i n novators. There is n o t , I think, a n y way of
decid ing i n advance fo r any lengthy p e r iod of t i me exactly what t h e
extent of private p rod ucti o n s h o u l d b e , a n d i n t h i s case, t o o a .
pragmatic approach seems ad visable, t h o ugh there s h o u ld be

restrictions (as there have been i n the socialist countries) o n t h e
n u m be r of e m ployees that a private prod ucer can h ave F u r t h e r .
more, i t should not be overloo ked t h at much small-scale p r od uc
tion and provisi o n of services can be undertaken by c o o p e r a t i ve s

(as it h as been) with the same advantage .
The second m aj o r question that has frequently been raised w i t h
reference to publicly o wned enterprises concerns t h e i r efficiency
and ability to i nnovate, which is related in most of the d iscussions
to the question of i ncentives fo r both management and workers.
This is a matter which is still difficult to d ecide i n an exact o r
convincing way, and I shall confine myself to some gene r a l
considerations and a very tentative judge m e n t . Firs t , it should be
clear that we are deali ng, i n the c ase of the socialist countries, o n l y
w i t h a relative i nefficiency, a n d e v e n t h e n n o t in all cases: t h e G D R .
for example, h as a relatively efficient socialized agricult u re
(whatever may be the case in the S oviet U n ion) and i n d u s t ry, and
its G N P per capita is probably higher than that of Britain, which is
ad mitted ly one of the least s u ccessfu l capitalist countries. M o re
generally, it is widely recognized that t he socialist count ries as a
whole (with few exceptions) were very successful in earlier p e r i o d s
in achieving rapid indust rial ization, and maj o r technological i n no
vation i n some sphe res. Only in t he past two decades have their
economies (or most of them) ex perienced a re lat ive stagnation. at a
time when most of the capitalist economies were maintai n i ng, until
rates of growt h .
rece n t l y , t h e i r p re v i o u s
In p r i n c i p le . t he re s e e m s t o b e n o reas o n t h a t p u b l icly ow ned
l' ll h : r p rises and p u b l i c s e r v i ce s should not be as efficient as t hose
w h i c h a re p r i v a t e l y o w ned and managed , particularl y in the new
eco n o m i c c o n d i t i o n s w he re enterp rises have m o re aut o nomy and
t h e re i s a d e g ree of compet i t i o n betwee n them. The experience of
m a n y W e s t E u ro p e a n count ries s hows that, i n p ractice, publicly
o w ned or c o o pe rat i ve enterp rises i n a capitalist eco nomy (in
m a n u fact u r i n g t ra n s p o r t , and p u blic u t i l i t ies) can operate at a h igh
,
l e v e l of effic iency; and there are also examples, as I h ave noted at

various points. of s o c i a l i s t economies, o r particular sectors within
t h e m . w h i c h are efficiently and successfu lly manage d . Nevertheless,
t h e re are t w o considerations which s uggest that central planners
and p o l i t i c a l leaders in a socialist society may be led to opt for a
somewhat lower l e v e l of efficiency, i n order to attain other social
goals.
First, the d rive fo r greate r efficiency, and especially the growth of
prod uct ivity through technological innovatio n in a more com
pet it ive economic climate, may come into conflict with the basic
socialist pol icy of fu ll employment. In Y ugoslavia, unemployment
has long been a problem, and s i m ilar problems are now appearing
i n some other socialist c o u n t ries. I t is very u nlikely that t hese
societies w i l l accept a growth of unemployment to the levels that
e x i s t i n many capitalist countries, and co nseq uently they will not
read i ly permit the closure of less efficient enterprises, u n less
alternative employment is available. In the l onger term, a solution
may be found i n the expansi o n of new occupations, particularly i n
t h e service secto r of t h e eco n o my, a n d i n a steady red uction of
work ing hours, which should i n any case be a maj o r element in
socialist policy, acco mpanying the growth of prod uctivity. But h e re
also there is no blueprint to follow, and n o easy or cost-free
o p t i o n s . Pol icy-mak ing will h ave to proceed largel y i n piece meal
fashion, dealing with specific problems as t hey arise, and, as I have
suggested , there may wel l be some delibe rate sacrifice of efficiency,
at least i n the short term, at the e n terprise level for the sake o f the
human and social benefits of ful l em ployme n t . M o reover, even
fro m the economic aspect i t may be argued that a system which
maintains full employment is i n one sense m o re efficient t h a n an
economy which wastes a substantial part of its labour force t h rough
unem ployment. I J
The second maj o r issue is the r o l e o f c o m pe t i t i o n i n a s o c i a l i s t

society. On one side, i nc re ased c o m p e tit i o n b e t w e e n i n d e p e n d e n t l y
managed enterp rises i n a market situation i s s e e n as a m e a m o f
i ncreasing efficiency, encouraging i n novat i o n , a nd e n s u r i n g , i n
particular, a better, m o re varied s u p p l y o f c o n s u m e r g o o d s O n t h e
.
o t h e r s i d e , it is evident t h at the co mpetitive s p i r i t , c e rt a i n l y i n i t s

m o re extreme forms, is i ncompati ble with t h e d i s t i nc t i v e e m p h a s i s
t h at is place<. , i n all forms o f socialist t h o u g h t , o n t h e v a l ue o f
cooperat i o n and the good of the c o m m u n ity. I t i s not a m a t t e r .
however, of choosing one option and exclud i ng t h e o t h e r e n t i re l y .
b u t of exploring the terms o n w h i c h t h e y c a n coex ist i n a s o c i a l i s t
society. In the fi rst p l ace, some d egree of rivalry and c o m p et i t i o n
seems i nescapable i n h u m a n societies, arising fro m a u n i v e r s a l
desire for personal o r group achievement, w h i c h may manifest itself
i n many d i fferent spheres. But individual achi e ve me n t d oes n o t
exclude cooperat i o n , a n d is indeed o ften facilitated by it; and o n t he
other hand , w here it d oes take the fo rm of rivalry, it has al w a y s t o
b e c i rcumscribed a n d regulated i n s o m e way, i n o r d e r t o m a i n t a i n
the u n i t y of a larger w h o l e , o r m o re deliberately t o a t t a i n what i s
conceived as a 'good society'. In particular, eco nomic c o m p e t i t i o n
and the rivalry between nation states need to be rest rained , because
of the undesirable consequences which may c o m e fro m t h e i r be i n g
allowed a free rei n , t h o ugh the possibility of effective rest ra i n t
depends t o a great extent upon the strength of th e i n t e re s t s o f
class o r national ambition - t h at a re involved .
At all events, the celeb rati o n of the unalloyed v i rt ues o f c o m pe
tition i n d u lged i n by latter-d ay advocates of laissez-faire ca p i t a li s m .
which I h ave criticized elsewhere ( Botto m o rc 1 986- 7 ) , i s t o t a l l y

a l i e n to socialist thought, a n d the practice of com p e t i t i o n i n t h i �
manner i s i ncom patible w i t h a socialist fo r m of society. Th e re a re
two issues here which deserve part i c u l a r atte n t i o n O n e c o n c e r n s
.
the kind o f society which is created when i n d ivid u a l ach ieve ment
comes to be j ud ged pri marily i n terms o f the acq u i s i t i o n o f wea l t h .
a n d m o ney d o m inates social l i fe . I n s u c h a so c i e t y m a n y o t h r r
h uman values are sacrificed to what is seen as t h e m o t o r o f
eco nomic progress, a n d t h e res u l t fo r some is d e p ri v a t i o n o f t h e
basic req u i rements of a c i v i l i zed life , fo r m a n y m o re t h e s e n s e n f
living i n a d u l l , oppressive, tawd ry and u nc rea t i ve world . A m o n g
t h e values m o s t conspicuously sacrificed is t h at o f a n agreea ble and
safe enviro n ment, and this constit utes the se co n d o f the i s s u e s t o b e
1 10 The Socialist Econ omy
faced in sol· i a l ist societies, and by socialist parties everywhere . Fe w

p e o p l e n o w d o ubt that t he natura l enviro n ment of h u m a n societies
is s e r i o u s l y endangered , b u t it cannot be said t h at the ex ist i ng
s o c i a l i s t c o u n t r i e s have so fa r bee n notably e n l ightened i n t heir
t: n \ i ro n me n t a l ideas and pract ices. L i k e other i nd ustrial societies,
and fo r s p e c i fi c reasons which I d i scussed i n an earlier chapter, t hey
h ave foc u sed their atte n t i o n almost exclusively u p o n overall econ
o m ic g ro w t h , i n a c l i mate o f o p i n i o n where comparisons between
c o u n t ries t e n d t o be made largely i n terms o f rates of growth and
s t a nd a rd s o f m a te r i a l l i fe. Of course, the latter are important. One
o f t h e fu ndamental a i ms of socialism has been to provide a decent
and comfortable l i fe for all citizens, and stead ily t o improve the
materi al conditions o f l i fe t h ro ugh economic growth (which some
socialist countries have, i n rece nt ti mes, conspicuously failed to d o ) .
But this is n o t , a n d c o u l d not b e , t h e only a i m ; a n d what can
reasonably be expected at a stage when basic material needs - by
the stand ards of the present time - can be adeq uately met, is t h at
the socialist countries should demonstrate a superior ability, not t o
increase without limit t h e flow of material goods, b u t to c reate a
society which is satisfying i n all its aspects : without extremes of
wealth and poverty, culturally creative, e nj oying extensive leisure,
caring for its natural environment, and encouraging in its citizens
an active participation i n public life and commitment t o the public
good .
The problems involved i n rest ructuring the socialist economies
are multiform and complex, and the p rocess of s o lving them is
l i kely to be long and d ifficult. In this process, as I h ave argued ,
what is i mportant is not the q uestion of ownership (although i n
some spheres i t m a y b e desirable to expand small-scale private
prod uction) or the excessive promotion of competition, but the
decentralization of economic decision-making by giving enterprises
greater independence i n a controlled system of market relations
(which of course implies an element of competition) and developing
new, i nd i rect methods of planning the economy as a whole. But the
economic changes, as I have made clear, are bound up with political
reforms; and throughout the socialist world these two aspects are
closely associated in the ideas of the reformers. The new economic
pol icies necessarily provoke widespread poli tical debate, and they
also have political conseq uences, for example in d i m i n ishing the
power of bureaucratic organizations (i ncluding sections of the party
Problems of socialism today 111
bureaucracy) , o r what K o n rad and Szelenyi ( 1 9 7 9 ) refe r t o a � t h e

new intellect ual class of 'rat i o nal re d ist r i b u t o r s M o re ge n c r a l l ;, ,
'.
the s uccess of t he economic reforms depends to a v e r y g r e a t e x t e n t

upon a w a k e n i n g p u blic e n t h usiasm and c o m m i t m e n t a n d t h i � can
.
only happen if t he re i s o p p o r t u n i ty t o e x p re s s free l y and e ffe c t i \' e l )

