Die Neue Zeit
24th September 2011, 23:32
Behavioural Political Economy and Economy-Wide Indicative Planning
“I have always had a visceral revulsion for the idea of ‘false consciousness’. As a student radical in the early 1970s, I was continually being warned about the dangers of this social disease. Many on the left argued that the general public, specifically the working classes, did not understand what their real interests were. The self-appointed carriers of true consciousness pointed to certain areas of plebian behaviour, such as seeking solace in football or voting for the UK Conservative Party, as proof of the widespread nature of ‘false consciousness’.” (Frank Furedi)
Many who subscribe to the notion of “false consciousness” see their relationship with more ordinary workers as one between parents and preteens. When considering that many of them in turn do not have working-class backgrounds or occupations, one cannot help but consider their attitude to be as patronizing as the more blatant attitudes of the better-off classes. In political reality, however, the analogy of social adolescents is far more appropriate. Social adolescents are maturing, may physically live on their own upon individual graduation, but will live their own lives upon maturity. In this period, parents tend to have a generally passive relationship with social adolescents, while high school teachers expect more maturity. Likewise, more ordinary workers tend to have high and sometimes erratic and mixed aspirations, but no advanced game. A more slang, provocative, yet light-hearted equivalent of this would be horny teenagers.
Meanwhile, academic Andrew Vincent summarized the evolution of Marxist attitudes towards “false consciousness” in Modern Political Ideologies:
Engels in particular coined the now notorious term "false consciousness" for ideology, something that Marx did not do [...] The problem of ideology in Marxism is further complicated when we move into the twentieth century [...] In Antonio Gramsci we see the most sophisticated, if equivocal, treatment of ideology. For Gramsci, domination under capitalism is not achieved simply by coercion, but subtly through the hegemony of ideas [...] Gramsci thus called for a struggle at the level of ideology.
“False consciousness” gave way to plain ideology, yet Antonio Gramsci focused too much on the superstructure in Marx’s base-superstructure analytical framework and also stuck with the reductionism of that framework. It simply does not describe the motion, flux, shifting balances of forces, and other changes that form the dynamic reality of human civilization, as opposed to analogies like the internal structure and atmosphere of the Earth, along with their specific dynamics and interrelationships.
Meanwhile, behavioural economics and behavioural finance have emerged in recent years with insights from psychology (such as cognitive dissonance, of which “false consciousness” is in fact a narrower but more political form), in an attempt to provide greater understanding of individuals’ and organizations’ economic decisions, specifically why less rational ones are made. Relatedly, however, new forms of bourgeois paternalism have emerged, as noted by Guy Standing in his work on the newest, cross-sectoral, cross-age (from youth to midlife and beyond), and growing part of the working class that is the precariat:
A new perspective on social and economic policy is behavioural economics, which has produced libertarian paternalism. Nudge, an influential book by Cass Sunstein and Thaler 2008, two Chicago-based advisers and friends of Barack Obama, was premised on the idea that people have too much information and so make irrational decisions. People must be steered, or nudged, to make the decisions that are in their best interest.
[…]
The new buzz word is ‘conditionality’. There has been a remarkable growth of conditional cash transfer schemes or CCTs. The leading examples have been in Latin America, led by the Progresa scheme (now Oportunidades) in Mexico and Brazil's Bolsa Familia, which by 2010 was reaching over 50 million people. Seventeen Latin American countries have CCTs. The essence of these schemes is that people are given small state benefits, in the form of cash, only if they behave in predetermined ways.
Conditionality has been imported into rich countries, including the United States, and CCTs have been widely used in Central and Eastern Europe. One of the most detailed was Opportunity New York – Family Rewards, an experimental scheme with incredibly intricate financial incentives and penalties for doing and not doing certain things. The premise of all CCTs is that people need to be persuaded to behave in ways that are best for them and for ‘society’. Thus the World Bank (Fiszbein 2009) believes they can overcome ‘persistent misguidedness’; it attributes poverty to an inter-generational reproduction of deprivation, such that CCTs will break the cycle by persuading people to behave responsibly.
