NONMARXIAN   SOCIALISM

Market Socialism

 


MARKET SOCIALISM vs. CAPITALISM

Ranjeeta Prasad, May 2000
 

 

There have existed several forms of economic planning systems in human history.  Nonetheless, the ideal of a government-controlled and centrally-planned economic system has been the most influential and the least successful.  Although market systems have been predominant in most of the world, their ideal has become politically popular only in the late  20th century.(1)

Socialism, a government-controlled economic system, is one in which all means of production and all productive organizations are state owned. Also, this is seen as a way of organizing a classless society; the government is the employer and everyone else is an employee. 

Market socialism, a neoclassical socialist system, is one which has not been put to practice but looks promising.  In this system, enterprises are owned by the government but independently run by managers appointed by the government.  Like a manager of an enterprise in a capitalist system, the manager of this system also aims to maximize profits.  The government then allocates the profits to everybody as a "social dividend." 

Advantages:

1)Classless market system with a lower limit on income and no extreme poverty

2)Freedom from bureaucracies

3)Efficient use of resources and labor

4)Decentralization

Disadvantages:

1)No one to monitor the appointed managers

2)Difficulty in subsidizing unprofitable enterprises

3)Removal of competition

4)Lack of investment activities due to guaranteed distribution of capital and profits.

The main problem with this system is the conflict between the

decentralization and equality factors.  Decentralization demands a

debureaucraticized economy, with minimal central influence.  on the other hand, equality requires the elimination of private ownership of productive assets.  This may cause inequality in both assets and incomes, therefore of consumption.  As a result, enterprises become dependent on government and reduce their sensitivity to price changes therefore  making the control of costs a secondary objective.  The government in turn is forced to use prices, and not markets, to balance budgets.  It is also forced to use quantity targets as means of balancing the market. (2)

Capitalism on the other hand, is a social system based on "private

ownership of the means of production which entails a completely

uncontrolled and unregulated economy where all land is privately

owned."  Most importantly, capitalism is based upon individual rights

and reasoning; one is the owner of his own life, and has the right to live in any manner he chooses as long as he refrains from violating the rights of others. Therefore, the separation of economy and the state comes secondary to this aspect.(3) 

Unlike market socialism, capitalism does not assign any market authority to the hierarchy.  Instead, through private ownership and self-interest it aims to create social harmony.  Nonetheless, the government does play a significant role in a capitalistic society.  Its two main duties are to protect its citizens' rights (i.e. via police, military, court system).(3) 

Advantages:

1)Creation of wealth in the most efficient manner.

2)Higher standard of living

3)Numerous economic opportunities

4)Availability of sufficient products for everyone

Disadvantages:

1)Consumer preferences may be determined by addiction and persuasive   advertising

2)Welfare of the poor is often forgotten

3)Possibility of formation of monopolies; eventually hurting the consumers

4)Public goods may not be produced in efficient quantities

5)Markets may not always settle at optimal levels of supply and demand; stagnancy is possible

Although some contend that capitalism creates economic inequality through unequal earnings, it is important to remember that what one earns is a result of how much revenue or wealth he has created in his job or profession.  This explains why an actor earns $1 million per episode while a professor may earn a mere $60 thousand per year.  Despite such shortcomings of this system, it is by far the most efficient and pro-human in comparison to other economic systems, including the market socialism. Milton Friedman sums it up nicely in saying "... a major source of objection to a free economy is precisely that it does this task so well."(4) 

BIBLIOGRAPHY:

 

1)Economic Planning (Chapter 1), Rannac

2)"On the (Im)Possibility of Market Socialism," by Michael Keren

3)www.ocf.berkeley.edu/`shadab/capit-2.html#1

4)"Capitalism and Freedom," Milton Friedman

 

  

 

 

 

 

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