ideas a n d criticisms.
I n an i m portant sense the w h o le refo r m m o v e m e n t c a n p r o pe r ! )
b e d escribed as a p rocess of d emocratizat i o n , c o m i ng v e;: r y l a t e . o n e
m a y t h i n k , i n t h e deve l o p me n t o f social ist society. I n t h e p o l i t i c a l
sphere t h i s req u i res free electi o n s , a m u l t i-party s y s t e m t o t he e x t e n t
t h a t m aj o r d ifferences of interest o r a i m b ec o m e m a n i fe s t , a n
electoral system ( i n c l u d i n g some fo rm of proport i o nal re p r t: s e n
tation) which allows all significant i n terests and aspirat i o n s t o be
rep resented i n government, freed o m of p o l i t ical acti v i t y fo r s o c i a l
move ments, groups and ind ivid uals within the l i m i t s s e t by t h e r u l e
of law, and all t hose ancillary, essential free d o m s e m bod ied i n a free
p ress, a b i l l of rights, and a pervasive d e m ocratic s p i rit in p u b l i c l i fe
which, among o t her t hings, p rotects the rights of m i n o rities. I n such
conditions a socialist d e mocracy w o u l d show itse l f s u p e r i o r i n
many respects t o even t h e most d e m ocratic capitalist countries,
where the pervasive i n fluence of wealth (not least i n t he mass
med ia), t h e te nd ency towards a trivializati o n of politics ( p o l itical
mee t ings as circuses), and i n s o me cases electoral systems which
p rod uce very u n re p resentative governments, all tend to l i m i t the
extent o f democratic participat i o n . ' 4 This is not all, howe v e r F r o m .
the beg i n n i ng, socialists conceived d e mocracy as a form of social

life which should be developed as widely as possible beyond t he
narrowly defined political sphere ; hence the use of the term 'soc i a l
democracy' b y socialist p a rties. T h e eco n o m ic reforms in t he
socialist countries have t h e re fo re also, i n t h is sense, a d i rectly
political significance. Dece n t ralizati o n itself will bring somewhat
greater control over their i m med i ate c o n d i t ions of l i fe to the
perso nnel of individual enterprises, because t hey w i l l no lon g e r be
d i rectly subord inate t o regional o r ce nt ral bureaucratic o rga n i n
tions; but the p rocess may nevert heless have very d i fferent o u t
co mes depend ing u p o n how t h e internal structure of the enterprises
evolves . I t is possible, fo r example, that t he system of m a n age m e n t
will be reconstructed i n such a way that a n e w elite o f t ec h n o c ra t s
and managers will emerge i n the eco nomy as a wh o l e a n d h eg i n t o
acq u i re political power ( o r even t h at a new c l a s s o f c a p i t a l i s t s will
appear). A l ternat ively. the p rocess of d emocratizat i o n may lead in a

more s o c i a l i s t d i rect ion towards some k i nd o f self-ma nagement
which. fo r a l l its c u rre n t d i fficu lties in Y ugos lavia, has shown itself,
over a fa i rly long peri o d , to be a viable, and i n earlier periods very
s uccess fu l , t y pe of eco nomic o rgan izat i o n . The res t ruct u ri n g of the
s o c i a l i s t e c o n o m i e s is, therefo re, not o n ly p r o fo u n d ly affected by
p o l i t i c a l refo rms, but is itself a p o l i t ical as w e l l as an eco n o m ic
phenomenon, on which t he socialist fut u re of t hese c o u n t ries
depends.
The 'socialistic' countries
The count ries , mainly in Western E u rope, which I have called

'socialistic', face p roblems w h ich are very different fro m those in the
socialist count ries, alt h o ugh some issues are of common concern, i n
particular t h e fo rms w h ich p u b l ic ownership ( o r control) of produc
tive resources, and eco nomic planning, s h o u ld take i n the fut u re. I n
t hese countries t h e movement toward s socialism has been gradual,
often checked ( o r i n the case of Britain d uring the past ten years
violently reversed) by the advent of conservative governments,
although Sweden and Austria constitute an exception i n this
respect . 1 5 These two countries can i nd eed be regarded as particu
larly socialistic, i n several senses, and I shall begin with a brief
account of the main feat u res of the i r eco nomies and social pol icies.
I n Sweden, the socialist party ( S A P) has been i n power almost
contin uously since 1 932, and in that time has brought abou t
substantial changes i n Swed ish society, especially si nce 1 945. The
1 950s and 1 960s were decades of rapid econ omic growt h, as they
were generally in Western E u rope, and in Sweden they were also
marked by a s ustai ned moveme n t towards socialism, i n the sense of
greater economic equal ity, more ind ustrial democracy, and a
substantial expansion of the public sector. The 1 970s, fol lowing the
oil crisis, b rought harsher eco n o m ic conditions t h roughout the
Western world , with weaker eco nomic growth and rising u nem
ployment, but Sweden has weathered this critical period better than
most count ries (and notably better than Britai n ) , while m a i n tai n i ng
its socialistic p o licies. As Ryden and Be rgst rom ( 1 98 2 , p. I ) note,
the democratization of working life, increasing the power of the
unions and d i m i n is h i ng that of corpo rate o wners, the e x pansion of
the public sect or, more public regulation and participation i n

ind ustry, h ave all continued ; a n d t h e y c o n c l u d e that t h i s 'has m e a n t
i ncreased i m p o rtance for everyth i ng w e refer t o when t a l k i ng of t h e
quality of l i fe - a better environment, more le i s u re , i ncreased
possibilities for making the decisions that affect one's l i fe . B u t i t has
also meant continued centralizat i o n , bureaucratizat i o n , intensified
efficiency and a sense of alienat i o n in the individ ual facing l a rge
private and p u .>lic b u reaucracies'. They go on to d iscuss t he m aj o r
problem of the d isproportion between the d e m a n d s o n society a n d
i t s p rod uctive capacity (especially i f there were a seri ous e n e rgy
crisis), and its relation to the t rad itional system of wage fo rmat i o n
t h rough free negotiat i o n . 1 6 Nevertheless, while recogn i z i ng t he
seriousness of the econ o m ic p roblems, they also point o u t t h at ' t he
international eco n o m ic crisis of the 1 970s touched t h e a v e r age
Swed ish consumer relatively mild ly [and] open unemploy ment
never rose above 2 . 5 per cent', and conclude that, overall, ' S wed i s h
society and the Swed ish economy - the welfare state - have proved
enormously strong against the i nstability and crises o f t he 1 9 70s ·
(ibid. , p . 8). I t is n oteworthy also t h at , d u ri ng t h i s period of
econ o m ic d i fficu lties, the government p ressed ahead with a project
that would grad ually extend the collective owners h i p of p rod uctive
reso u rces t h rough the e m p l oyee i nves t ment fu nds (which will be
d iscussed i n the next ch apter), and thus m a i n t ai ned , t o some e x t e n t ,
the i mpetus of the movement toward s socialism.
In Austria the i m plementat i o n of socialist pol icies o n a national
scale is a p ost-war phenomenon, although the socialist party
( S P 6 ) could d raw upon the earlier ex perience of the socialist
ad m i nistrati o n of Vienna i n the years 1 9 1 8-34, and i t h as occu rred
in a d i ffere nt context. For historical reasons, there has been a
considerable expansion of p u b l ic owners h i p o f i n d u s t ry a n d
fi nancial institutions, beg i n n i ng with the n a t i o n a l i z a t i o n of A u s
tria's largest bank, the C red it-Anstalt, fol l o w i ng its c o l l a pse i n
1 93 1 , a n d c o n t i n u i ng after the war w i t h t he n a t i o n a l i z a t i o n o f t w n
other banks and of the 'German Propert y ' ( acq u i red by the G e r m a n
R e i c h after the annexation of 1 938). T h e l a t t e r w a s t a k e n o ve r h y
t h e A l l ies i n 1 945 a n d t h e n ret u rned t o A u s t r i a as n a t i o n a l i 1 cd
enterp rises, in the Western sectors in 1 946 / 7, and in t he R u s s i a n
secto r i n 1 955 w h e n Austria regained i t s sovereig n t y . As a re s u l t o f
these nationalizations a p u b l i c sect o r o f m aj o r i m p o r t a nce w a s
created in t h e A ustrian economy; as Ziegler, R e i s s n e r a n d B e n d e r
1 14 The Socialist Economy
( 1 98 5 . p. 7 5 ) n o t e :
A l m o s t 1 00 p e r ce n t o f u t i l i t ie s , a b o u t t w o-t h i rd s o f m i n i ng, i r o n
and mi neral oil p rod uct i o n { me a s u red e i t h e r by n u m be r o f p e o p l e
e m p l oye d o r by o u t p u t ) i s w i t h i n t he p u b l i c sect o r . I t c o n t ri b u t e s
about a q uarter t o t o t a l o u t p u t o f m a n u fact u r i n g i nd u s t ry and
a b o u t J I per c e n t to gross d o mestic prod u c t (exc l u d i ng
a g r i c u l t u re ) .
The nationalizations were carried out and maintained by coalition

govern ments of t he Peo ple's Party ( O V P) and the S ocialist Party
( S PO) w h ich were i n power fo r twenty-one years fro m t h e end of
t h e w a r ; a n d when one-party government ret u rned i n 1 966 t h i s did
n o t change fu nd amentally the i m p o rtance of the public secto r i n the
economy. S i nce 1 970 A ustria has had socialist governments -
s o me t i mes i n a coal ition with the s m a l l Freed o m Party ( F P O ) and
more recently with the O V P agai n - which have not s o ught to
e x t e n d p u b l ic owners h i p by d i rect nationalizat i o n , but h ave
em barked o n economic and social policies inspired by a new
st atement of socialist principles that was stro ngly i n fluenced by
Swed ish social democracy: modernizat i o n of the i n d ustrial
st ruc t u re, the establ i s h ment of a new m i nistry for health and the
env i ro n ment (in 1 972), refo r m of the archaic penal code, extension
of the social welfare programme, and a progressive d e mocratizat i o n
of society b y i ncreasing the participat i o n of workers i n t h e manage
ment of ind ustry, i m proving the d issemi nation of i nformati o n , and
encouraging wide-ranging d e bates on social and political q ues
tions. 1 7
Sweden and A ustria demonst rate how s uccessful a socialistic
society can be i n ach ieving m aterial prosperity, low unemployment
and low inflation (more successful than many other Western
capitalist countries, and very much m o re successful than Britain),
while at the same t i me creating greater equality and a substantial
degree of de mocratic participation i n the management of the
economy. Their example has been i nfluential elsewhere i n Western
Europe, fo r instance i n France, where frequent refere nces to
A ustrian socialism were made by lead ing m e m bers of the French
socialist government of 1 98 1 , and also, in a more d i ffuse way,
wherever socialist govern ments have been i n power, for longer or
shorter period s, si nce the war. 1 8 H owever, in these countries (which
include, besides France, Britain, N o rway, t he Fede ral R e p u b l i c of