The morality of this approach is dubious […] Already there are conditionalities in many benefit schemes and these are being tightened. Thus in the United Kingdom, doctors are now required to report on their patient's degree of employability if they are receiving disability benefits, turning a confidential doctor-patient relationship into social policing.
One should worry where such trends could lead. In India, following the libertarian paternalists, a cash transfer scheme targeted at economically insecure women promises them cash when their first child reaches adulthood, on condition that they are sterilised after the birth of a second child.
That is not to say that the work of this founding member of the Basic Income Earth Network is immune from paternalism, because its advocacy of unconditional basic income – a scheme which, under bourgeois society, would result in both the monetarization of social benefits through their privatization and a universally downward shift in wages, without yielding either non-mandated skills development or psychological benefits associated with gainful employment – is still inherently paternalistic, as noted by one John Tomlinson:
Is there any difference in the paternalism of such universal payments that makes them less objectionable than the paternalism explicit and implicit in targeted categorical welfare payments or participation income schemes? I think the answer is an undeniable “Yes!” though it is true that under a Basic Income every permanent resident is, from birth to death, guaranteed an income entitlement to which they have not directly contributed. In that sense, the provision of such income support is clearly a benevolently paternalistic act of the government towards each and every permanent resident.
All pretenses to being against paternalism aside, even behavioural economics and behavioural finance are insufficient terms to describe attempts to understand why less rational decisions are made and to provide appropriate solutions. The key lies in the devolution of political economy into mere economics, as noted by the neo-conservative Stratfor founder George Friedman:
For classical economists, it was impossible to understand politics without economics or economics without politics. The two fields are certainly different but they are also intimately linked. The use of the term “economy” by itself did not begin until the late 19th century. Smith understood that while an efficient market would emerge from individual choices, those choices were framed by the political system in which they were made, just as the political system was shaped by economic realities. For classical economists, the political and economic systems were intertwined, each dependent on the other for its existence.
The current economic crisis is best understood as a crisis of political economy.
[…]
The sovereign debt question also created both a financial crisis and then a political crisis in Europe.
[…]
This, then, is the third crisis that can emerge: that the elites become delegitimized and all that there is to replace them.
Little wonder, then, that Marx began working on a comprehensive Critique of Political Economy in the late 1850s – covering capital, land ownership, wage labour, the state, international trade, and the world market – though unfortunately he never outlined this project more voluminously (ultimately focusing too much on Das Kapital), let alone completed it.
In modern times, attempts to understand why less rational decisions are made and to provide appropriate solutions should be called Behavioural Political Economy. In more political affairs, this gets past the notorious “false consciousness,” the very non-political “cognitive dissonance,” and the philosophically near-idealistic “ideology” in attempting to addressing certain phenomena within the working class. One such phenomenon is that of labour aristocracies in the original sense (that is, not related to real or perceived imperialistic superprofits extracted from workers in less developed countries): the parochial unionization of high-paid and high-skilled workers without any interest in unionizing lesser-paid or lesser-skilled workers, as has been the case historically with the American Federation of Labor (AFL). Another such phenomenon is that of workers voting for politically conservative parties especially after their individual situations have been worsened by a combination of privatization, deregulation, and racist discrimination – on top of not having all the facts by drawing only upon certain, like-biased news sources, as if lies told often enough have become truths.
Behavioural Political Economy attempts to address the most important phenomenon within the working class, which goes right back to the very Party Question and Partiinost discussed earlier, and goes against the organizationally defeatist worship of the self’s lack of control over the world. With a workers-only voting membership policy and a proper approach to the democracy question, the classical Social-Democratic relationships of programmatic, theoretical, and other educational authority, of all kinds of charismatic and other agitational authority, and of institutional and other organizational authority – all between the whole mass party-movement as authoritative leaders and all other workers as followers – still apply, because ad hoc organs of agitated action upon agitated action (including the glorified strike committees better known as workers’ councils or soviets) cannot provide long-term governance or accountability, and because only the mass party-movement is the worker class for itself!
Moreover, Behavioural Political Economy provides the policy basis for how whole economic organizations and groups of them, not just individuals, should be “steered” such that they will “make the decisions that are in their best interest” and in the interest of society as a whole. Part of such a comprehensive policy has been described by the non-mainstream development economist Ha-Joon Chang:
Even in a capitalist economy, there are situations – a war, for example, in which central planning is more effective. For example, during the Second World War, the economies of the major capitalist belligerents, the US, the UK and Germany, were all centrally planned in everything but name.
