Marx's Economics and Lord Desai's "revenge": A response to the book "Marx's Revenge" by Meghnad Desai - Part Six

The socialist calculation debate is usually regarded as beginning in 1920 with a challenge to the socialists thrown down by the right wing Austrian economist von Mises. He opined that rational economic calculation would be impossible in a socialist commonwealth. Unfortunately, the socialists who took up this challenge did not, with the sole exception of Maurice Dobb of the British Communist Party, regard themselves as Marxists.

The socialist calculation debate

Desai raises this interwar debate, in which some of the fundamental economic issues between us socialists and the supporters of capitalism were covered. He gives a competent summary. Since the issues are likely to be unfamiliar to many readers, it is worth going over the ground again.

The case for capitalism

The socialist calculation debate is usually regarded as beginning in 1920 with a challenge to the socialists thrown down by the right wing Austrian economist von Mises. He opined that rational economic calculation would be impossible in a socialist commonwealth. By rational calculation he evidently meant the ‘optimum’ outcomes that produce obscene wealth and appalling poverty under capitalism according to the Pareto optimum discussed in the section on equilibrium.

“Without calculation, economic activity is impossible. Since under socialism economic calculation is impossible, under socialism there can be no economic activity in our sense of the word, it will no longer do to speak of rational production. In the absence of rationality, production could not be consciously economical.” (Socialism p 119)

We shall try to paraphrase what he saw as the problem. Socialism, by definition, entails social ownership of the means of production. Let us assume the socialists take power first in Tunisia . All Trotskyists know that you can’t build socialism in one country, but you have to start somewhere and the national class struggle has its own rhythm and momentum. In our fictitious example Tunisia is the country where the power of capital is broken first. Tunisia is a poor small country and we can assume that our socialists all accept that they need to catch up and surpass the advanced capitalist countries as quickly as possible. To do this they will trade with the capitalist world - if they are allowed to. (It did not seem to occur to the non-Marxist socialist side in the debate that if democracy did not favour the capitalists, then they would get rid of it. This is strange, for this was the era of Hitler and Mussolini.) Naturally the Tunisian socialists will try to get the best deal possible in foreign trade.

Let us consider one of the means of production – land. The socialists boil the choice of use down to two; they can grow wine for export or they can turn it over to golf courses for tourist development. How do they extract the maximum possible moolah from the pockets of the rich capitalist nations – a necessity the Tunisian socialists thoroughly approve of? We are assuming here that Tunisians don’t play golf or drink wine. Von Mises’ point is they have no way of knowing the more productive use of the land.

Under capitalism, the means of production, including the land, would be privately owned. The capitalists anxious to cover the country with golf courses would bid for its use. So would those who want to turn the country into one great vineyard. The ones who could get more money out of the foreigners would be able to outbid the other lot. That is how you get rational, optimizing behaviour under capitalism. You not only have consumer sovereignty where the consumer can vote with their pounds (spend their money) in one great, continuous referendum. (Thank you, Enoch Powell, Tory, defender of capitalism and racialist, for that analogy. But didn’t you notice that in the marketplace some people have a lot more votes (i.e. pounds) than others?) You also need a market in the factors of production so they are not wasted. If you suppress that market through social ownership, you have economic chaos.

The socialist response

The socialists who took up this challenge did not, with the sole exception of Maurice Dobb of the British Communist Party, regard themselves as Marxists. On the contrary they were all anxious to show that the case for socialism could be made respectable in terms of welfare economics. They postulated a society where the means of production are publicly owned but there continues to be a consumer goods market and a labour market (workers work for wages). Technically, this is not socialism in the Marxist sense but it can be regarded as a society in transition to socialism.

The eventual reply, known as the Lange-Taylor solution after two of the economists responsible for formulating it, was widely admired and trumpeted as a famous victory in the debate. Bergson, in his 1948 survey, opined, “by now it seems generally agreed that the argument on these questions advanced by Mises himself is …without much force.” (Socialist Economics p 412)

Broadly Lange, Taylor and their fellow thinkers suggested administrators of socially owned enterprises should use what are now called shadow prices to mimic market forces through what they described as a ‘trial and error’ process. Though they didn’t spell it out, it was visualized that they start with ‘prices’ given from capitalism and adjust them as necessary. They should, for instance set aside a sum for rent, even though there was no landlord. Likewise they would charge interest to socially owned firms, though, as Samuelson comments, ‘no one necessarily receives interest income from them.’ This procedure would make sure that the firms were ‘really’ breaking even – that public enterprise was not making a loss and thus creating a burden on the rest of the socialist commonwealth. Though Lange and the other socialists were criticised for suggesting shadow prices in this way, it seems to us a lot more realistic than the procedure by which the auctioneer conjuring up a set of equilibrium prices in Walrasian theory. At least the factory managers, unlike the auctioneer, actually exist!