Germany, Spain and G reece) t he periods o f socialist government
have generally bee n t o o short and intermitte n t , and i n s o me case�
their policies have been too l i m i ted o r ill-prepared , t o make p o s s i b l e
any s ubstantial advance t oward s socialism . Britain provide� a
striking example. The Labo u r gove rnment of 1 945 carried o u t
several n a t i 1 n alizations, established a national health service, and
expanded the educational syste m , and t o t h at extent i t c reated
conditions fav o u rable t o a fu rt her ad vance towards socialis m . B u t
i t failed lamentably i n t w o maj o r respects : fi rst, i t d id n o t b r i ng t h e
lead i ng financial instit utions i n t o p u blic owners h i p . a n d second .
unlike France, it d id n o t c reate an effective system of ce n t ral
planning. H ence, the socialist project came to a standstill, not even
at a 'half-way house' ( m o re like a q u arter-way house), and s u bse
quent Labou r govern ments were largely confined to managing t he
existing system, a weak fo r m of mi xed economy in which p rivate
capital re mained absol utely d o minant (aided by Britain's special
subord i n ate relationship with the U n ited States), and t o coping a s
far as possible with its recu rrent economic c rises.
But there is another great p roblem confronting the socialistic
cou ntries, which arises fro m the international characte r of p resent
d ay capitalism. Sweden and A ustria have been able to p u rsue t h e i r
d istinctive policies i n specific conditions w h i c h I have b riefly
described , and also because, as small econo mies, they d o not
present a maj o r t h reat t o i n ternational capital. The circu mstances
are very d i fferent when a m aj o r European economy begins t o move
in a socialist d i rect ion, as was d ramatically illust rated by the
difficulties encou ntered by the French government in 1 98 1 , when it
tried to overcome the recession by reflating the economy u n i l at e r
ally. This policy, i n the absence of supporting act ion by other maj o r
European economies, prod uced a balance of payments c r i s i s fo r
France while bringing s o me benefits in increased t rade and p rod uc
tion to other countries. As the authors of a s t u d y o u t l i n i ng a
socialist policy for economic development in Western E u r o pe
( H olland 1 983) argue, what is needed is a joint reflation o f t he main
European economies, with com plementary policies of public spend
ing, planning and economic d emocracy, and pu blic and coope rative
enterprise; and since 'the strongest and clearest p ress u re g ro u p
agai nst reflation comprises t h e financial i ns t i t u t i o n s , bot h o ffi c i a l
a n d private . . . methods must be fou nd by w h i c h gove r n m e n t s can
res ist the pressure of fi nancial markets' ( p p . 63-5).

Establishing effect ive control at an i nternational level over the
financial institutions, t h rough p u b l ic owners h i p and other means, 1 9
evidently presents enormous difficu lties, b u t an adva nce i n t his
d i rect ion could well come i n Western E u rope as t he E C plan for
E u ropean monet ary union is i m p lemented over the next few years;
and more particularly because the political i n fl u e nce of socialist
and green parties has been stead ily growi ng. The political p ressu re
for a reorientation of European economic and social policies was
clearly shown by t he resu lts of the E u ropean electi o ns in J u ne 1 989,
and i t is ret1ected in the proposals for a 'social c harter' as well as i n
t h e movement towards mo netary u n i o n . This resurgence o f what
may now perhaps be called 'green sociali s m ' in Western Europe,
together with the reforms in E astern E urope, opens the prospect, i n
spite o f the evident d i fficu l t ies, o f a sustained movement towards a
European socialism which would transform the world economy.
B u t there is still a long way to go, i n the first place to catch up
with what already exists in Sweden and Austria. I n t h ose countries
t hemselves the socialist parties clearly regard their achievements to
date as stages in a continuous, grad ual process of reform which will
lead eventually to a new society. For some socialists, n o doubt, the
process is all too grad ual, and they would prefer more d ramatic
ch anges, but I t h i n k t hey are profoundly mistaken in their j ud ge
ment of the pace at which h u m a n attitudes and behaviour are likely
to change towards a more cooperative and less competitive mode of
life, and also of the real social situation i n the advanced capitalist
countries in the late twentieth century. Only with the cumulative
experie nce of successfu l cooperative p rod uction and ind ustrial
democracy will attitudes slowly change i n what Otto Bauer called a
'slow revolution'. As to the social situation, i t h as to be recognized
that for a majority of people in the prosperous capitalist countries it
is quite out of the q uestion that they should support or em bark
upon any sudden and rad ical transformation of society, especially
when t hey have before their eyes the evidence of its costs i n the
historical ex perie nce of authoritarian social i s m .
These issues fo rm the subject m atter of the n e x t chapter, the main
themes of which can be introd uced by bri nging toge t her the
discussion so fa r of the problems of socialism i n socialist and
socialistic cou ntries. In the fo rmer, the major reforms that are
required - and in many, if not q u i te all of t h e m , already being
implemented - include the extension of d e m ocracy, which d o e s n o t

si mply m e a n the introduction of a p l u ra l i s t i c polit ical syste m , b u t
the creati o n of s o m e t h i ng t h a t can best be called a pervasive
'd e m ocratic culture '; the decentraliza t i o n of the eco n o m y and
c hanges i n t h e structure of e n terprises, not only fo r the sake of
eco n o m ic efficiency but to promote i nd ustrial d e m oc racy; and t h e
constructic n of a new, m o re s o p h ist icated and i nd i rect system fo r
planning t h e eco n o my as a whole. I n t he latter count ries, exem
plified by S weden and A ustria, the process o f continuous refo rm
points to a grad ual exte n s i o n of public owners h i p , i n d iverse fo rms;
a growth o f p ublic services; and the maintenance and improve me n t
of ind i rect econo mic p l a n n i ng.
It is n o t fancifu l t o suggest, therefore, that the socialist and the
socialistic c o untries are now slowly converging upon a type of
society which would e mbody the maj o r aspirations o f t he h i s t o rical
socialist movement i n the profo u n d ly changed ci rcu mstances of the
late twentieth c e n t u ry . Of course, it is customary i n t he pred o m i
nantly c o n s e rvative Western med i a to interpret the changes now
going o n i n East e r n E u rope as some k i nd of ' ret urn t o capital i s m '.
but that is very wide of the mark, at least i n most of the countries
concerned . For the most part public ownership and cent ral plan
n ing are l i kely to rem a i n , along w i t h the e mphasis i n their pol icies
on ful l e mployment, social welfare and a substantial degree of
econ o m ic equality; to w h ic h may n o w be added greater democratic
participation i n all s p h e res of life. In all t hese res pects they will
d iffer little from the socialistic countries of Western Europe, as the
latter c o n tinue t o p u rsue t h e i r own reforms. What new issues t h i s
'socialism of the future' w i l l h ave t o face h a s s t i l l t o b e considered
after a closer study of the transit i o n a l period in which we a rc
presently living.
Notes
I . The term 'soc i a l i s t i c ' is i n te n d ed to refe r to t h ose s o c i c t i l' s , cspt·c i a l l y i n

Western E u rope, i n w h i c h socialist o r s oc i a l d e m oc r a t i c p a r t i e s h a ve
i n t ro d uced , at various t i mes si nce t h e Second W o rl d W a r , s i g n i fi c a n t
clements o f a socialist eco n o m y , i n c l ud i ng a s u bs t a n t i a l a m o u n t o f
p u b l ic owners h i p , s o m e degree o f ce n t ra l p l a n n i ng. and a ge n e r a l
i n c rease in p u b l i c· np.:nJit ure. The e x p e r i e n c e s of t hese c o u n t r i e s w i l l

b e J i s c· u s s ed l at e r i n t h e t e x t .
1 I n W e s t e rn E u ro p e . p a rt i c u l a r l y . t h e s o c i a l i s t m ove m e n t is s t r o n g a n d
by fa r the l a rgest s i ngle gro u p i n the
i n fl u e n t i a l . T h u s s oc i a l i s t s a n:
E u ropean Parl iament. a nd fo l l o w i ng the E u ropean e lections i n J u ne
1 989 t h e y a re l i k e l y to fo r m a m aj o r it y i n a l l i ance w i t h other left-wing
g r 11 u p , . w h ic h will have i m p o r t a n t conseque nces fo r the social p o l icies
,, f the E C .
J . D i c k i n s 11 n ( 1 939. p. 9), w h o m I q u o t e d i n an earlier chapter, o bserved
t h a t s i n..:e t h e 1 920s t h e term ' p l a n ned prod uct i o n ' had tended to t a ke
the place of 'soc i a l owners h i p ' in the defi n i t i o n of soc i a l i s m a n d a rgued
t h a t ' t h e re i s a close conncksion between these two defi n i t i o n s '.
S i m i l a rl y . P i g o u ( 1 93 7 , pp. 6- 7) wrote:
. . u n d e r t he i n fl ue nce o r t h e R u s s i a n expe r i n11: n t , t h e d e fi n i t i o n o r ge n e r a l

< o c i a l i s m has b e e n mod i fied . Twenty years a g o t h e re was l i t t l e t a l k o r
ce n t r a l p l a n n i ng. S o c i a l i s m e n t a i ls , i t w as t h e n h e l d , ( I ) t h e e x t r u s i o n o f
p r i v a t e p r o fi t - m a k i n g . . . a n d ( 2 ) t h e p u b l i c o r c o l lective o w n e rs h i p o f t h e
means o f p r o d u c t i o n ( o t h e r t h a n h u m a n beings). N e i t h e r o f t hese req u i re
ments si ngly m a k e necessa ry any fo r m o f central p l a n n i ng; nor d o the t w o
t og e t h e r . . . . N o n e t h e less, a t t h e p re s e n t d ay t h e n o t i o n o f c e n t ra l
p l a n n i n g is c o m m o n ly i n t rod uced i n t o d e fi n i t i o n s o f s o c i a l i s m .
There were, however, ind ications of the importance of central planning

in some earlier M arxist d iscussions of the future socialist society,
notably by K autsky ( 1 902, pp. 1 50- 1 ) , and more briefly by H i lferd ing
( 1 9 1 0, p. 2 7 ) in his reference to a 'co nsciously regulated ' prod uctive
com munity.
4 . H obhouse's study, along with parts of his later work o n social j ustice
( H obhouse 1 922), provides one of the most valuable and l ucid
d iscussions of the problems of d e mocracy, still highly relevant to the
issues facing de mocratic socialism today.
5. For a critical examination of H aye k's general concept i o n of capitalist
society as a spontaneous order, o r a 'Great Society', see Bottomore
( 1 985, ch. 4).
6. E v en in such a work of U topian socialism as that of Bellamy, which
envisages a large and powerfu l cen t ral ad m i n istrat i o n . William M orris
is an except ion, but his U topian novel leaves the economic organiza
tion of his ideal society completely vague.
7 . H ayek ( 1 982, vol. I, p . 1 1 ) writes:
I t i s t o t h i s p h i l o s o p h i c a l concept i o n [ r a t i o n a l i s m ] t h at we owe t h e p r e fe r
ence w h i c h prevails t o t h e p rese n t d ay fo r everyt h i n g t h a t is d o n e ' c o n
s c i o u s l y ' and 'de l i be r a t e l y ' . . . . Because of t h i s t h e e a r l i e r pres u m pt i o n i n
ra v o u r of t rad i t i o n a l o r est a b l i s hed i m ages b e c a m e a p re s u m p t i o n aga i n s t
t h e m , and 'op i n i o n ' came t o be t h o u g h t o f as ' m e r e ' o p i n i o n something
n o t d e m o nstrable o r d e c i d able b y r e a s o n and t h e refore n o t t o h e acce pted

as a v a l i d gro u n d fo r d ec i s i o n .
Against this 'constructivist rat i o n a l is m ' h e fo r m u l ates h i s o w n

