Planned Economy vs. Free Economy

[dmcauliffe09]

In a "free economy," the price of goods is based on the system of supply-and-demand. The word "free" is misleading, because it really means "free of control and thus subjected to the wrath of economically retarding recessions." It should be called a "wild economy." Anyway, there are obviously pros and cons to a planned economy (though this is far from being the only form of socialist economy), but I think that it would be much more beneficial. It would be much easier to control, obviously, but on the flip side, the problem of surplus and shortage comes up. Thoughts?

[cyu]

Supply and demand / market economies only work when their democratic aspects are stronger than their authoritarian aspects.

As long as everyone has similar spending power in a market economy, then it approaches economic democracy. Each unit of money spent is a vote for where the economy should put its resources.

However, once in the clutches of capitalism, spending power is no longer equal. As the difference in economic power between the rich and poor grows ever greater, the market economy becomes less and less able to set its priorities right. Because each wealthy person has many more "votes" (money) than each poor person, larger and larger percentages of the economy's productive resources will become devoted to serving the rich. This is when you get mass poverty and nations start to move toward authoritarian rule (unless it's balanced out by revolution).

[Bilan]

Supply and demand / market economies only work when their democratic aspects are stronger than their authoritarian aspects.
How is that possible? The nature of capitalism dictates that it is coercive due to the very social relationship constructed around the movement and development of Capital. They are in a constant state of conflict - i.e. Between Capitalists (whom embody capital) and the working class.
For it not to be "authoritarian'' requires it not to have the domination of capital. That is simply not possible.



As long as everyone has similar spending power in a market economy, then it approaches economic democracy. Each unit of money spent is a vote for where the economy should put its resources.

How? The necessity of producing capital necessitates that classes exist. The two are inseparable, and you merely recreate primitive capitalist modes of production which will redevelop.



However, once in the clutches of capitalism, spending power is no longer equal. As the difference in economic power between the rich and poor grows ever greater, the market economy becomes less and less able to set its priorities right. Because each wealthy person has many more "votes" (money) than each poor person, larger and larger percentages of the economy's productive resources will become devoted to serving the rich. This is when you get mass poverty and nations start to move toward authoritarian rule (unless it's balanced out by revolution).

I don't know what you mean by authoritarian rule.

[Schrödinger's Cat]

This is a false dichotomy. Planned economies can and should be just as free as markets. What exists under capitalism is the development of micro-states in a market: the landlord acts as his own governor over a geographic area. He (or she, or they) claim ultimate authority with little compromise.

As my user title indicates, I think there is a perfectly legitimate reason for supporting free market socialism (mutualism). Individuals should decide for themselves what works.

[cyu]

They are in a constant state of conflict - i.e. Between Capitalists (whom embody capital) and the working class.



Yes, that is a good characterization of capitalism, but I don't automatically associate markets with capitalism. What would a market without capitalism look like? It would just be many industries / companies, each run democratically. The profits wouldn't go to anybody but the employees themselves.

For example, the employees of GM stage a coup and one day lock the CEO out of his office. They then start to vote on the long term strategies of the company and vote in a new pay structure. Soon, all companies in the economy follow the same example. Thus democracy has replaced authoritarianism in the corporations throughout society.

However, the employees of GM (and the various companies) may still reserve the right to set prices for their products as they see fit. Thus a market economy is maintained.

The point I was making earlier was that if this resulted in people having similar amounts of money to spend, then market mechanisms would distribute the world's resources more evenly across the population, rather than focusing it on the rich - thus more economic democracy.

[turquino]

I don't understand why a market would need to be preserved, or even be desirable in a socialist system. Firstly, if different worker controlled firms are competing for profit (as that's what a market entails), then there will be inevitable unemployment as some firms fail and others attempt to maximize profitability. Monopolies also arise naturally out of free competition. The result is the more successful firms will have wealthier workers who set demand in the market for luxury items, so that now some parts of the economy dedicated to luxury consumption over need. To me, this market socialist system starts to look less and less like an economic democracy. On the other hand, planned socialist production aims to abolish commodity production with its exchange values in favour of ever-expanding production for use.

[cyu]

I don't understand why a market would need to be preserved

I don't feel a market has to be preserved - I'm just saying I'm not totally against a market, provided certain conditions (equal spending power) are met. If you replaced a market with some other form of economic democracy, I'd be fine with that too.



Firstly, if different worker controlled firms are competing for profit (as that's what a market entails), then there will be inevitable unemployment as some firms fail and others attempt to maximize profitability. Monopolies also arise naturally out of free competition. The result is the more successful firms will have wealthier workers


Only in certain circumstances, but not in this one:

Everyone in the economy gets paid the same monthly salary - regardless of whether you're a child, an engineer, retired, or whatever (yes, people in more difficult jobs may get more "respect" than other jobs, but that's just social conditioning and not related to their salaries). They then spend that money in a market to buy what they want / need. Market pricing still determines prices.

Here's the rub: instead of higher profits going to the producers, the extra money going into those industries just means there is more demand for those products and services. So the money is used to pay new producers in those industries, thus increasing supply - and everyone still has the same monthly salary.