But, more importantly, many capitalist countries have successfully used what is known as "indicative planning." This is planning that involves the government in a capitalist country setting some broad targets concerning key economic variables (e.g., investments in strategic industries, infrastructure development, exports) [...]
France had great success in promoting investment and technological innovation through indicative planning in the 1950s and 60s, thereby overtaking the British economy as Europe's second industrial power. Other European countries, such as Finland, Norway and Austria, also successfully used indicative planning to upgrade their economies between the 1950s and the 1970s. The East Asian miracle economies of Japan, Korea and Taiwan used indicative planning too between the 1950s and 1980s. This is not to say that all indicative planning exercises have been successful; in India, for example, it has not. Nevertheless, the European and East Asian examples show that planning in certain forms is not incompatible with capitalism and may even promote capitalist development very well.
Undoubtedly this summarization is a bit misleading, to say the least. Together, the Japanese Economic Planning Agency, National Land Agency, and Ministry of International Trade and Industry practiced the most extensive, centralized, and successful example of indicative planning for recovery and more after the devastation of the Pacific War. Even the Soviet Union during the New Economic Policy, for all the economic historians’ overemphasis on market forces, practiced indicative planning through the State General Planning Commission, in conjunction with more aggressive electrification planning through the State Commission for the Electrification of Russia. On the other hand, the Commissariat général du Plan (General Planning Commission) and other institutions responsible for the more regionalized indicative planning in France came closest to realizing Soviet economist Leonid Kantorovich’s linear programming, along with other forms of mathematical optimization, in operation at levels above mere enterprises and isolated government agencies. The absence of linear programming in the Japanese example and elsewhere in the Asia-Pacific region can be attributed to the preference for “industrial policy” within indicative planning, and this has been known for its inherently sectoral approach and arbitrarily “picking winners,” not to mention increasing the potential for the relevant sectors and “winners” to extract economic rent in the classical sense from society as a whole.
When considering the rapid development of information technology overcoming socialist calculation debates based on planning by pencils and pens, the appropriate policy is one of economy-wide indicative planning based on extensive mathematical optimization. This transcends the mathematical optimizations employed by mere enterprises and isolated government agencies, and also transcends any emphasis on particular economic sectors. One particular problem, and quite a behavioural one at that, to be addressed by economy-wide indicative planning based on extensive mathematical optimization is that of surplus capital or idle capital, regardless of dynamics between this and the tendency of the rates of industrial and non-industrial profit to fall. As noted by the Marxist geographer and critical urban theorist David Harvey:
At times of crisis, the irrationality of capitalism becomes plain for all to see. Surplus capital and surplus labour exist side by side with seemingly no way to put them back together in the midst of immense human suffering and unmet needs. In midsummer of 2009, one third of the capital equipment in the United States stood idle, while some 17 per cent of the workforce were either unemployed, enforced part-timers or 'discouraged' workers. What could be more irrational than that?
For capital accumulation to return to 3 per cent compound growth will require a new basis for profit-making and surplus absorption. The irrational way to do this in the past has been through the destruction of the achievements of preceding eras by way of war, the devaluation of assets, the degradation of productive capacity, abandonment and other forms of 'creative destruction'.
Does this reform facilitate the issuance of either intermediate or threshold demands? Mentioned earlier was the threshold demand for the institution of normalized planning and policy pertaining to additional reductions in the normal workweek and to related increases in labour productivity, but the historic reductions in the workday to ten hours and then eight hours did not require even more rudimentary indicative planning. Also mentioned earlier was the threshold demand pertaining to pro-labour eminent domain and restructuring related luxury enterprises and industries into ones more susceptible to technological advance and more directly sustaining the workers' consumption bundle, but this is within the very realm of “industrial policy,” its inherently sectoral approach, and its “picking [of] winners.” In general, economy-wide indicative planning based on extensive mathematical optimization is quite compatible with a “free” consumer and services market, and also with the capitalism-specific markets of labour and capital, but computerized planning of a methodologically more advanced nature questions the validity of the latter two markets if not eliminates them altogether.
