Excerpts from


by John Roemer

The demise of the Communist system in the Soviet Union and Eastern Europe has bolstered old arguments, … that socialism cannot exist, … I wish to argue that social­ism remains an ideal worth pursuing and a possibility in the real world. The argument in favor of a socialist economy, as I see it, requires some revision of standard views of what constitutes socialism. Clearly the Soviet model of socialist society is dead, but that does not mean that other, untried forms of socialism should be buried along with it.

This essay is a defense of … market socialism. The term comes to us from the “socialist calculation“ debate of the 1930s, whose principal protago­nists were Oskar Lange and Friedrich Hayek. …Lange … showed the possibility of combining central planning and the market, and Hayek retorted that planning would subvert … the mechanism that gave capitalism its vitality. Hayek‘s criticisms of market so­cialism, and more recently those of  Janos Kornai, are for the most part on the mark. But the experiences of capitalism, as well as of socialism, in the last fifty years suggest ways of reformulating the concept of market socialism in response to the Hayekian critique of its intellectual ancestor. My task in this essay is to propose and defend a new model that combines the strength of the market system with those of socialism. Such a model would be concerned with both ef­ficiency and equality.

Economic theory does not yet enable us to write a com­plete balance sheet of the benefits and costs of the market mechanism….. Economic theory can explain how, …a market economy will reach an equilibrium at which resources are allocated in a way that economists call Pareto-efficient… But this kind of static efficiency may be unimportant relative to the dynamic efficiency with which markets are often credited—that they produce innovations in technology and commodities effectively than any other economic mechanism could. Al­though we seem to have much evidence of market dyna­mism, we have no fully adequate economic theory of it: no one has ever produced a theorem proving that markets beat planning when it comes to innovations. …
The economic theorist must, therefore be much more agnostic about the effects of the market than are elementary economics textbooks and the popular press. Indeed, con­temporary economic theory has come to see that markets operate within a context of non-market institutions. These are, notably, firms, contract law, the interlinking institu­tions between economic and other actors (such as between the firm and its stockholders l and the state. Large capitalist firms are centrally planned organizations (in which internal transactions are not mediated by a price system), and they are usually run by managers hired to represent the interests of shareholders. This they do imperfectly, as their own in­terests do not typically coincide with the interests of share­holders. Contract law is an essential supplement to the market: long-term contracts, in effect, render it costly for the parties to return to the market during the life of the contract. Furthermore, in different capitalist economies dif­ferent kinds of non-market institutions have evolved — here, we do have somewhat of a real-life experiment that can help us evaluate alternative economic mechanisms. In Germany and Japan for example the institutions through which own­ers of firms monitor their managements are very different from those in the United States and Great Britain.
The market, in a word, does not perform its good deeds unaided; it is supported by a myriad cast of institutional characters that have evolved painstakingly over time, and in a variety of ways, in various market economies. This essay’s central argument is that these institutional solutions to the design problems of capitalism also suggest how the design problems of socialism may he solved in a market setting. The distribution of income in a market economy, according to this view, is, in the long run, determined by the relative scarcity of various factors of production principally human talents, including entrepreneurial talent. …. Firms are just the means through which entrepreneurs cap­italize their talent: .. any attempt to interfere with the operation of markers… will, on this view, only reduce overall welfare, as it will inevitably inhibit entrepreneurs  from bringing their talents fully into play.
Were this “naturalistic” view correct, egalitarians would have little remedy for inequality other than education, …. But the advanced capitalist economy, .. is in large part the product of large, complex institutions, whose operation depends upon the combined efforts of many “or­dinary “ people—ordinary in the sense that their talents are not of the rare variety … The wealth of society is not due primarily to rugged individualists, as it were, but is reproducible accord­ing to blueprints that are quite well understood. The market is necessary to implement competition and to economize on information, but not so much for cultivating the inspiration of rare geniuses.
A particular way in which the modern view of capitalism suggests a future for socialism is in its understanding of the firm as a nexus of relationships between economic actors (in particular those that economists call principal-agent relationships, …). … Firms, … are run by hired agents of their owners, and this suggests that hired agents could as well run firms in a socialist economy, one in which profits would be distributed even more diffusely than they are under capitalism. Indeed, the mechanisms that have evolved (or been designed) under capitalism that enable owners to control management can be transported to a socialist framework.
… the modern … view sees markets as part of a complex network of man-made insti­tutions, through which all individual contributions become pasteurized and refined. … Income distribution, in particular, is more mal­leable under the modern view; the door is opened to the possibility of reducing inequality substantially, … The specific task of this essay is to suggest ways in which such a reallo­cation of profit income may be effected, I also hope to challenge an oft-cited criticism of market socialism: namely, that it is an oxymoron, that markets cannot perform their good deeds without the essentially unfettered right to pri­vate property in firms and the corollary right to accumula­tion of capital.