See also:
http://everything2.com/node/1949681 (http://www.anonym.to/?http://everything2.com/node/1949681)
http://everything2.com/node/1951931 (http://www.anonym.to/?http://everything2.com/node/1951931)

[Hyacinth]

Market mechanisms can indeed be employed by planners in the way cyu has suggested; you need some sort of means by which to track and respond to consumption, and markets were, for most of recorded history, the most effective means by which this could be achieved. The reason some leftists, myself included, oppose the use of these market mechanisms to achieve this purpose is not because markets are ideologically incompatible with socialism (provided that there is democratic oversight), but rather due to technical reasons: markets are antiquated, we can track consumption via other methods, such as, for example, by keeping track of requisitions made by consumers in real time over a network via things like barcodes, etc. Basically by utalizing the same sort of mechanisms already employed by large and sucessful capitalist enterprises, except by applying them to the entire economy.

[GPDP]

Plus, markets have a nasty little habit of being unable to deal with externalities. Even in the freest and most democratic of markets (i.e. mutualism), I'm afraid any sort of exchange or transaction would only involve the input of the parties involved in the transaction, without much regard to the extent to which said transaction would have an impact on others. Kinda like when a person buys a powerful but polluting SUV. The cost of cleaning up the environmental damage will have to be footed by people outside the transaction that landed you that SUV. Sure, the market could adjust appropriately if enough demand for, say, cleaner vehicles comes up, but that would be well after the fact, and by then people will have already been coerced into making up for that externality.

And therein lies my dislike for markets: they are, for lack of a better word, reactionary. They adjust as a reaction to trends, not out of conscious design.

[cyu]

Kinda like when a person buys a powerful but polluting SUV. The cost of cleaning up the environmental damage will have to be footed by people outside the transaction that landed you that SUV.


True, although most existing "capitalist democracies" have already found one solution to this problem: environmental regulation.

In a society where wealthy capitalists have no influence, I'd imagine projects for environmental cleanup or clean air engine research would get a lot more funding - after all, even the SUV buyers and producers want clean air. The only problem is that you don't go to a market to "buy" clean air.

This is similar to the problem of how roads get built. I would imagine there would be some common funding for various public projects, and everyone might be given 1000 "votes" as to how that funding is divided. If they like clean air more than roads, then maybe they use 200 votes on clean air, and 100 votes on roads, etc. In this way, everyone has equal say over what percent of the public resources go into what projects.

There will be a certain percentage of all economic resources devoted to public projects. Will this be more than 50%? I guess that would depend on the people and what they themselves choose. I think that once product advertising becomes a relic of history, replaced by advertising for what projects the society should pursue next, the percentage of people brainwashed by consumerism would fall dramatically.

[GPDP]

I find the idea of everyone having an equal amount of votes kind of unfair. What if a certain group of people are affected adversely by the building of a road in a certain location, say, through a local community farm? Shouldn't they have more say in the building of the road?

IMO, decision-making power should be vested upon individuals to the degree to which they are affected by the decisions being discussed. If you are not benefiting or suffering from the building of a road, then your say in the project should be marginal, though of course, your voice should always be heard if you so wish to speak.

[cyu]

decision-making power should be vested upon individuals to the degree to which they are affected by the decisions being discussed.


I actually agree completely with this. I was thinking more along the lines of how much funding to give to transportation in general (without specifying where road will go, etc), how much to give to energy research in general, how much to give to marine agriculture research in general, etc.

As far as the details go, yes, indeed if a decision hurts some people much more than others, those hurt the most should have the most say.

[MMIKEYJ]

In a "free economy," the price of goods is based on the system of supply-and-demand. The word "free" is misleading, because it really means "free of control and thus subjected to the wrath of economically retarding recessions." It should be called a "wild economy." Anyway, there are obviously pros and cons to a planned economy (though this is far from being the only form of socialist economy), but I think that it would be much more beneficial. It would be much easier to control, obviously, but on the flip side, the problem of surplus and shortage comes up. Thoughts?
I think a free economy meaning one that is controlled by millions of people coming together in the marketplace is much preferred to a controlled economy where things are controlled by a little elite group for their own personal benefit.

[bailey_187]

I think a free economy meaning one that is controlled by millions of people coming together in the marketplace is much preferred to a controlled economy where things are controlled by a little elite group for their own personal benefit.

:confused:


As we have now? :huh:

[cyu]

I think a free economy meaning one that is controlled by millions of people coming together in the marketplace is much preferred to a controlled economy where things are controlled by a little elite group for their own personal benefit.


That's why a market economy only works when all participants have relative equal amounts of spending power. Once you allow spending power to be concentrated, it destroys the ability of the market economy to set priorities as to what should be produced next.

[MMIKEYJ]

:confused:


As we have now? :huh:
We dont really have a free market right now even though most people think we do. Our entire monetary system is controlled and centrally planned.

And everytime they screw things up, free markets are the first thing to get blamed.

[bailey_187]

We dont really have a free market right now even though most people think we do. Our entire monetary system is controlled and centrally planned.

And everytime they screw things up, free markets are the first thing to get blamed.

So you want a freer market? :confused:

[MMIKEYJ]

So you want a freer market? :confused:
Yes.

Because nobody in Washington DC is smart enough to know how to run the economy.