co nservative p h ilosophy ( i n d istinguishable fro m t h at o f Ed m u n d
B u rke) which emphasizes t h e i m p o rtance of trad i t i o n : ' M a ny o f t he
institutions of society which are i n d ispensable cond i t i o n s fo r t he
successf1 1 l p u rs u i t of o u r conscious a i m s are in fact t h e n:s u l t o f
customs, habits o r p ractices which have been n e i t h e r i n ve nted n o r a rc
observed with any such pu rpose i n v i e w . ' A nd t h e h u m a n be i n g i s
successful 'because h i s t h i n k i n g a n d act ing a r c governed by r u l e s w h ich
have by a p rocess o f selection been e v o l ved i n t h e society i n w h ic h h e
lives, and wh ich are thus the prod uct o f the experie nce of ge nerat i o n s . '
8 . I n the actual world, eco n o m ic p l a n n i n g has s o far retai ned its ce n t ral
place, i n mod i fied forms, i n the socialist c o u n t ries, and it h as acq u i red
an i m p o rtant p l ace i n the more successfu l capital ist eco n o m ies as w e l l
a s i n such s u p ranational bod ies as the E C . So the movement towards a
'rational society' has c o n t i n ued , and the idea of such a society has been
vigorously d efended against such criticisms as t h ose of H ayek ( w h ic h
indeed h ave a l imited i n fluence), notably by J u rgen H abermas ( 1 9 7 1 ,
1 98 1 ) who, i n his recent work, e x a m i nes critically the co ncept of
rationality and develops his own conception o f the rat ional ization of
the modern world i n a broader sense than that of p u rely tec h n o l ogi
·-
cal rationalizati o n .
9. But E r i c h From m , i n s o m e o f his l a t e r writi ngs, u n d e r t o o k a more
thorough analysis of human natu re, and particularly of its aggressive
and destructive elements ( Fromm 1 973); and he concluded this l ast
study by saying that he believed it had 'contri buted valid a rguments in
favour of the thesis that aggression and d estructiveness can once again
ass u me a m i n imal role i n the fabric of h u m a n motivations'.
1 0 . This is the aspect which Heller also e m p h asizes in her study of M a r x 's
theory of needs (see above, p. 1 2).
1 1 . Y ugoslavia began the process of decentralizat i o n much earlier and has
moved further along this path, and its central planning syst e m .
acco rd ing to Bornste i n ( 1 97 3 , p. 1 0) c a n 'best b e c o m p a red w i t h
French-style "ind icative" planning'.
1 2. I use the terms 'public ownership ' and 'social o w n e rs h i p ' m o re o r less
inte rchangeably. The former is more widely used in the West : t h e l a t t e r
perhaps corresponds more closely with t he i d e a of soc i a l i s m , es pel· i a l l y
i n i t s 'self-management ' fo rm.
1 3 . In this con nection the comparison made by E l l m a n ( 1 989. p . 305)
betwee n the German Democratic R e p u b l ic and t h e Fed e r a l R c p u ll l i c
of Germany is inst ructive:
. i t a p pears ! h a! l a b o u r prod uc t i v i t y pe r inhahitant grew fast e r in ! h e

G D R t h a n i n t he FRG i n 1 96 7 - 76, b u t p e r ernnomically active pnson i i
grew s l o we r i n t h e G D R t h an i n t h e F R G . ( O u ! p u l growt h r e m a i ned m o re
s t a ble in 1 967 76 in t he G D R t h a n in t h e F R G . ) T h i s can be i n t e r p reted l o
mean 1 ha1 t h e i n fe r i o r performa nce in d y n a m i c e fficiency by t he G D R was
o ffset by a n i nc rease i n the act i v i t y rate, i.e. an i n c rease i n ! he b u rd e n o f
w o r k e .\ l racted fro m t he p o p u l a t i o n . A l t e r n a t i ve l y , ii c a n be i n terpreted t o
m e a n t h a t t h e F R G has an i neffic i e n t eco n o m i c system w h ic h w a s t e s m u c h
of i t s p o l e n l i a l l a b o u r force and d e p rives m a n y p e o p l e o f t h e o p p o r t u n i t y
1 0 pa n i c i p ate i n paid w o r k .
14. See the d iscuss ion of t hese issues, fro m diverse points of view, in
Duncan ( 1 989).
1 5 . I have d iscussed the position of the Austrian and Swed ish socialist
part ies i n an essay on political trends in Western Europe ( B ottomore
I 984a. ch. 1 1 ).
1 6. This is discussed more fu lly in a later essay i n the same volume
( Ysander 1 982).
1 7. For a more detailed account see Sully ( 1 982, ch. 8).
1 8. See, for exam ple, the references in Holland ( 1 983, Part 3).
19. See the comment in Holland ( 1 983, p. 66). H owever, the means of
est ablishing financial cont rol are not very thoroughly examined in the
later discuss ion of new policy priorities.
8
Modes of transition to a
socialist economy
The problems of socialism d i scussed i n t h e p revious chapters

should not be regarded as unique trou bles i n an otherwise pe rfect
world , for the p roblems of capitalism are at least as great, and m o re
fund amental, and so far as they h ave been contai ned at all d u r i ng
the pos i -war period it h as been by the ad option of social istic
policies: greatly i ncreased public spend i ng, some extension of
public owners h i p , and m o re cent ral planning, o r in s hort. t he
development of various fo rms of 'mi xed eco nomy'. I t is t h e
instability of capitalism, characte rized by the cycle of b o o m and
slump, its i n ability t o ensure consistent full employment, the gross
i nequality· of weal t h and i ncome that it prod uces, and the i m p over
ished and tawd ry culture d o m i nated by mo ney t hat i t creates i n i t s
more extreme laissez-faire fo rms, w h i c h account fo r the cont i n ued
growth of the socialist movement i n Western E u rope si nce the war;
a growth which has accelerated in recent years as t he t rou h l e s o f
capitalism have multipl ied . A n i nd ication of capitalis m 's c o n t i n u i ng
instability was given fi rst by the recession of the late 1 970s. t he n h y
the stock market crash o f October 1 98 7 ; and some observers e x pect
another, perhaps worse, coll apse in the near fut u re , u n l e s s i t is
ave rted by a profound reform of financial i n s t itu t i o n s t h a t wo u l d
involve more public regu lat i o n . 1 M eanwhile. unemployment
re mains high in most of the capitalist c o u n t r i e s . a n d ec o n o m i c
growth rates arc s t i l l l o w .
I n t hese cond itions, the q uest ion of a t ra n s i t i o n t o s oc i a l i s m
121
becomes more u rgent agai n, above all in the E u ropean societies,

and we must begin a n e x amination of this q ues t i o n by o u t l i n i ng t he
k i n d of fu t u re s oc i a l is t society to which it is reaso nable t o aspire.
S u c h a s o c i e t \' w o u ld be characterized by a s u bstantial degree of
p u b l i c o w n e r � h i p eco n o m ic and social planning at a national,
,
r e gi o na l and l o c a l leve l , and event ually o n a transnational scale (as

i s a l re ad y the case t o a l i m ited but increasing extent); and at the
same t i me a decentralized eco nomy i n which the transactions
among prod ucers, and between p rod ucers and fi nal consumers,
would take place i n a regulated market system, w h i le the internal
structure of enterprises would comprise a large element of self
management. The practice of self-management would indeed be an
essent ial component of socialist democracy, and the latter would be
fu rther reinforced by the greater equality of economic and social
cond ition among cit izens which i t is a primary aim of socialism to
establish.
The transition to such a society will necessarily take a d i fferent
course i n Eastern and Western E u rope, but there will also be great
variations betwee n ind ivid ual countries, resulting fro m the d iversity
of econo mic and cultu ral cond itions: i n the East, the size and
strength of d i ffere nt economies, political and cultural trad itions,
the part icular problems of multi-national states; i n the West, the
e x i s t i n g extent of public ownership, the presence o r absence of a
planning system, the strength or weakness of individual national
eco nomies. In Eastern Europe the two m aj o r changes t h at are
needed , and already begi n n ing to be implemented , are t he decen
tralization of the economy and the extension of democracy. The
first of these I have d iscussed in earlier chapters on the experience
of socialist planning and on the relation between planning and
markets , and I shall return to the subject later in another context
with reference to the objectives that should now be formulated by
the socialist movement in Western Europe.
The second subject, which I have only briefly referred to earlier in
this book, deserves closer attention, particularly in the context of
the present debates about pol itical pluralism, the development of
new social movements and parties, and the widespread d iscussion
of the scope of democratic partici pation in economic and social
affairs th roughout Europe. The socialist movement, from the
beginning, stood for an extension of democracy. One of the first
major activities of the newly formed socialist parties i n the late
Modes of transition to a socialist economy 1 23
nineteenth century and early twentieth ce n t u ry was to campaign fo r

universal ad ult suffrage, which t hey were l argely i ns t r u mental i n
achieving, w h i l e at the s a m e time t hey ad vocated greater d e moc racy
over a wider area - a co ncern exp ressed in t he name 'social
democ racy' by which some of them chose t o be known. The growt h
of socialism in Western E u rope aft e r the Second W o rld War w a �
checked t o a large extent by the unappeali ng s pectacle of t he
societies 0 1· 'real socialism' in Eastern E u rope, which re mai ned
authoritarian and oppressive even after the death of Stal i n , t h o ugh
the active opposition o f internat i o nal capitalism, led by t he U n ited
States, was also a m aj o r factor. Only Y ugoslavia offe red a m o re
h opefu l picture , p rovid i ng a s u bstant i a l degree o f d e m ocratic
participation through the self-management system and a relatively
liberal political regime, i n spite of the absen ce of opposition parties.
The p rocess o f democratization which has begun i n Eastern E u rope
is now rapidly changing this situation, and it raises q uest i o n s , not
only about socialist democracy, but also about the fut u re develop
ment o f democracy i n a wider context.
I t is mislead ing t o conceive the d e m ocratic movement in the
socialist countries as simply a belated transfo rmation of t hese
societies into Western-style d e mocracies, with a mult i-party system
and free elections. Such a conception omits the whole issue of social
democracy, and at the same t i me assumes that de mocracy in the
advanced capitalist countries h as attained a state of near perfection
beyond which no further advance is possible o r desirable. As to the
first point, i t needs t o be stro ngly asserted that socialist dem ocracy.
in its most d istinctive form, w o u ld be c o m m i tted t o the widest
possible participation by citizens in d ecision-making in all spheres
of life . Thus, alongside an electo ral system in which various groups
and / o r parties compete ( at national, regional and l ocal levels) on
the basis of alternative economic and social pol icies, there would be
institutions ensuring partici pation in the management of p rod uctive
enterp rises and of educational and cultu ral o rganizat i o n s . In s h o rt .
a democratic socialist society would move stead ily towards the
practical achievement of those ideals fo rmul ated i n t h e i d e a o f
'participatory democracy', however long a n d grad ual t hat process
might be.2 It is a corollary of this view t hat polit ical power would be
less monolithic than it has been until now in the socialist s o c i e t i e s .
and , as I argued briefly i n an earlier chapter, it is q u ite c o n ce i v a b l e
that government (at all levels) in the socialist societ ies o f the fu t u re
would be carried o n , d u ring s o me periods, by coalitions o f various

groups o r p arti e s M o reover, there should be, and as I co nceive it
.
t h e re w o u ld be a considerable devo l u t i o n o f powers fro m the