This pricing procedure was criticized by the opponents of socialism, but we have to ask ‘why’? We deal with neoclassical capital theory in more detail when we discuss the Cambridge capital critique in the section on the so-called transformation problem. But neoclassical economics has a problem in generating a theory to explain the price of capital goods. As we have seen in the section on equilibrium, neoclassical economics differs fundamentally from Marxism by starting with consumption, not production. Naturally for them the factors determining the price of consumer goods are considered first. The factors determining the price of capital goods are a bit of an afterthought. What is the marginal utility of a factory building or a fork lift truck to a consumer? Only what they contribute to the price (‘value’) of the consumer goods they help to provide. So the Austrian theory of capital, to which von Bohm Bawerk was a major contributor, basically ‘imputed’ the value of capital goods from that of the consumer goods to which they contributed. (Bohm Bawerk, as we shall see, was a neoclassical economist and critic of Marx in the transformation problem discussed later.) Now if the value of capital goods is just read off from consumer goods, rather than being an objective factor given by the materialized labour time involved in its production, what is the problem of the administrators of socialist firms imputing a subjective evaluation on to it in exactly the same way?

Socialism was accused with presenting us a problem of solving millions of equations.

This, we were assured, was impossible. Lange replied thus. “The only ‘equations’ which would have to be ‘solved’ would be those of the consumers and managers of production. They are exactly the same ‘equations’ which are ‘solved’ in the present economic system and the persons who do the ‘solving’ are the same also. Consumers ‘solve them by spending their income so as to get out of it the maximum total utility; and the managers of production ‘solve’ them by finding the combination of factors that minimize average cost and the scale of output that equalizes marginal cost and the price of the product. They ‘solve’ them by a method of trial and error, making (or imagining) small variations at the margin, as Marshall used to say, and watching what effect those variations have either on the total utility or on the cost of production. And only a few of them have graduated in higher mathematics. Professor Hayek and Professor Robbins themselves ‘solve’ at least hundreds of equations daily, for instance in buying a newspaper or in deciding to take a meal at a restaurant, and presumably they do not use determinants or Jacobians for that purpose. And each entrepreneur who hires or discharges a worker or who buys a bale of cotton ‘solves equations’ too. Exactly the same kind and number of equations’, no less and no more, have to be ‘solved’ in a capitalist economy, and exactly the same persons, the consumers and managers of production plants have to ‘solve’ them.” (On theEconomic theory of socialism pp 88-89)

Socialist administrators should set prices at marginal cost, as is supposed to happen in a competitive market. Then they would recreate the bliss of a Pareto optimal economy within socialism.

Problems with the reply

The socialist victory was pyrrhic, according to Maurice Dobb. (Pyrrhus was a Hellenistic general whose ‘victories’ came at such cost they felt like defeats. ‘One more such victory and we are undone,’ he said.)

One positive strand of the socialist onslaught on capitalist ideology was that they explained that a Pareto optimum was meaningless as a real guide to human happiness. In addition the socialists put forward all the arguments as to why the real capitalist economy can never approximate to the idealized model in the economic text books. This is because of unavoidable market imperfections, such as monopoly, positive and negative externalities and commodities with public goods characteristics (see the section on Equilibrium for a fuller treatment). And, where markets fail, it is right that the socialist state should step in.

Dickinson’s 1939 list of examples of market failure (in Economics of Socialism), for instance, involves cases where increased consumption would increase social welfare as a whole; where services would not be wasted if provided free; and where free service does not compete with marketed commodities. All basic wants should be provided free as of right. Collective needs must be provided as they are consumed in common (public goods), goods where individual enjoyment is bound up with others, for instance phone lines. It is not much good being the only person in town with a phone. It is in your interests that everyone else has a phone, so you can talk to as many people as possible. So encourage them to get plugged in! (This is called a network effect. It means that if phone companies had charged customers to install phones at marginal cost, we still wouldn’t have a national phone network.) The list is vague, but the intention was clear. Dickinson, after all was writing a contribution to a theoretical debate, not a manifesto. Large areas of economic life were to be removed from the aegis of the market and provided free – and this was the ‘efficient’ thing to do!