What socialists want

I believe socialists want equality of opportunity for:


(1)  self-realization and welfare,

(2)  political influence, and

(3)  social status.

Self-realization is the development and application of an individual‘s talents in a way that gives meaning to life. This is a specifically Marxist conception of human flourishing. It is to be distinguished, for instance, from philosopher John Rawls‘s notion of fulfillment of a plan of life, for a plan of life might consist in enjoying one‘s family and friends, or eating fine meals, or counting blades of grass… One does, however, derive welfare from enjoying one‘s family and eating fine meals, and so I do attribute value to these activities in the socialist‘s reckoning.3
… Were equality of welfare the goal rather than equality of opportunity for welfare, then society would be mandated to provide huge resource en­dowments to those who adopt terribly expensive and unre­alistic goals. … Calling for equality of op­portunity for welfare, on the other hand, puts some respon­sibility on me for choosing welfare-inducing goals that are reasonable.
…. What distinguishes socialists or leftists from conservatives is, in large part, the matter of deciding what exactly is required to equalize opportunities. .., equality of opportunity requires that people be compensated for hand­icaps induced by factors over which they have no control… most socialists … believe that there is a realm for will, and hence it is important to insert the opportunity clause in any list of “what socialists want.“4
The statements are still inaccurate. For in­stance, what socialists really want is not equality of oppor­tunity for self-realization, but equality of such at a high level…. in other words, (1) says we should maximize, over all possible organizations of society, the level of opportunity for self-realization that can be achieved as an equal level for all. …
… imagine that we can rate each possible organization of society with a triple of numbers (a,b,c) where a is the degree of equality of opportunity for self-realization and welfare, b is the degree of equality of opportunity for political influence, and c is the degree of equality of opportunity for social status with that organization. What socialists disagree about is the prefer­ence ordering over all the possible combinations.
With the demise of what used to he called “actually existing socialism,“ the world has no model of any “feasible social­ism“; indeed, many people have concluded that no such model exists. …

Some socialists, and many Marxists, will strenuously deny that I have accurately portrayed here “what socialists want.“ They will say that what they want is the end of the system in which a small capitalist class lives off the surplus value that workers create and that is rightfully theirs—an end, that is, to exploitation. … I therefore see the kind of egalitarian philosophizing of this section not as an alter­native to Marx‘s theory of exploitation but as one compo­nent needed to make it ethically cogent.

G.A. Cohen (1990b) has recently suggested a politico-~ historical explanation for why many socialist scholars, for­merly content with the Marxist condemnation of capitalism based upon the expropriation of surplus value, now take political philosophy more seriously. It used to be approxi­mately true, he writes, that the working class:

 (1)            constituted the majority of society,
 (2)            produced the wealth of society,

 (3)            were the exploited people in society, and

 (4)            were the needy people in society.
Furthermore, the working class:

(5)            would have nothing to lose from revolution, whatever its upshot, and

(6)            could and would transform society.

It is no longer a good approximation of reality to say the working class is characterized by features (1) through (4). The proletariat, those who own nothing but their labor power, no longer constitute a majority of advanced capitalist means—and I will not here attempt to offer any explication of (2) and (3).

I am not saying that socialists should adopt the ethical theory that works best from the pragmatic viewpoint, let us say, of justifying calls for socialist transformation in today‘s world. My argument, rather, is that one of the ethical the­ories that is used is wrong, the one based upon self­ownership. Modern egalitarian theorists (whom I briefly discuss in §3) have argued definitively that the thesis of self-ownership is not a justifiable ethical stance. People do not deserve to profit differentially from the luck of the birth lottery, which distributes valuable assets (talents, citizen­ship, parents) in an arbitrary and highly unequal way. The only sound ethical argument for socialism is an egalitarian one.