.
ce ntral gove rnme n t t o regional and local governments, w h i le the

e x i s t e n ce o f democratic participat ion i n a m u l t i t u d e o f other
i n d ependent o rganizations, fro m enterprises to c u l t u ral bod ies,
w o u ld be a fu rther limit o n the role o f government. This is the
manner i n w h i c h t he famous 'withering away o f the state' is most
l i k e l y t o be achieved ; though t o d ay it may be more i l l u m inating to
describe it as t he socialist version of ' m i n i m u m government'.
On the second point, which co ncerns m o re particularly the
socialist parties in advanced capitalist countries, it should be
remembe red that democracy, i n the sense of u niversal and equal
suffrage. is quite a rece nt growth i n these countries, achieved for the
most part only since the First World War, and in s o me cases after
1 94 5 ..1 There is no reas o n to s uppose that the p rocess of
democratization will, o r should, come to a halt at t h is point. In the
fi rst place there is a need to provide for better representation of the
d i verse interests and cultural values that exist i n a modern society,
and t h is can be met in several ways: by reforming electoral systems
to allow for proportional representation (as has been done already
i n many E u ropean countries), and by giving greater powers to
regi onal and local elected assemblies, which are closer to the
immediate everyday concerns of citizens. Regrettably, Britain is at
present one of the least de mocratic countries i n Western E u rope;
with a no n-elective, totally u n representative second chamber, an
electoral system which excludes proportional representation and
allows a govern ment supported by j ust over 40 per cent of voters
and about one-third of the total e lectorate to carry out sweeping
changes ( many of which are opposed by a m aj ority of the popula
tion), and a steady erosion of the powers of local government over
the past ten years with a co rrespond ing i ncrease i n the powers of
central government. I n the U n ited States the structu re of govern
me nt and the electoral system have s i m i l arly, and fo r a long time,
frustrated the development of new parties and consolid ated the
two-party syste m, while the electoral p rocess as a whole is d o m i
nated , even more than elsewhere, by the power of wealth.
The development of proportional representation i n Western
E u rope is l i kely to lead , j ust as in t he socialist countries, to poli tical
regimes in which coalition governments, representing more faith-
fu lly t h e d iversity of values a n d a i m s in society but a l s o , I t h i n k ,

increasingly socialistic i n t h e i r orientat i o n , become more usual, at
least for the med i u m-term fut u re . B•lt t h is is still not the l i m i t o f a
democratic t ransfo rmati o n of social life , which req u i res a cont i n ued
growth of 'social d e mocracy' - the extension of democratic
participation to all spheres of life - which is fo reshad owed , n o t o n l y
i n the �urre n t reforms i n t he socialist countries, but also i n the
proposals for a 'social charter' that are being d iscussed i n the E C .
There are many other aspects of t h e h isto rical p rocess o f
democratization, given a n e w i m petus b y t h e refo rms i n E astern
Europe, that would need to be examined i n a comprehensive
restatement of the meani ng of d e m ocracy i n the ad vanced ind ustrial
societies of the late twentieth century (among them the institution
of more 'open' government and a d i minution of the elitism which is
partly a s u rvival fro m earlier forms of society); but I m ust confine
myself here t o the brief i n d ications I have already given, and turn
now t o the mainly economic aspects of a transition to socialism,
primarily in the European countries.
I n the socialist countries, as I have emphasized , pol itical reform
is an essential part of the transition, and it is inextricably
i nterwoven with the econ o m ic changes, which req u i re fo r their
s uccess a new spirit of i n d ividual e nterprise, commitment, and
responsibility i n production and ad m i nistration that can only be
achieved by e n larging the sphere of free debate, critical j u d gement
and participation i n pol icy-making. The restructuring of manage
ment at all levels, fro m the central m i nistries to i nd ivid ual e n t e r
prises and services, is therefore a crucial featu re of the economic
reforms. Another fundamental aspect is the d evelopment of a
coherent and systematic relationsh i p between plan n i ng and
markets, which is l i kely to be a grad ual and tentative p rocess. A s 1
said earlier, there is no existing theoretical model which can be
mechanically applied to solve the p roblems (although useful ind ica
tions of possible courses of acti o n are to be found i n recen t w M k o n
the s u bj ect);4 and the balance between market mechanisms a nd
plan ned development, as wel l as a n effective regu latory system. w i l l
have to be d i scove red largely by e x p e r i m e n t and t h rough
democratic debate and ch oice, while d rawi ng upon t he e x peri e n ce.
both positive and negative, already acc u m u lated i n Y ugoslavia and
Hu ngary, as well as i n some capitalist c o u n t ries ( fo r e x a m ple,
wartime planning, and the post-war p l a n n i ng i n France and Japan).
In the c a p i tali s t
welfare states of Western E urope, a trans i t i o n to
s o c i a l i s m i n v o lvesmore purely eco n o m ic changes, and above all an
e x t e n s i o n o f social o w ners h i p and pla nning; but the cond i t i o ns i n
w h i c h t hese changes may c o m e about vary greatly fro m o n e country
t o a n o t h e r . I n A u s t ri a , as we have seen , there is s u bstantial public
o w n e rs h i p . a n d i n France the socialist government of 1 98 1
e x t e n d e d public owners h i p , especially of financial institutions. By
c o n t ras t , i n Britain t he p rivatization mania of the past d ecade, still
c o n t i n u i n g , is red ucing public owners h i p to a m i n imal leve l , even i n
ess e n t i a l public services (telephone, gas, electricity, water, railways)
which i n other European countries are, for the most part, owned
a n d operated by the state (and very efficiently operated , we may
ad d ) A n y transit ion to socialism in Britain will, therefore, be long
.
and d i fficult, the difficu lties compounded by the fail u re ever to

create an effective system of central planning; and such p rogress as
there may be is li kely to come mainly t h rough the influence of other
E u ropean countries, and i n particular of the EC, i n conj u nction
with the mounting problems of the privatized economy.
But although the problems i n Britain are exceptional there are
more general questions to be considered about the extension of
public ownership. First, let me repeat that public ownership of the
maj o r prod uctive resources is essential for the construction of a
socialist society; on one side, to e l i m inate domination by a capitalist
class, as a necessary p recondition for a broadly 'classless' society,
and on the other side, to extend democratic participation as widely
as possi ble, which is simply another aspect of classlessness and
equal ity. I n addition, public ownership, i nclud ing owners h i p of
major financial institutions, is a prereq uisite for effective socialist
planning. It is evident, however, that conceptions of the scope and
nature of public ownership have been changing, and with them the
kinds of policy that socialist parties should advocate and can hope
to implement i n the long term.
It will be useful to begin a d iscussion of this q uestion by
expunging from the socialist vocabulary the term 'nationalization',
which now connotes a system in which large centrally ad ministered
state corporations dominate the economy. I nstead , we should
always refer to 'socialization' and 'social owners h i p ', as I have d one
throughout this boo k , which may take a variety of fo rms in
accordance with economic circumstances and p u blic pol icy
decisions: st ate corporations, self-managed enterprises, cooper-
atives, and perhaps i n some sp heres m i xed private and public

undertakings . S tate corp o rati o n s are n o d o u bt the most appropri
ate form in s o me basic i n d ustries and services - airlines, railway�.
telec o m m unicatio n s , postal services, oil, gas a n d electricity, engi n
eering, chemicals, car manufacture, and others - but t here can well
be some region a l devolut i o n , and the management of s uch corpor
ations should always include a large element of self-management by
employl c:s, as well as represe ntat i o n of c o n s u mer interests. It is not
necessary, moreover, t h at t here should be only one state corpor
ation i n each sector, and it is i ndeed desirable t hat several
corporations, competing with each ot her, should exist in some
spheres; for example, in engi neering, the car i n d ustry, and I arge
scale retail trade. This point is especially germane to the q uesti o n of
owners h i p of fi nancial institutions, which is crucial fo r t he develop
ment of a socialist economy. The alternative to p rivate ownership is
not a single state bank, with ancillary fi nancial services. but a
number of socially o w ned banks and insurance com panies, which
would , like manufactu rers and service ind ustries, compete with
each other t o some extent; and we must even consider, however
shocking this may appear to fu ndamentalists of one sort or other,
the forms w h ic h a socialist stock exchange (i.e. a capital market )
might take. There is a further issue concerning ownership of
prod uctive reso urces which is of very great i m p o rtance for the
future of socialism, though it has been strangely neglected by
socialist parties i n recent t i mes: namely, land ownership, which is
very unequal in capitalist societies (and particularly so in Britai n ) . �
The owners h i p o f land is a n i m p o rtant element i n t h e wealth and
power of the capitalist class, and it is clear that rad ical cha nges
would be necessary in a socialist society to bring about social
ownership. I n p rinciple, the land should be regarded as being
owned by the com munity as a whole, but t h is does not exclude a
variety of forms of ownership or possession i n practice: med i u m o r
long-term leases for agricultural, ind ustrial and commercial p ur
poses; national, municipal and l ocal c o m m u nity owners h i p o f
'co m m o n land ' for recreational use; i n d ivid ual ownership fo r
dwell ings .
The second general fo rm of social ownersh ip, autonomous self
managed enterprises, seems appro priate over a wide range o f
economic activities, mainly in the field of med i u m -si1e prod ucers of
goods and services, includ ing much agricu l t u ral prod uct ion, as well
as in cultural and leisure act ivit ies of a l l k i nd s . As I have said, t here

is much to be learned from the Y ugoslav experience, but also from
various fo rms of 'co-determi n a t i o n ', w h ich may grad ually be
e x t e nded i n Western E u rope i f the E C 'social charter' is eve ntually
i m p le mented .
I n other spheres, and especially i n small-scale prod uct i o n and
p r n v i s i o n of services , cooperative e n terp rises have an i m p o rtant
r o l e t o play. and there are ind ications that t he n u mber of cooper
a t i v e s has been i ncreasing, at a modest rate, i n s o me E u ropean
countries. someti mes with the help of socialist parties at the
national or local level . If i n the future , for reasons to be d iscussed
later. there is a growth of small-scale production, then coope ratives
w i l l be l i kely to have a still more important place in the economy.
Their part icular value is that they are voluntary creations which can
be established rapidly (within an appropriate legal framework) to
meet new or neglected needs, and of course easily d issolved again if
they are not successfu l . At the same time, individual cooperatives
can well fo rm connections with each other, o r extend their activities
into new fields, thus creating l arger cooperative federations which
will facilitate and stimulate the overall growth of cooperative
prod uct ion and trade.6
But there will also be, i n any conceivable socialist society, a
relatively large sphere of private production. Exactly how large it
will be, and what forms it will take, are q uestions that cannot be
decided i n advance, in precise numerical terms, o r for the i ndefinite
future. Two considerations are important in this context. The fi rst
is that i n the advanced ind ustrial countries the number of self
employed persons has tended to i ncrease, along with the expans i o n
o f the service sector of t h e economy, a n d this trend seems li kely t o
cont inue.7 Second , there are benefits t o be gained , a s I argued
earlier, from encouraging small-scale p rivate economic activity i n
many different fields - i n agriculture, artisan production, retail
trade, and services - and this may be carried on by self-employed
i nd ividuals, families, or enterprises employing a small nu mber of
workers (though some of the latter could equally well be cooper
atives). The persistence, and even expansion, of private economic
activity may be seen by some socialists as n u rturing an excessive
ind ividualism and hence the d anger of a rebirth of capitalism; but I
think such concerns are exaggerated . S ocialism should not be
regarded as the antithesis of ind ividualism, but as a specific
concept ion - one w h i c h , more over, h a s t o b e c o n t i n u a l l y revised