These instances of market failure are all recognized as ‘exceptions’ or ‘imperfections’ in the literature of bourgeois economics. Of course they are so pervasive that they make the search for the Holy Grail a trifling matter compared with the hunt for a Pareto optimum. Not only do they make welfare economics impossible of achievement. They also show that any equilibrium that the economy may reach cannot be assessed as optimal in any meaningful sense.

The socialists had attacked welfare economics as meaningless apologetics. Then they had reinstated it as a rule for administrators of socially owned enterprise! But there had to be limits to the marginal cost pricing rule.

The case of investment

The rate of investment, it was agreed, would be democratically decided – not ‘automatically’ by the supply of saving and demand for investment funds as neoclassical economists believe it to be under capitalism. Dobb had continually raised this side of the question.

Stiglitz’s 1994 work Whither Socialism? extends the discussion on investment decisions which was part of the original debate. The socialists distinguished between primary uncertainty (uncertainty as to what the future holds) and secondary uncertainty. This latter form of uncertainty exists because one capitalist does not know what other capitalists are going to do. For instance he may be unwilling to invest until he knows all the others are going to expand production, thus providing a market for his firm’s goods. Socialism cannot do anything about primary uncertainty, for instance about the weather, but it can knit the uncoordinated decisions of individual economic ‘atoms’ into a plan. By publishing a plan the planning authority gives residual private owners or isolated managers of socialist enterprises clear guidelines as to how much they may prudently expand production and invest for the future. It breaks down bottlenecks imposed by secondary uncertainty.

Even the interwar socialists, influenced as they were by neoclassical conceptions, agreed that the level of investment would be determined by the state. Stiglitz agrees. “Thus, rather than there being a mechanism for coordinating investment decisions, market economies seem to provide incentives that provide obstacles to coordination” (Whither Socialism? p17).

Large individual investments would also be subject to a democratic decision-making process. Then there was government redistribution from rich to poor and extensive free provision. The debate had exposed the limits of laissez faire (and its ideological cloak of invisibility, welfare economics) as a guide to policy in the socialist reconstruction of society. But that should have been obvious from the start.

Not all socialists were convinced that planning the economy could be a simple process of cold calculation.

The Trotskyist case

“If there existed the universal mind that projected itself into the scientific fantasy of Laplace, a mind that would register simultaneously all the processes of nature and of society, that could measure the dynamics of their motion, that could forecast the results of their inter-reactions, such a mind could of course a priori draw up a faultless and exhaustive economic plan, beginning with the number of hectares of wheat and down to the last button for a vest..” It is clear that the author thinks no such mind exists. And that planning will inevitably be a more hit and miss affair even with the mass involvement of the working class. The author is Leon Trotsky, criticising the excesses of Stalin’s first five year plan (Soviet Economy in Danger p 113). Reading this 1932 work, it is quite clearly influenced by his comrade Christian Rakovsky’s pamphlet The Five Year Plan in Crisis. Rakovsky, writing from inside Russia in 1930, was emphatic that Stalin’s Plan was, in many respects, a shambles. The quote from Trotsky was picked up by Abba Lerner and injected in to the debate, presumably as a dig at the slavish Stalinist Maurice Dobb.

Second thoughts from the defenders of capitalism

The capitalist apologists also did an about turn. Von Mises had begun in 1920 by asserting that socialism was ‘impossible’. His colleague von Hayek moved from arguing that socialism was impossible because of calculation problems to the case that socialism was ‘complex’ to achieve – not the same thing at all. In other words he was appropriating Trotsky’s argument. Hayek, argued, “Mises had originally used the somewhat loose statement that socialism was impossible, while what he meant was that socialism made economic calculation impossible.” (Nature and history of theproblem pp 36-37) The reason for the climbdown may lie in external events. The infant Soviet Republic in 1920 must have seemed to a hostile (and uncomprehending) observer such as Mises to have been in its death throes. He wanted to dance on its grave.

His celebrations were, however, premature. In 1935 it was world capitalism that was in dire straits, while Russia seemed to be soaring ahead. How would Hayek deal with that? “It follows that the excellence, from a technological point of view, of some parts of the Russian industrial equipment, which most strikes the casual observer and which is commonly regarded as evidence of success, has little significance as far as the answer to the central question is concerned.” (In The present state of the debate p 209) When the facts get in the way of a good theory, ignore the facts! Moreover, in his anxiety to dodge and weave away from the assault of the socialists, Hayek ends up belittling the ‘devastating’ critique of socialism he was supposed to be defending.