Public ownership

Marx located the injustice of capitalism in exploitation, and the source of exploitation in private ownership of the means of production (MP). (There are different opinions concern­ing whether Marx viewed capitalism as unjust ….” I take the view that, whatever he believed, his argument shows that capitalism is unjust.) He also identified private ownership of the MP as the cause of another unattractive feature of cap­italism: its tendency to go through periods of crisis. The Marxist prescription was, therefore, to abolish the doubly guilty private ownership of the MP, and this prescription was interpreted by Lenin and the Bolsheviks to require state ownership of the MP. …
What should public ownership of an asset mean? That the people have control over the disposition of that asset and its product. … problems arise … whether a particular mechanism of popular decision-making in fact empowers the people in such matters…democratic elections in an environment with ample civil liberties constitute popular decision-making. … the democratic process makes public ownership … a rather weak concept. … For instance, in Eastern Eu­rope, many different proposals for what to do about the formerly state-owned firms are currently under debate. Some advocate a distribution of ownership of firms to the people through the dispensation of vouchers; some would sell the assets to the highest private bidder; some favor self-management by workers, others traditional state own­ership; still others want to turn the factories over to those who know most about the firms, the management and former nomenklatura. Any of these solutions might be cho­sen by democratic elections, in which case public owner­ship would voluntarily pass into some other form of ownership; that is, control of the means of production would be granted to some person or group.
Or consider the following: the government distributes a portfolio of stock in the nation’s firms to each young adult at age twenty-one and permits the person to trade that stock as she wishes during her life; she would collect the dividends that her portfolio entitles her to, but she would be forbid­den to cash in any stock. At death, her portfolio returns to the public treasury. Does this arrangement constitute public ownership of the MP? …

My view is that socialists have made a fetish of public ownership: public ownership has been viewed as the sine qua non of socialism, but this judgment is based on a false inference. What socialist want are the three equalities I enumerated in §1; they should be open-minded about what kinds of property rights in the MP would bring about those three equalities. …

Another instance of the fetishism of public ownership is the position common among socialists that the public should decide, presumably through some kind of represen­tative democracy, how to use the economic surplus (or, as economists say, how to determine the rate and sectoral dis­tribution of investment). .. I do not view popular or political control over investment as a right, as that reason implies..

…, political control of the investment process, which I think is important, is so not because those who produced the surplus have the right to allocate it, but because market failures of a conventional kind make it preferable….

. … in a market economy, the markets required to allocate investment efficiently do not exist, and investment has a number of external effects ….. The missing markets are called futures markets.

A category of property that deserves special mention is what William Simon (1991) has called social-republican property. This is private property owned by individuals but subject to two kinds of constraint: that “the holder bear a relation of potential active participation in a group or com­munity constituted by the property, and that inequality  be limited  among the members of that group or community”. (p.1336). Simon shows that there exist a wide variety of property rights in the United States and other capitalist economies that satisfy these two conditions, …

The labor-managed firm is perhaps the most well-known example of social-republican property, but there are many others. Rent control, which typically gives the renter secu­rity of tenancy at a controlled rent, is one.. Housing cooperatives are another instance. The Uniform Partnership Act in the United States makes key partnership rights nontransferable and provides, in the absence of contrary agreement, for equal division of profits among business partners.
In sum, I view the choice of property rights over firms and other resources to be an entirely instrumental matter; possibilities for organizing such rights should be evaluated by socialists according to the likelihood that they will in­duce the three equalities with which socialists are con­cerned. The history of socialism on the question is, very crudely, as follows: Private property, characteristic of cap­italism, was under socialism declared to be public property, which became, under the Bolsheviks, state property. For complex reasons (including bureaucratic ossification and class interest), this form of ownership remained dominant for seventy years. The labor-managed firm remained a pe­ripheral form of ownership in the socialist movement. The widest variety of property forms became visible in modern capitalism, not socialism: nonprofit firms, limited-liability corporations, partnerships, sole proprietorships, public firms, social-democratic property,  labor-managed firms, and other forms of social-republican property. The prop­erty forms that will best further socialist goals may involve direct popular control or state control of the means of pro­duction in only a distant way.