and restated - of. the balance to be sought between i n d i v i d u a l
achievement a n d self-fulfilment, and t he attainment of a 'good
society', t h at is to say, a society whose i ns t i t u t i o n s enable a ll
individuals, and not s i mply a privileged m i n o rity, to deve l o p a s
fully as possible their powers of creat i o n and enjoyme n t . The idea
of such a relation between the individual and society is p resent i n all
socialist thought, and notably i n M arxist t h o ught, although i t has
sometin 1es been obscured by an emphasis o n t h e shaping o f human
nature by i m p ersonal social forces; and some versions o f M a rxism,
as S a rtre ( I 960, p . 5 8 ) o bserved , h ad 'completely lost the sense of
w h at a h u m a n being is'.
I t is true that p rivate prod uction d oes not socialize i n d ividuals i n
t h e p roduction p rocess, d oes n o t i ncorporate t h e m i n t o the body o f
'associated p rod ucers ' i n any d i rect manner, b u t t hey would s t i l l
participate i n the cooperative life of a socialist c o m m u n ity i n many
other ways, through their relations with the sphere o f socialized
product i o n and public services, and their involvement in n u merous
p rocesses of d e m ocratic decision-making i n p u blic affairs. In any
event, the sphere o f socialized production, i n the fo rm of state
corporations, self-managed e nterprises, and cooperatives, would
have a p red ominant p l ace in the economy, accounting perhaps for
at least half of all manufacture, a substantial part of agric u l t u re and
t rade, and a very l a rge part o f the provision of basic services such as
health, education; transport and general public u t i l ities; and there
would be social owners h i p o r effective control of land and fi nancial
institutions.
But the movement towards the k i nd of society I have s ketched
here is bound to be grad ual, and very uneven between countries. i n
the economic cond itions of the late twentieth cen t u ry. S id ney
Webb's argument that ' i m p o rtant o rganic changes can only be
democratic . . . acceptable to a m aj o rity of the people . . . prepa red
for in the minds of all . . . grad ual, and thus causing no d islocat i o n '
(see above, p . 1 4) is n o w m u c h m o re apposite than when i t was fi rst
propou nded . In Britain, after t he wholesale privatizations, t he
extension of public owners h i p and central planning will be
exceptionally d i fficult; but i n Western E u rope genera lly.� even i n
more favourable c i rcumstances, it seems unli kely t hat t he o ld -style
method of buying out the shareholders in private industry will play
a maj o r part i n the p rocess of social izati o n , although it can still be
used effectively in some cases, particularly where capitalist enter

prises run i n t o eco nomic d i fficult ies d u ring a reces s i o n , or where
public opi nion turns strongly against private m o n o po l ies.
In any case, there are alternat ive methods, among them the
S wed ish project for collective capital fo rmation t h ro ugh employee
or wage-earner i nvestment fu nds, which emerged fro m d iscussions
at t he 1 9 7 1 Co ngress of t he Swed ish Confederation of Trade
lJ nions ( LO) and the res u l t i ng detailed study by M eid ner ( 1 978).
Briefly, M e i d ne r's original scheme proposed a method of accumu
lating 'collective capital' by a levy o n the pre-tax profits of
compan ies employing more than fifty wo rkers, the p roceeds of
which would be paid i n t o a central fund i n the for m of newly issued
sh ares. The capital accumulated i n this way, and by the p u rchase of
add iti onal shares out of the i ncome o n s harehold i ngs, would
eventually give employees a s u bstantial holding in the companies,
lead i ng to the nomination of board members i n individual compa
n ies and a more general control thro ugh the administration of this
collective capital by regional or sectoral funds ( Meidner 1 978, ch.
7). Over a period of twenty-five to sixty years, depend ing on the
profitability of companies, a large part of the Swed ish economy
would in this way be socialized (Olsen 1 989, ch. 2). As a result of
subsequent d iscussions and studies, however, Meid ner's plan was
considerably mod ified , and the legislation introd uced in 1 983
established a much less rad ical scheme, which applied only to large
companies (with 500 or more employees), i nvolved a tax only on
'excess profits' plus a payrol l tax, accumulated funds in cash instead
of shares, created regional rather than sectoral funds (though with a
majority of employees on their boards), and changed the main
emphasis of the plan from socialization and workers' control to the
accu mulation of i nvest ment capital (Olsen 1 989, ch. 2). The scheme
was also introd uced expl icitly as an experiment for a limited period ,
to be reviewed in 1 990, and it seems now to be the i ntent ion not to
continue it beyond that date, by which time the funds will h ave only
about 8 per cent of the 1 983 value of shares quoted o n the
Stockholm stock exchange (Olsen 1 989, ch. 2). Nevert heless, the
review of the 'experi ment' may itself generate new interest in
the scheme and revive the debate about alternative methods of
socializi ng the economy; and it will provide valuable lessons for
other socialist parties and governments t h roughout E u rope.
Among other methods of extend i ng social owne r s h i p we � h o u ld

consider, particularly, i ncre ased support fo r small-scale cooperative
prod uct i o n , which can be provided very effectively at t he m u n ic i p a l
·
or local level, a n d the creation of n e w e n t e r p r i s e s where t h i s i �
necessary, especially i n the financial sphere. For e x a m p le, i n
·
Britain , where none o f t h e com mercial b a n k s , o r other m aj o r
financial institutions, were ever t a k e n into p u b l i c owners h i p , a
significant begin n i ng might be made in extend i ng social owners h i p
by :the <!Stablish �e n t of n e w b a n k s , partic u l arly an invest ment b a n k
a n d perhaps a l s o s o me c o m m u n ity banks, a n d at the s a m e t i me
applying to the existing privately ow ned banks some appropriate
vers i o n of the e1,I1ployee i nvestment fu nds scheme.9 In other coun
tries of Western E u rope, where there is more extensive social
.
ownership of financial institutions, of maj o r infrast ruct u ral ser
vices, and to so m e extent of manufact uring ind ustry, t he develop
ment of a social i st economy will be relatively easier. The influence
of these c o untries, t ogether w i t h t h at of the reformed socialist
societies of Eastern Europe, is l i kely to be a maj o r factor in t he
evolu t i o n of Europe as a whole over the next few d ecades. W h at i s
evident, i ndeed, is t h at the transition to socialism h a s become, more
than i t ever was i n t h e past, a s upranational process, and there is a
correspond i ng need for socialist t h i n ke rs and polit icians to work
out p rogrammes, p o l icies and mechanisms, o n a E u ropean basis,
for advancing fro m welfare capitali s m and 'socialistic' regimes
towards a more d isti nctively socialist economy. There is an example
of such collaborat i o n i n t h e report by H olland ( 1 98 3 ) , although t h i s
w a s a proj ect for E u ropean recovery rather than specifical l y fo r
European socialism.
Many such projects, with a socialist orientation, s h ould now be
initiated i n o rd e r to prepare for t h e new opport u n it ies that w i l l
emerge i n the n e x t decad e . I f socialist ( o r socialist/ green ) part il·s
come to power in several more E u ropean coun t ries, and i f t h r
restructu ring of the socialist econ o m ies in Eastern E u rope begins t o
prod uce successfu l results, then a decisive movement toward �
socialism will b e possible, and fo r this to c o n t i n ue a n d end u re t h e re
must be carefully prepared and coord i nated act i o n by s oc ia lis t
governments, d rawing upon the ex perience of all o f t he m i n
developing forms of social ownership, with a st rong e m p h as i s upon
self-management, and i n creating efficacious types o f cen t ral p l a n
ning. Not o n ly the achievement, but the satisfact o ry operation o f a
socialist economy is, and will remain, a complex and d ifficult tas k ,
and w e must hope t h a t t he present a n d future generations w i l l i n
fact d isplay that degree of intell igence in coping w i t h it w hich
E ngels c o n fidently antici pated .
The t as k is all the more complex and d au nting because socialist
gove r n m e n t s must try to achieve, over a period of time, a n u m ber of
d i ffe re n t aims w h ich are not easily reconciled and coord i nated .
F i rs t . t hey have to maintain t he comfortable standards of living
w h i c h can now be regarded as customary for a maj o rity of the
population i n t he developed ind ustrial countries, while at the same
t i me ex tend ing such cond itions of life to the still considerable
n u m be r s of those i n poverty, and red ucing the wealth of a small
privi leged minority. M aintaining t hese standards will, h owev er,
depend increasingly upon public rather than p rivate provision for
many bas ic needs, and a socialist government will not necessarily be
com mitted to unlim ited aggregate economic growth regard less of
w h a t i s growing and what social and environmental costs i t entails.
The emphasis i n all socialist policies should be o n i mp roving the
quality of l i fe fo r the whole populati o n , not o n sheer economic .
growth, and it is to be hoped that a t i me will come when the
ac hievements of different countries will be judged i n terms of the
former criterion, rather than by their relative position in some
international league of growth rates.
This q uestion is especially relevant in considering a second
concern of socialist governments: namely, how they can best
contribute to overcoming poverty i n the poorer countries of the
Third World, where eco nomic development is und oubtedly needed .
I t is evident to all that the present d ivision of the world between
wealthy and poor countries cannot, and should not, conti nue
indefinitely. But there are two aspects of this situat i o n t o be
considered . In the first place, what are the policies and mechanisms
th at can most effectively help the poor countries? There is a great
deal of accumulated experience of successful, and unsuccessful, aid
to these count ries, i n which both the objectives of d onor nation!!
and the character of the ind igenous regi mes are i m portant factors,
but I do not think that there has yet emerged a d istinctive and
coord inated socialist pol icy to overcome i nternatio n al economic
inequalities; or second , a serious and thorough consideration of the
consequences of economic development on a global scale and their
implications for the ind ustrial countries the mselves. Let us suppose
that over the next half-ce n t u ry many of the poor count ries, with t h e
h e l p of socialist ind ustrial n a t i o n s , s u cceed i n raising the stand ard
of living of their populat i ons s u bstant i a l l y , and t h at the m i d d l e
income countries of t h e Third W o rld conti n ue effectively t h e i r
policies o f indust rialization and general economic development, s o
that t hey begin to catch u p with the ad vanced industrial societ i e s . I t
is evident - and we can pict u re the sit uation most v i v i d l y b y
imag ' ning t h at every country in the world eventually attai ned I i \ i n g
stand ard s equal to those in the p rosperous West E u ropean societies
- that economic development o n t h is scale, coupled with popu la
tion growth , would place an e n o rmous b u rden o n the eart h 's
resources, in land, energy, food and m i nerals, and would add
massively to the problems of pollution and damage to the eart h 's
atmosphere. 1 0 So t here is an o bvious need , in considering t h e lo nge r
term, for a great deal m o re planning, with an i n te rnational scope,
based o n p o l icies which would tackle simultaneously the overcom
ing of poverty i n the Third World, l imiting the growth of popula
tion, and restricting o r eliminating n o n-sustainable and damaging
types of economic growth . 1 1
Many socialist parties, I think, h ave not yet seriously confronted
such issues, and for t h at reason there has been a rapid increase i n
t h e support for green parties w h i c h propose more definite and
rad ical policies; though the eventual outcome may be, as 1
suggested earlier and as I h o pe, the emergence of a new, 'green
socialism '. I n fact, most of the questions that I have raised
concerning the present-d ay problems of socialism and possible
modes o f tra n sition to a socialist econ o my point in that d i rect ion.
The decentralizati o n o f eco n o m ic d ecision-making through t he
development of self-managed ente rprises, cooperatives and
ind ivid ual self-employment, would encou rage in various ways t he
growth of smaller, m o re local productive enterprises; and even
though some enterp rises must necessarily be o rgan ized o n a l a rge
scale - railways, car manufactu re, some engineering and c h e m i c a l
plants - there is no reason why large enterprises t hemselves s h o u ld
be brought together in giant corporations, whether p r i v a t e o r
public. The recent wave o f merge rs and takeovers in t h e ,· a p i t a l i s t
world has been d i ctated m ore by fi nancial speculati o n . b o u n d less
profit-seek i ng, and the desire to eliminate co mpet ition. t h a n by a n y
ve ry obvious economic need , or benefit to the population at l a rg e 1 : .
The development o f small-scale prod uct i o n and p r o v is i o n o f