Hayek’s work increasingly moved away from any notion of equilibrium, which he now regarded as the high ground of socialist thinkers. The socialists, he stated, “have an excessive preoccupation with problems of the pure theory of stationery equilibrium.” (Socialist: calculation: the competitive solution p 131). Maurice Dobb, from the Communist Party, had made such a critique earlier in almost identical terms (in Political economy and capitalism). Now this is all rather ironic because the whole theory of general equilibrium had been developed, as we have shown, as an elaborate cathedral of concepts to justify capitalism.

Instead Hayek emphasized the economy as a dynamic process, not a state of equilibrium. Real gains in living standards came not from equilibrium states that optimized welfare, but from the dynamism of entrepreneurs. In chasing the pot of gold at the end of the rainbow they drove the economy forward. Gains in productivity were the real welfare benefits of capitalism. All this sounds like a right wing reading of Marxism. Can it be that the founder of the modern Austrian school of economics was Leon Trotsky?

The obsolescence of the market

Desai comes to much the same conclusion as we do – that the debate actually showed the limits of neoclassical welfare economics. “(I)n 1940, Hayek tried to point out patiently that this ‘solution’ solved none of the real-life difficulties. For example, goods made in anticipation and bought ‘off the shelf’ could be considered to have demand and supply curves. But big, bulky products – ships, large machines – were made to order, and had no demand or supply curves. Or again, he pointed out that saying that factory managers should treat prices as given does not clarify for how long they were to stay given. But then, the Walrasian system did not delve into such nitty-gritty issues. It was the lack of realism in mathematical economics, hailed as a pinnacle of the achievement of the marginalist school, which proved the undoing of the liberal critique of socialism.” (Marx’s revenge p 195). Here Desai is quoting almost word for word from Hayek’s 1940 contribution in Socialist Calculation: the Competitive Solution.

Meghnad has no idea that the points Hayek is ramming home, and that he is agreeing with, are lifted from Marxist analysis. He seems also to be unaware that Hayek is not just developing a critique of welfare economics. He is also demonstrating the obsolescence of the market, of which neoclassical economics is an idealised model. That is why the world is ready for socialism. The fact that the market no longer rules large areas of economic life was the real lesson of the debate.

Under Hayek, the Austrian school were reinventing themselves as a right wing maverick tendency within bourgeois economics. This had not always been the case. Lavoie, sympathetic to their cause, admits in his survey, “Most histories of thought treat the Austrian tradition of economics as a branch of neo-classical economics parallel to the Marshallian and Walrasian branches and it seems that this was the view of the Austrian economists at the time of the debate.” (Rivalry and central planning p 6). Hayek had co-opted part of the Marxist argument about economic dynamics and equilibrium as an illusion, or at best a moment of becoming, and was using it as a defence of capitalism.

Welfare economics was in the wars. Economists firmly in the neoclassical tradition such as Arrow and Debreu demonstrated that without perfect information, any equilibrium need not be optimal. But perfect information is impossible! In any case how do we find out in a world where we cannot know anything for sure? Only by groping forward, by doing something and seeing what happens.

Nove’s contribution

This approach seems to have become the new orthodoxy. It argues that socialism is impossible because of the sheer complexity of the economy. Alec Nove’s book The Economics of FeasibleSocialism rehashes the debate. Nove asserted there were 12 million commodities in Stalinist Russia. How on earth would it be able to plan, working out the interconnections of each of 12 million commodities? Bureaucratic bumbling was inevitable. “The economy cannot be planned and run ‘like the post office’. It is not just a matter of technique accounting-arithmetic, as Lenin (before 1918) seemed naively to imagine…In the USSR at this time” (1983 – MB) “there are 12 million identifiably different products (disaggregated down to specific types of ball-bearings, designs of cloth, size of brown shoes, and so on). There are close to 500,000 industrial establishments, plus, of course, thousands of construction enterprises, transport undertakings, collective and state farms, wholesaling organs and retail outlets.” (Economics of Feasible Socialism p 33)

Nove has been answered by a nice little piece posted on the internet by L. Proyect (Computers and Alec Nove’s market socialism). Nove was not an expert on computerisation, and neither am I – but Proyect is. “I have worked as a systems analyst, database administrator and computer programmers since 1968 and am astonished Nove does not recognise that these types of tasks have long since been relegated to large-scale automation… For example, a system which can automate the assembly and subassembly of parts and components is known in my trade as a ‘bill of materials’ database application. It enables managers to keep track of what parts are required to put together an automobile, an aircraft engine, a mainframe computer, etc…

“I was won over to socialism in the same year I first became a computer programmer. I always used to stress to comrades that it seemed that computers (in those days IBM 360s) made socialism objectively possible for the first time in history. If nothing else, this conviction has only deepened while bureaucratic socialism has entered into crisis or disappeared.

