Non-Marxian Socialism

 Market Socialism  

   

 

Aslund on
“Market Socialism
or the Restoration of Capitalism”

by Andrew Chan

X

 

When the Eastern European countries jettisoned communism in favor of a more market-oriented economy in 1989, there was confidence in the minds of many that a new beginning had emerged. For the first time, free elections and a host of new political parties made their way into people’s everyday lives. There was a collective sense of optimism that the economic growth experienced during the socialist regime would improve immensely. Instead, the opposite occurred in 1990, the year after the transition. The economic growth in 1990 was one of the worst in decades and suddenly pessimism about the implementation of the market socialist system surfaced. Currently there exists a prevailing attitude among the population in that only a fully effective market system of capitalism can salvage the dismal failures of the socialist systems in Eastern Europe. The essential questions that arise were: Are the market socialist systems second-rate and inferior to market-capitalist systems? Can market-socialist economies actually work efficiently? In his book “Market Socialism or the Restoration of Capitalism?”,  Anders Aslund explores the different aspects between capitalist and market socialist systems and attempts to shed light on why the reform of socialist economy was regarded as a failure for Eastern Europe. However, despite being perceived as a failure, Aslund does point out some positive facets of the market socialist system.

 

At the present, there exists a fervent belief among the population that only the materialization of fully natural system of capitalism would be able to rescue the former socialist economies in Eastern Europe. Aslund describes that under capitalism there exists private ownership of the factors of production: land, labor, and capital. An individual has the right to control the goods by either purchasing or selling them. Private property is supposed encourage thriftiness and serves as a stimulus to individual initiative and industry, both of which are crucial for rapid economic growth. The types of goods produced in a capitalist economy are determined by the managers of enterprises or by individual entrepreneurs. The profit motive is, of course, the main attraction that draws managers to produce the goods in the first place. In private enterprises, economic profits are necessary for survival, since those that incur economic losses will go bankrupt and lose the means of production. Capitalism can therefore act as a gauge of whether a specific item should be produced or not, given its success in the marketplace. Although modern capitalism may be seen as an immediate solution, Aslund points out that one also has to consider the history of negative effects that can potentially occur by implementing such a system. One of the periods that Aslund described was the Industrial Revolution. The Industrial Revolution was widely regarded as the hallmark of capitalism. The development of machinery and rapid industrialization revolutionalize the Western economies. What many people, Aslund point out, did not realize was that the Industrial Revolution also contributed to many negative environments. Among them were hazardous working conditions, dangerous equipments, and a polluted environment, all of which were detrimental to the welfare of the labor force. In addition, average wages were often low and thus contributed to only minimal and gradual improvements in the standards of living. It is pointed out that excessive reliance on the capitalist markets system would undoubtedly produce these undesirable results. Other unfavorable conditions can include:
  • Unequal distribution of income
  • Unemployment due to insufficient consumer spending
  • Inflation and deflation (volatile fluctuations in business cycles)
  • Undesirable personal qualities such as competitiveness, individualism, and hostility.

 

Of course, the negative implications that are described above should not be interpreted in a way that capitalist systems are totally undesirable. On the contrary, capitalists do and can produce many positive results. For example, capitalism fosters innovation and requires firms to be as efficient as possible. In addition, the price system inherent in a capitalist economic system determines efficient resource allocation and private property rights provide many incentives to save and produce. It is assumed under a capitalist system that people are rational and thus would try at all times to promote their own personal welfare. This self-interest, would in turn promote the interests of the society as a whole. Capitalism can potentially create a stable middle-class, thus providing the necessary conditions of external capital flow for rapid growth as well as abolishing the priority of socialist goals. A powerful argument among the proponents of capitalism, Aslund point out, is that capitalism has proved to be the natural state of society, into which one should return after having subjected to painful experiments in socialism. It is widely believed that only the dominance of ownership can form the basis for the rapid increase in the small and medium-scale enterprises needed for competition and technological progress. An example are the economic reforms in Eastern Europe which failed to significantly improve the antiquated socialist system and is now trying to restore versions of a modern capitalist system.

 

 Market socialism, on the other hand, is essentially a mixed system containing characteristics of both capitalism and communism. Although many definitions exists under the term market socialism, in general elements of communism are infused into the market socialist system while some elements of capitalism are retained as well. For example, aspects of private ownership of property are retained while state ownership in production and distribution of goods are also preserved in the economy. Today market socialism is closely associated with promoting social welfare. For example, the state assumes the responsibility to protect all its citizens with a variety of transfer payments such as social security and various health benefits.
Market socialism, on the other hand, is essentially a mixed system containing characteristics of both capitalism and communism. Although many definitions exists under the term market socialism, in general elements of communism are infused into the market socialist system while some elements of capitalism are retained as well. For example, aspects of private ownership of property are retained while state ownership in production and distribution of goods are also preserved in the economy. Today market socialism is closely associated with promoting social welfare. For example, the state assumes the responsibility to protect all its citizens with a variety of transfer payments such as social security and various health benefits.

 

The real power of the market socialist regime does not lie in its measurable affects on the people, but rather in its goals. Market socialism was a new system of living which sought to remove the social echelon to create a classless society. As to the question of the level of success socialist systems achieved in the real world, in hindsight one can easily notice that the system failed to be implemented successfully in Eastern Europe, as in the Soviet Union. The rigidity and stubbornness to stabilize the economic environment, failure to maintain financial discipline, recurrent amendments and sudden reversals in planning targets, unwillingness to fully expose the business enterprises to the market, and the lack of coherent economic and government policies all led to the breakdown of the socialist system. However, it does not detract from the fact that the market socialist system attacked the most destructive aspects of modern society, social stratification, and economic disparity. Taken objectively, the question of the positive effects of socialism in Eastern Europe can truly be a difficult one to access. Indeed, attempting to assemble convincing evidences that indicate socialism had some positive aspects might seem, at the very least, complicated and implausible. However, as with any socioeconomic system, there always exist a few elements that can be regarded as positive in the context of the whole system. One can assert that the market socialist regimes of Eastern Europe did in some respects provide a variety of social benefits for their respective populations. Indeed, the availability of transfer payments such as healthcare, housing, social security, and pensions did provide a valiant attempt to improve the standards of living of the general population. In addition, prospect of full employment and an equal distribution of income did give the societies an outward appearance of living up to the ideals of market socialist theory. Of course, this cannot in any way reverse the negative impacts of the market socialist systems, but it does provides a indication to the resilience and ability of the people in Eastern Europe to preserve their national identities and to some extent, their way of life. Of course, the very fact that these socialist systems were dismantled during the late 80s provides proof that the negative aspects of socialism that inundated the societies of Eastern Europe (lack of personal freedom and choice, loss of initiative, poor quality of goods and services, etc) do outweigh the positive aspects mentioned above. In many respects, socialism can be regarded as “a system that might have been, but never was.” (Aslund, p18). However, it was just a shame that the positives aspects were not given much attention.

 

References

Anders, Aslund, Market Socialism or the Restoration of Capitalism. Cambridge [England] ; New           York : Cambridge University Press, 199

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