services, where v e r this feasible, would, on the cont rary, bring

is
c on s i d e r a ble s o c i a l a n d
environmental benefits. Socially, it would
e n l a rge t he sphere i n which individuals can have some real control
o v e r t he i r work i ng l ives and participa t e effectively i n decis i o n
m a k i n g . E n v i r o n me ntally in conj u nction with the greater powers
,
o f local gove rnment, it would be l i ke l y to increase concern fo r the

nat ural s u r r ound i ngs i n which people l ive and work, and to reduce
t h e co ngestion re s ulting fro m long j o u rneys to work. The shape of
a n a lt e r nat i v e economy fo r the twenty-first century is now unmis
takably begi nning to appear, at least i n very broad outline, and
s o c i a l i s t projects fo r the near fut u re as wel l as for the l onger term of
t h e next half-century should take account of the new possibilities
a n d the new public attitudes that are emerging.
Any t ransition to socialism will require extensive and flexible
plann i ng of an indirect, ind icative kind, if the d iverse aims I h ave
,
sketched here - greater equality of wealth and income in each

co u n t ry and i n the world as a whole, more extensive public
own e rship and democratic participation in all the affairs of social
l i fe , and a reorientation of economic development to accord with
these aims and also with the protection and renewal of the human
habitat - are to be achieved , however gradually. There is one aspect
of p l anning which should be p articularly stressed; namely, the need
to take account, in constructing social and economic plans, not
only of the market prices or 'accounting prices' derived fro m them,
of all the elements - material resources and labour - which
constitute the 'prod uctive forces ', but also of the ways of valuing the
exhaustible resources which can be allocated between generations.
The s ubject is discussed in some detail in a study of the history of
'ecological economics' by M artinez-Alier ( 1 987), who considers
so m e of its implications for development policies in the Third
World and also in the wealthy ind ustrial countries, where zero
growth, or low and selective growth, may be desirable i n the future.
These questions are of great importance for socialists, but t hey
ha ve received l ittle attention until very rece ntly. One of t hese who
con s idered them at an earlier time was Otto Neurath , who specifi
cally raised in his discussion of a 'natural eco n o my' the issue of
val uing, and making a choice between, the present and future use of
non-renewable resou rces (see p. 21 above). Neurath also advocated ,
as an integral part of socialist planning which would take account
of physical resou rces (materials and energy), the construction of
alternative 'scientific U topias' which would be an essential element

i n a continuous p rocess of social transformat i o n , and t h i s idea too
is valuable for the p resent generati o n of socialists. The s t rength and
success of the socialist movement came histo rically from its v i s i .'.rn
of a completely n e w society, b u t today t hat v i s i o n seems to havt
faded , and socialism i n many countries, lacking an i n tellect u a l
c o n e n t ( a s distinct fro m various k i nd s of techn ical expertise), i s
orientated , for t he m o s t p art, to the achievement of modest
reforms. A cautious and u n i n s p i red pragmatism has almost
vanquished Utopianism. Yet without the latter I d o not think there
can be any movement deserving to be called socialist or capable of
engendering the enthusiasm and political will necessary t o bring
about substantial social change. Not U topianism i n the sense of a
belief that human society and human nature can be miraculously
transformed overnight i n order to remedy all the multiple problems
and i nj u stices of the existing world, but as the forcefu l statement of
an ideal to be attained over a long period, by the v ariety of means
that I h ave d iscussed , and t h rough the successive elaboration of,
and widespread debate about, what we may call 'i nterim U t opias'.
The transition I have s ketched here is not located in some d istant
future. O n the contrary, it began early i n this century in a d ivers i t y
of forms, and since t h e end of t h e Second W o rld War h a s passed
through maj o r phases of success and failure which are briefly
charted i n this book. From that experie nce there have emerged t he
new movements and new ideas of recent years which have still to be
clearly recognized i n a state ment of socialist aims and policies a -
new socialist manifesto - t hat would bring together the ideal o f a

socialist society and the sequence of p ractical meas u res t h rough
which it can be approached , i n the manner and at the tempo
considered desirable by a maj o rity of the population. It is above all
in Europe, East and West, that the circu mstances are now most
favourable for such a venture.
Notes
I . The French economist M au rice A l lais, for example. in an art icle in /,,·
Mon de (26 J u ne 1 989) anticipates a new period of t u rbulence, and
obserws t hat eco nomic instability, social i nj ust ice. and poverty are t h e
b a n e o f m a r k e t ec o n o m i e s .
1 l h a ve d i sc ussed t he d i \'erse conceptions of democracy more fu lly in
Bono m o re ( 1 9 79, ch. I ) . See also the d iscussi o n of t h e re lation between
d e m o c r a t i c ideas and elite t heories i n Albertoni ( 1 98 7 , Part I I ) .
.t See B o u o m o re ( 1 9 79. c h . I ) .
-1. F o r example. in H o rvat ( 1 982. c h . 1 2) and Selucky ( 1 979).
5. See t h e data i n Scott ( 1 982), in particular his estimate that 'about 200
peerage fa m i l ies hold ing est ates of 5,000 acres or m o re owned about
one-t h i rd of t he British land area', and his s u m mary of research by
M c Ewan ( 1 9 77) on 'the phenomenally h igh percen tage of landowners
a m o n g Britain's weal thy elite' ( p . 1 03), even i n recent t i mes.
6. A good example of this process is the M o n d ragon cooperative i n Spain
w h ich has grown from small begi n n i ngs into a fai rly l arge and
successfu l associat ion of cooperatives (Thomas and Logan 1 982).
7. This is \'ery evident i n Britain and also i n some socialist countries, for
example in H u ngary's 'second eco nomy'.
8. I n t he following d iscussion I exclude fro m consideration the U nited
States, where the poss ibility of socialism seems to belong to a very
remote fut u re. H ence there will be for a long t ime, o n any reasonable
reckoning, two economic systems - capitalist and socialist - coexisting
i n the world and influencing i n different ways the development o f the
poorer count ries of the Third World.
9. See the d iscussion i n Coakley and H arris ( 1 983, ch. 1 0) of the need to
'nationalize' the m ajor financial institutions and, j ust as important, to
ch ange the character of t heir operations (which does not always
necessarily fol low the change of ownership, as the experience of the
nat i o nalizations by the socialist government i n France i n 1 982 indi
cates). The authors d o not, however, suggest any definite p roced u res
by which social ownership and a change in the orientation of fin ancial
pol icies could actually be ach ieved i n the existing social and political
cond itions, and conclude only in very general terms that preparation
has to be made to overcome the difficulties that socialization presents.
1 0. See the d iscussi o n , with particular reference t o population growth, in
Faaland ( 1 982).
1 1. M uch has been written on this subject since the publ icat i o n of the
pessimistic projections of the Club of R o me ( M eadows et al. , 1 972),
including d i scussions of the 'social li mits t o growt h ' ( H irsch 1 977); and
the rapid development of environmentalist m ovements and green
parties in the 1 980s is an indication that economic pol icy-making has
entered a period of profound change.
1 2. In one sphere, particularly, the effects of 'gigantism ' are very clear.
There is no value at all (except fi nancial gain for a small n u mber of
people) i n the emergence of giant publishing corpo rations, controlling

a wide range of newspapers, magazi nes, book publishi ng, television
and rad io stations; and we should all be a great deal better off, i n terms
of literacy and the general level of culture, if such activities were carried
o n by a large number of i ndependent med i um-size enterprises .
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146 Bibliography
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Ysander, Bengt-Christer ( 1 982) ' I ncome formation in a mixed economy', i n
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I ndex
accumulation, 29 councils, 1 7 - 1 8 , 27 -8
agriculture, 1 7 , 42, 64, 94-S Cuba, S
Aron, R aymond , 6 1 , 63 Czechoslovakia, 42, 94
Austria, 39, 1 1 3 - 1 4 , 1 26
Austro- M arxism, 27 Darwin, Charles, 1 4
decent ralizat i o n , 8 8 , \ O S , 1 06 , 1 1 0 , 1 1 1 ,
base and s u p e rst ructu re , 2 1 1 7, 1 33
Ba u e r , Otto, 27, 1 1 6 d e m ocracy, 1 3 , 1 4 , 1 8 , I l l , 1 1 7 , 1 22 - 5
Bavarian S ovi et , 24, 3 6 Devons, Ely , 4 1 , 58
Bellamy, Edward , 1 0, 1 7 , 1 9 , 84, 1 04 Dickinso n , H. D., 53, 5 8 , 5 9 , 82, 84 ,
Bender, D o n a l d , 1 1 3 85
Bergstr6m, V i lly, 1 1 2 Dj ilas, M ilovan, 6 1
Berliner, Joseph S . , 6 5 , 7 3 , 74, 75 Durb i n , E . F . M . , 3 7 , 1 03
Bernste i n , Eduard, 1 3 , 1 4
Besant, A n n i e , 1 4 , 1 5 Eastern Europe, 4 2 -4 , 89
B<ihm- Bawe r k , Euge n , 52-3 ecology , 3, 26, 1 1 0 , 1 3 3 , 1 34
Britain, 1 9 , 3 9 , 4 1 , 45-6, 48 , 7 2 , 79, economic
1 1 2, 1 1 4, 1 1 5 , 1 24, 1 26 , 1 29 , 1 3 1 calculat i o n , 52-60
Bukharin, N i k o l ai , 28-9, 34, 3 5 depressi o n , 36, 3 8
b u re au cr ac y , 5 7 , 60-2, 7 3 - 5 , 1 04 growth , 4 , 5 , 42 , 4 4 , 48, 67 -8, 1 32
efficiency, 6, I 0 7 - 8
c a p it a li sm , 1 9 , 36, 4 5 - 8 , 6 6 -7 , 80, 1 2 1 � l i t e , 62, 6 3 , 1 1 1
China, 4 3 , 9 3 -4 Ellman, M ichael, 95
civil society, 7 3 , 97 empl oyee investment funds, 1 30
class, 1 3 , 3 5 Engels, Fried rich , 7, 9, 7 1
Cole, G . D . H . , 1 1 Erlich, A l e x an d e r , 42
collect ivizati o n , 29 European Community (EC), 47 , 67
communism, 9
competi t i o n , 59-60, 79, 1 09 financial institutions, 1 1 6 , 1 2 1 , 1 27
Comte, Auguste, 1 4 Fourierists, 9
cooperatives , 1 2, 1 3 , 1 28 , 1 3 1 France, 39, 46 - 7 , 1 1 4 , 1 1 5 , 1 26
corporatism, 46 Frankfu rt School, 4
147
148 Index
rreed o m , J, 1 1 , 59, 73 Manning, Nick, S , 4S