“I think that Lenin’s claim is as true as ever if it is modified in the following manner. ‘Capitalism has simplified the work of accounting and control, has reduced it to a comparatively simple system of bookkeeping that any literate person can do with a computer’.”

Stiglitz

Later economists have made a livelihood by exploring the consequences of economic activity in a world of imperfect, and unevenly shared, information. One such is Joseph Stiglitz, who readers may know was once chief economist of the World Bank. He then blew the gaff on the international financial institutions in books such as Globalisationand its Discontents. Stiglitz wrote a book in 1994 that was a sort of belated contribution to the socialist calculation debate. Although the book is entitled WhitherSocialism? it is not aimed primarily against the interwar proponents of the socialist case. Rather it is written to explore the limitations of modern welfare economics. “The first fundamental theorem” (of welfare economics) “asserted that every competitive economy was welfare efficient,” we are told (Whither Socialism? p 27). “The second theorem asserted that every Pareto-efficient allocation could be attained through the use of market mechanisms” (ibid p 45). The two fundamental theorems make up what Stiglitz calls the ‘standard model’. How is this a criticism of the socialists? Because they mimicked a market to produce a ‘socialist’ Pareto optimum, Stiglitz correctly identifies them as applying the standard model to socialism.

Stiglitz’s main purpose is to investigate how conditions of pervasive uncertainty and also of asymmetric information, encapsulated in what he calls the Greenwald-Stiglitz theorem, affect economic outcomes. Asymmetric information means one negotiator knows more than the other. Stiglitz quotes the maxim appropriate to such cases, ‘I wouldn’t want to buy something from someone who is willing to sell it to me.’ Stiglitz has no idea that this haggling process demonstrates our central contention, that market relations are increasingly obsolete. It is time that conscious planning of the economy, and our lives, took over.

Surprisingly, Stiglitz raises the question of incentives as a major objection to socialism. Of course the anti-socialists had mentioned in the inter-war debate the problem of committing socialist managers to optimizing social welfare as a whole rather than pursuing their own interests. The theoretical basis for this belief seemed to be nothing more than a pessimistic understanding of ‘human nature’.

Stiglitz’s espousal of incentives is a little more nuanced than the original generation of anti-socialists, for whom it was a second string after their main argument on economic rationality. The anti-socialists didn’t labour the point, presumably because they thought it obvious from ‘human nature’ that administrators of socially owned firms would loot public resources if they could. For this to be a telling argument against socialism, they have to be able to persuade us that this cannot happen under capitalism.

Ownership and control

The socialists, for their part, seem to have proceeded from the unstated view that interwar capitalism had developed a separation of ownership and control. This view was confirmed by the empirical studies of Berle and Means at the end of the decade (The modern Corporation and Private Property). They showed that managers who might hold relatively small shareholdings in the firm, managed it in the interest of absentee shareholders. From the separation of control and ownership, was posed the consequent possibility of managers pursuing their own interests rather than ‘maximising shareholder value’, as a reality of modern capitalism.

The counter-argument to this, put by what the advocates see as the ‘Anglo-Saxon’ school of capitalism, is that the allegiance of managers to the ‘maximisation of shareholder value’ can be secured by making them shareholders. This was the justification for inventing executive share options.

The Marxist position was outlined by Lenin in his book Imperialism, the HighestStage of Capitalism, when he explained that the ‘democratisation of capital’ (through widespread share ownership) “is in fact one of the ways of increasing the power of the financial oligarchy.” (Imperialism p 45). So the Marxists don’t deny as a fact the separation of ownership and control demonstrated in Berle and Means’ research. They pointed to this as a trend decades before their empirical work became available. They regarded this trend as a sign of the increasing parasitism of the capitalist class. But they rejected interpretations of the data that tried to show that share holding was becoming ‘democratic’ or that as a result capitalism had changed its spots.

