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The need for a socialist planned economy

This article is a transcript of the presentation given by Vincent R. Beaudoin at Fightback’s Marxist Winter School 2021. When the Soviet Union collapsed in 1991, Francis Fukuyama told us that this was evidence of the failure of the planned economy and the success of the capitalist market economy, and that it represented the end […]

Vincent R. Beaudoin

Wed, Mar 24, 2021

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Source: Txetxu, Flickr

This article is a transcript of the presentation given by Vincent R. Beaudoin at Fightback’s Marxist Winter School 2021.

When the Soviet Union collapsed in 1991, Francis Fukuyama told us that this was evidence of the failure of the planned economy and the success of the capitalist market economy, and that it represented the end of history. In October 2018, however, he changed his mind. He recognized that the neoliberal period, which began with Ronald Reagan and Margaret Thatcher, promoting the benefits of an undirected market, had had disastrous effects. He also recognized that Marx was right when he said that capitalism leads to crises of overproduction that impoverish the workers and propel a class of oligarchs to power, who will make the workers pay for the crisis. It was Fukuyama who said all this!

Although capitalism has been going into crisis every 10 years or so for 200 years, and impoverishing the workers every time, Fukuyama had to see the effects of the 2008 global crisis for himself to understand the relevance of the Marxist analysis. In 2008, the banking sector collapsed as a result of a crisis of overproduction. The “invisible hand of the market” did not save the capitalists. It was the state that rescued the banks by gifting billions of dollars to them, which was paid for by the workers in the form of austerity in the decade that followed.

The current COVID-19 pandemic also shows the limits of the capitalist market. Business owners have pressured governments to leave non-essential businesses open. Workers were thus forced to work in unsafe, unsanitary conditions so that the bosses could continue to make a profit. And the big bosses made a lot of profit.

Since the beginning of the pandemic, Canadian billionaires have become nearly $40 billion richer, and American billionaires have become $637 billion richer, while 40 million American workers have applied for unemployment benefits. Between March and September of 2020, former Amazon CEO Jeff Bezos became $74 billion richer, and now has a fortune of $200 billion. Bezos now makes more money per second than the average American worker makes in a week. What an American worker will earn in a lifetime, about $2.2 million, Bezos makes in 15 minutes. Since the beginning of the COVID-19 pandemic, workers around the world have lost $3.7 trillion and billionaires have gained $3.9 trillion.

In the pandemic there is a contradiction between the needs of the market economy, and the needs of public health. Bosses cannot close non-essential businesses and continue to pay workers wages. If they had done so, they would have gone bankrupt. It was the state that bailed out these companies with wage subsidies and other handouts, while also providing a subsistence income to the workers through emergency benefits like the Canadian Emergency Response Benefit (CERB). The Canadian government has paid out hundreds of billions of dollars to save corporate profits, a huge amount of money that will have to be paid back by the workers in the form of taxes, inflation and austerity.

Conversely, if we lived in a socialist planned economy, where corporations are nationalized under the democratic control of the workers, we would have quickly closed down all non-essential workplaces and continued to provide full wages to the workers. No company would have gone bankrupt. The virus would have been contained from the beginning, and at this point the pandemic would probably be a thing of the past.

Listen to this presentation on Spotify:

The problem of economic calculation

Ludwig von Mises and Friedrich A. Hayek. Source: Public domain

The central question of the current article is: What is the best economic system for the efficient distribution of goods and services—a capitalist market economy or a socialist planned economy?

This debate has been formulated notably through the writings of the economist Ludwig von Mises, in the early 1920s, then developed by the economist Friedrich Hayek. This debate is referred to as the “economic calculation problem” or the “socialist calculation debate.”

Mises’ thesis is that in a large-scale economy, a socialist planning council would be unable to obtain and calculate all the information necessary to know what products to produce and in what quantity, and how to distribute them. And so socialist planning would create mismatches between supply and demand, and...