Market Socialism Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

Market socialism is a political economic system employing the marketplace to distribute goods and services while still adhering to the basic egalitarian values of Marxism. Market socialism arose as an alternative to the centrally planned economy in the Soviet Union.

Karl Marx criticized capitalism and the use of markets to distribute goods and services for several reasons. In his Economic and Philosophical Manuscripts of 1844 and The German Ideology (1845–1846), Marx leveled a philosophical and sociological attack on capitalism. Capitalism destroyed the essential bonds that connected individuals, producing a sense of alienation from oneself, others, the process of production, and nature. These initial philosophical criticisms matured into economic arguments in the Communist Manifesto (1848) and in several volumes of Capital (Volume 1, 1867).

In his economic critique, Marx contended that capitalism involved the exploitation of the workers or proletariat by the bourgeoisie. While the proletariat was the source of all value, their labor power had been purchased by the bourgeoisie, who owned the means of production. This extracting of what Mar called the “surplus value” from the workers impoverished them, and, over the long term, the development of capitalism would increase the size of the proletariat at the expense of the bourgeoisie. Capitalism, as Marx described it in the Communist Manifesto, produced the seeds of its own self-destruction. Overall, Marx and Marxists depicted capitalism and the use of markets as producing social alienation; class warfare; and economic misery, inefficiencies, and inequalities.

Because of Marx’s attack on capitalism, the Marxist-socialist tradition was critical of markets. However, market socialism arose from three distinct sources. The first traces itself back to early efforts to revise Marxism to accommodate the theory to events that occurred after Marx died. One notable effort was by Eduard Bernstein in Evolutionary Socialism (1898). Bernstein’s democratic socialism is not to be confused with market socialism. Bernstein essentially accepted Marx’s criticism of capitalism and markets, yet the former’s efforts to accommodate parliamentary democracy with communism left open subsequent attempts to make other revisions to Marxist theory and practice.

A second source of market socialism occurred in the early 1920s after the 1917 Russian Revolution. Here, Vladimir Lenin, following the revolution and the instability flowing from the transition to a centrally planned and controlled economy, instituted in 1921 the “new economic policy” (NEP). NEP allowed for some private ownership in agriculture and industry as a way to encourage production. Following Lenin’s death in 1924, Nicholas Bukharin, another leading communist official, advocated many of the NEP reforms. In 1928 Joseph Stalin ended NEP and the use of markets when he instituted the first of several five-year plans.

Perhaps the most important theoretical arguments for combining Marxism or socialism with economic markets are in the works of Polish economist Oskar Lange (1904–1969). Rejecting Marx’s labor theory of value, Lange sought to combine neoclassical economic theory, especially its concepts on pricing, with some of the central planning concepts of Marxism. In his most famous book, On the Economic Theory of Socialism (1936), Lange argued that central planning boards (CPBs) should set general pricing and goals for a national economy but that markets could be used to direct production. The state could run an efficient economy with markets that furthered socialist goals. It is this combining of macro socialist ideas and CPBs with markets that constitute the core concept of market socialism.

The most elaborate efforts at implementing market socialism came in Yugoslavia in the 1950s and 1960s under Josip Tito. The state had a CPB setting investment policies and goals, with workers’ councils managing enterprises that competed against one another in the marketplace. Hungary, Poland, and Czechoslovakia, under Communist Party head Alexander Dubcˇek, also experimented with market reforms while still under communist control, with varying economic success. Even the Soviet Union began to liberalize its economic policies to allow for some market reforms in the late 1980s before its breakup.

Today, the vestiges of market socialism may be found in European welfare states such as Austria and the Scandinavian countries, which combine the use of economic markets for some items and an extensive public sector delivery of basic goods such as health care and other necessities.

Bibliography:

Lindblom, Charles E. Politics and Markets: The World’s Political-Economic Systems. New York: Basic Books, 1977.
Nove, Alec. The Economics of Feasible Socialism. London: George Allen and Unwin, 1985.
Pateman, Carol. Participation and Democratic Theory. Cambridge: Cambridge University Press, 1970.

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