The separation of ownership and control had been observed as a fact decades earlier – see for instance the quote from Shaw in the section on the transformation problem. This did not mean there was no potential conflict between capitalist owners and managers, but that the problem would be no more deep-seated with the transition to socialist ownership, with managers following rules dictated by welfare economics. None of the socialist participants raised the question of workers’ control as a check over unaccountable managers inclined to bureaucratic aloofness. This, in our opinion, was a grievous weakness.

But Stiglitz’s criticism is no more applicable to the Lange-Taylor solution than to capitalism. “The socially acceptable (or desirable) distribution of wealth almost inevitably entail a separation of ownership and control, leading to the same kind of incentive problems for market economies as are associated with nonmarket economies” (Whither Socialism? p 63).

Outside the arena of orthodox economics it has been well understood, and firmly in accordance with common sense, that most of the participants in a profit making firm have no incentive whatsoever to maximise shareholder value. These ‘participants’ are called workers. Here’s Herbert Simon. “Most producers are employees, not owners of firms…Viewed from the vantage point of classical theory, they have no reason to maximise the profits of firms, except to the extent that they can be controlled by the owners…Moreover there is no difference in this respect among profit-maximising firms, non-profit organisations and bureaucratic organisations…The conclusion that organisations motivated by profits will be more efficient than other organisations does not follow in an organisational economy from the neo-classical assumptions.” (Quoted in Stiglitz – The Roaring Nineties pp 284-85)

Insiders and outsiders under capitalism

The issue of share options to unify the interests of managers with those of the owners was a huge scandal in cases such as the collapse of Enron, where ‘insiders’ walked out from the ruins with their fortunes intact while outside shareholders, including the workforce, were ruined. Stiglitz criticises this in his book, The RoaringNineties. “These activities of Chief Executive Officers did not seem to be in the general interest. The critics were right, and ‘market failure’ theories helped explain why. Among the ‘market failures’ to which our research called attention were those associated with agency problems, problems where one person has to act on behalf of another. Because of imperfect information it is often difficult to make sure an agent does what he is supposed to do, and because of the failure to align incentives it is often the case that he has not.” (The Roaring Nineties p 14).

The consequences in the Enron scandal, and the accountancy swindles that accompanied it, are pointed out on page 126. “Stock options – as actually practiced – did not provide much of an incentive to do those things that would increase the long run value of the firm. Stock options meant that executive pay depended on stock prices in the short run, and in the short run it was easier to improve the appearance of profits than to increase true profits.”

The point to bear in mind is that none of Stiglitz’s criticism is aimed at Marxist socialism. It is intended as a critique of a model which tries to defend socialism in terms of bourgeois welfare economics, and which reduces the planning process to a matter of managers, under no check of workers’ control, applying the rules of marginal cost pricing.

Stiglitz was more concerned with managers not knowing where the true interests of the socialized firm lay, because of inevitable ignorance, than with the crass earlier view that, ‘they’ll all be on the take.’ In fact Stiglitz provides a gloomy view of any form of economic activity. We’ll always be bumping around in the darkness because of lack of knowledge. But competition between firms allows us to grope our way forward. That is his case for capitalism

In 1920 we were told socialism was impossible because no rational economic calculation was possible. Three quarters of a century later Stiglitz is still telling us socialism is impossible. But now rational economic calculation, it is admitted, is not possible under capitalism. But at least capitalists can feel their way towards some sort of concept of external reality, some functioning arrangement of economic activity. Socialism rules out even this form of blind man’s buff.

In fact Stiglitz’s work shows something different from what he intends. On p 35 he shows that market relations are often purely formal. “Farmers have a strong incentive to sell their crops on futures markets, but most do not avail themselves much of this opportunity, and for good reason. Those markets are dominated by five large trading companies who have every incentive to be more informed than the small farmer.” (Whither Socialism?) They also have much more financial muscle. Beneath the veneer of ‘free and equal’ exchange is the reality of bullying and brute economic force.

If the five trading companies were taken over as part of a world wide social revolution, they could communicate through price signals to millions of atomised small farmers as to what crops were wanted in what proportions to serve as part of a global plan. For their part, the small farmers need not fear being ripped off, as they are under capitalism.

All the evidence Stiglitz provides in his concrete analysis points to the fact that really markets are fading away. “The market socialist model – and the neoclassical model – both fail to recognise the importance of the interface between producers and those who use the products being produced. The central message of these models, that communication between producers and consumers could be limited to price signals, is fundamentally wrong.” (Whither Socialism? p 85) Actually that is the case for democratic planning in a nutshell!