M arschak, Thomas A . , I 06
Gabor. Dennis, 67 M arshall Plan, 3 1 , 4 1 , 46
Gay, Peter, 1 3 M artinez- Alier, Juan, 1 34
general will, I OJ M arx, Karl, 1 -3 , 9, 1 1 , 1 2, I S , 1 6, 22,
George, Vic, 5 , 45 S9, 7 1 , 76, 8 3 , 1 04
G e rman Democratic Republic, 42, 8 J , Meidner, Rudolf, 1 30
9 6 , I 07 M ichels, Robert, 6 1 , 62
Germany, J9 M ises, Ludwig, I , 2 S , 30, S 3 -4, S S , S 7 ,
G o l u bovii:, Zagorka, 88, 90, 9 1 S9, 6 0 , ! 06
G orbachev, M i khail, 4J mode of production, 2
G ramsci. Antonio, I , 28, 85 money, 1 6, 2S
green movement , 1 1 6, I JJ M orris, William, I O, 1 7, 7 1 , 84, ! 04
M u rray, Robin, 4S
H are, Paul, 92, 9J
H a y e k , F. A., JO, 5J, SS, S7, S8-9, 60, nationalism, 87, 97
62-J, 82, 84, 1 03 , 104 nationalization, 1 4 , 1 26
Hegediis, A n d ras, 6 1 natural economy, 24
Heller, Agnes, 1 1 , 1 2, 1 6 needs, 3 , 1 1
H itrerding, Rudotr, 2 3 , 2 7 , 30, 40, S2, Netti, J . P . , 1 2
62 Neurath, Otto, 24- S , 26, 27, 36, 1 34
H o b h o use, L. T., 73, 1 03 New Deal, 38-9
H olland, Stuart, 1 3 1 New Economic Policy ( N E P), 28, 34,
H o rvat, Branko, 79, 89-90, 92-3 94
human nature, 10, 1 04-S N icaragua, S
H u ngary, 36, 66, 7 1 , 7S, 79, 80, 8 3 , 88, Nove, Alec, 3 3 , 3 S , I O S
92-3 N u t i , Domenico M ario, 7 S
individ ualism, 1 28-9 Olsen, Gregg, 1 30

industrialization, 3S-6, 42-3 organized capitalism , 4, 40, 8 S
debate, 28-30 Owen, Robert, 9
innovation, 6S, 67-8 ownership
investment, I 06 of land, 1 27
private, 83, 87, 8 8 , 93, ! 07, 1 28-9
Japan, 47, 8S social, 6, 87-8, ! 06 , 1 26-8
K autsky, Kar l , 7, I S- 1 7 , 23, 83, I 07 Paris Commune, 9

Kollontai, Alexandra, 28 parties, 1 2, 62, 7 1
K omiya, Ryutaro, 47 pe asantry, 29
Konrad , G., I I O planning, 6, 1 4, 26-7, 30, 36-7, 40-2,
4S-8, 62-3, 64-7, 79, 82, 84-S,
labour, 1 1 98-9, 1 03 -4, ! 06, 1 1 7, 1 2S , 1 34
Labour Party, 1 2 and markets, 90- 1
labour process, 2 , 1 1 plu ralism, 7 1 , 72-3, 87, 96-7
Landauer, Carl, 22, 25, S2 Po land, 7 1 , 7S, 79, 80, 83, 88, 94
Lange, Oskar, S3, S4-7, S8, S9, 60, 82 Po llock, Fried rich, 30
Lavoie, Don, S9-60, 6S po pulation , 7 , 1 3 3
Lenin, V. I., 28, 34 pov erty, 4 , 1 32
Lerner, A . P . , S3, SS Prcobrazh cnsky, Evgeny, 28-9, 34, 44
pr ices, SS-6
management, 95-6, l 2S pr o perty, 1 7
Index 1 49
Rad ice, H ugo, 9 2 , 9 3 30, 34

Reissner, Gerhard , 1 1 3 S w a i n , Nige l , 9 2 , 9 3
relations of production, 2 Sweden, 3 8 , 8 3 , 1 1 2 - 1 3 , 1 30
Renner, Karl, 1 8 , 2 3 , 26 Szelenyi, I . , 1 1 O
revisionism, 1 3 Szl:ll, Gytirgy, 77
Richel, X., 89
R ichta, Radovan, 44, 66 Taylor, Fred M . , S S , 56, S8
k obbins, Lionel, S 3 , S S , S 1 , S 8 Third World, S, 40, 4 5 , 1 3 2 - 3
R o osevelt, Franklin D . , 3 8 Tinberge n , J . , 4 1 , 4 7
Russian Revolution, 2 7 , 3 6 Tomlinson, J i m , 78
Ryden, Bengt, 1 1 2 totalitarianism, 1 9 , 62, 6 3 , 70
Saint-Simonians, 9 unemployment, 1 08 , 1 1 3 , 1 1 4 , 1 2 1
Sartre, Jean-Paul, 1 29 U S A , 3 8 - 9 , 46, 4 8 , 80
Schumpeter, J. A . , 46, S 8 , 60, 6 1 , 66, U S S R , S , 26, 30, 3 1 , 3 3 -6, 38, 40, 4 2 -
97 4, 6 1 , 62, 1 S , 80, 8 3 , 88
science and technol ogy, 16, 2 2 , 44, S 1
Second World W a r , 3 9 , 40 Vienna, 27
Seibel, Claude, 46
self-management, 1 7 , 1 8 - 1 9, 76-9, 84, War Communism, 28, 33
96, 1 1 2 war economy, 23, 24, 36, 4 1
Shaw, George Bernard , 1 4 Webb, Sid ney and Beatrice , 1 4, 1 8 , 36,
socialism, I , 4 , 6-7, 9 , 1 9 -20, 22-3, 7 2, 3 8 , 1 29
84-S , 1 0 1 -2 , 1 22 Weber, M a x , 2 S , 60, 6 1 , 62, 73
Fabian, 1 3- 1 4 Welfare State, 3 8 , 48
Guild, 1 7, 1 8 , 1 9 Western Europe, 1 9 , 4S-8, l I S- 1 6,
i n Western Europe, 1 1 2- 1 7 1 29, 1 3 1
municipal, 1 3 White, Christine, 4S
Utopian, 9- 1 1 , 1 2, 1 7, 84, 1 3S W h ite, G o rd on , 4S
socialist market economy, 40, S4-6, 7 8 , Wicksteed , P . H., SS
8 7 , 9 3 , 94- S , 9 7 - 8 Wieser, Friedrich, S2
socialization, I S , 24-S, 1 26 Wilczynski, J., 42
social policy, S, 42, 4S Wootton, Barbara, 37, 38
S pencer, Herbert, 1 4
Stalin, J . V . , 2 9 , 4 2 , 43 Yugoslavia, 18, 3 1 , 40, 4 3 , 1 S , 76-9,
State, the, 70, 7 1 , 73 80, 82, 8 3 , 86 - 8, 89 - 92
state monopoly capitalism, 40
State Planning Commission (Gosplan), Ziegler, Rolf, 1 1 3
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The Socialist Economy

� Tom B. Bottomore 1990

All rights reserved. No part of this publication may be

Typeset in I0/ 12pt Times

Printed and bound in Great Britain by

British Library Cataloguing in Publication Data

Bottomore, Tom, /920-

Introduction: Socialist economy and socialist society

The nineteenth-century vision 9

Socialism, as a p o l i t ical d octrine and a social m o ve m e n t , h as neve r

and ' reconstructed ' by many late r t h i n kers,� not as asse r t i ng a

as natural beings, they would s t i l l be s u bject to m a t e r ia l constraint!>,

the realm of freed om . . . [lies] . . . o u t s i d e the sphere o f material

Hence M arx's further contention that a p recond i t i o n of freedom is

I. The ad vent of socialism i n cou ntries which were, fo r the most

This ad d iction to growth has, of course, been co ntested by many

had an i m p o rtant i n fl ue nce o n the i d e as and p o l icies of social ist

But i n recogn izing the develop me n t o f new attit u des to economic

hostility of the capitalist w o rl d , w h i c h is expressed in cconom1c

possess any incont rove rt i b le criterion of w h at socialism really 1s,

Of course the abstract poss i b i lity e x ist s that the number o f h u m a n

I. Schu mpeter ( 1942. p p . 170· I ) c l a i me d that socialism is so "culturall�

developed into a policy and an economic philosophy much wider in its

The nineteenth-century vision

form a t i o n and d evelopment of new p o l i t ical part ies in t he latter

ment or ad m i n istrat i o n . I n any case, as Morris explicitly said , his

the good society' (Cole 1 954, p . 423). As such it evidently appealed

ment, t h e re we re u n d o ubtedly U t oi: i a n e l e ments, as well as many

self-realizati o n of t h e h u m a n personality' and he nce a v i t a l need).

co ncludn op1imii.1ically that lhe Utopian aspects of Marx's ideas

In the nineteenth century, al all events, the various currents of

changes in the formulation of socialist aims. While Utopian ideas

welfare services. By the end of the century the outcome of t�

important element in the changes in capi tali !>t M>Cicty 1Ahitb

not increase. There i$ increase in insecurity. dependence . social

socialist society and as a field of fruitful acti\'ity alonE?'.'iide the

the revision of socialist conceptions at the end of the nineteenth

w h o t h u s unconsc i o usly p ave the way fo r t h e i r o w n superscssion'

'shape, w i t h conscious fo resi g h t , 'he w h o l e eco n o m i c life of the

in many means of production (p. 127). But the effects of this

Money is 1he simpl e st means k nown up to the present t i me which

H e then went o n t o discuss how the incomes o f workers might be

be municipal and cooperative e nterprises alo ngside the large state­

. . . the greatest d iversity and possibility of c h ange w i l l rule ...

Apart fro m agricu l t u re, w here K autsky st ressed t h e i m p o rt a n t ro l e

producti o n '. The educat i o n a l syste m and sci e n t i fic research w o u l d

and relying to a great extent u p o n cent ral plan n i ng , U t o p i a n ideas

I nd ustrial W o rkers o f the W orld, a n d i n t he guild socialist nHwe­

sh i p of workers ', peasants' and soldiers' councils' (which he d i d not

S i nce the m id - l 970s, h owever, t h e re has been a n o t a ble res u rgence

boo k . I n assessing the cu rrent ret h i n k i ng and rest ruct uring of

t rast with socialism as a more peacefu l , grad ual an d ' re fo r m i s t '

Marx referred o n ly i n the most general terms, a n d o n rare

i n fl uence of t h e historical and i n s t i t u t ional ist schools . . . to be

be municipal and cooperative e nterprises alo ngside the large state

I nd ustrial W o rkers o f the W orld, a n d i n t he guild socialist nHwe

Social Democratic Parly had nol worked o u t a n econ o m i c pro

and increasing its political weight. The p o l icy of forced in

eco n o my t o d e a l w i t h mass u ne m p l oyment and p o v e r t y A c o n .

initially t h rough the National I n d ust rial Recovery Act; a re