Does this reform enable the basic principles to be “kept consciously in view”? On the one hand, indicative planning was never implemented without pressing conditions. On the other hand, without the very specific form of political struggle known as class struggle, indicative planning has been used exclusively for bourgeois interests. That points to the necessity of class struggle. Both today’s capital mobility and some imposition of capital controls require a transnational perspective, since surplus capital and other problems to be tackled by economy-wide indicative planning based on extensive mathematical optimization are transnational problems. On the general thrust of social labour, the systemic establishment of worker management (i.e., planning, organization, direction, and control) and responsibility over an all-encompassing participatory economy, most market-socialists are in fact in favour of indicative planning. Some, however, dismiss this and by extension the systemic and participatory aspects of social labour, as noted by the socialist Michal Polak:
On the other hand, there are also market socialist models that address the issue of entrepreneurship and discovery explicitly. A prime example of this strand is Brus and Laski's […] The model differs from the "neoclassical" ones mentioned above in that there is no attempt by the center to monitor, regulate, much less plan the economy – that is, there is not even 'strategic' or 'indicative' planning. Instead, major investment decisions are taken by publicly owned but independently operating firms themselves, i.e. there is a real market for capital goods (just as there are labour and consumer markets).
This last model really reveals the prime source for dissatisfaction with market socialist models. Brus and Laski note that while they themselves have in the past advocated more 'socialised' version of the market socialist model, practical experience shows that […] once that model is specified as above, the 'socialist' component of the model reduces purely to formal state ownership of the assets. That ownership, however, amounts to practically nothing, given that firms must be free to have complete operational control over these assets. The retention of state ownership is thus itself "artificial and redundant", as Adaman and Devine (1997) note. Brus and Laski (1989) themselves conclude that "the pure logic of the fully-fledged market mechanism seems to indicate the non-state (private) enterprise as the more natural constituent of the enterprise sector".
Similar lesson is drawn by Kornai in his (1990a). The conclusion seems inescapable. Market socialism, however modelled, is not a stable formation. There is an inner logic within it which points toward independence of the decision-making units whose goal is profit maximization. The greater that independence, the more capable they are of simulating the entrepreneurship within the capitalist economy.
Also, because economy-wide indicative planning based on extensive mathematical optimization requires at least some input by the likes of suppliers, creditor institutions, government agencies for regulation and taxation, local and higher-level communities, and activist groups – in addition to management and non-management employees – it is a far superior “school of planned economy,” to quote Trotsky in relation to both computerized planning and participation, than mere “workers control” of production processes at the workplace, which excludes the aforementioned stakeholders.
REFERENCES
[i]Defending moral autonomy against an army of nudgers by Frank Furedi [http://www.spiked-online.com/index.php/site/article/10102/]
Behavioural economics and finance: where’s Marx? [http://www.revleft.com/vb/behavioural-economics-finance-t97546/index.html]
Modern Political Ideologies by Andrew Vincent [http://books.google.ca/books?id=igrwb3rsOOUC&printsec=frontcover]
The Precariat: The New Dangerous Class by Guy Standing [http://www.bloomsburyacademic.com/view/The-Precariat/book-ba-9781849664554.xml]
Basic Income: Comprehensive paternalism pursuing autonomy by John Tomlinson [http://www.sinteseeventos.com.br/bien/pt/papers/JohntomlinsonBasicIncomeComprehensivepaternalism.p df]
Global Economic Downturn: A Crisis of Political Economy by George Friedman [http://www.stratfor.com/weekly/20110808-global-economic-downturn-crisis-political-economy]
23 Things They Don't Tell You About Capitalism by Ha-Joon Chang [http://books.google.ca/books?id=qUqoS7MTwPwC&printsec=frontcover]
Comparative economics in a transforming world economy by John Barkley Rosser and Marina Rosser [http://books.google.ca/books?id=y3Mr6TgalqMC&printsec=frontcover]
Re-Thinking Industrial Policy by Philippe Aghion, Julian Boulanger, and Elie Cohen [http://www.bruegel.org/publications/publication-detail/publication/566-rethinking-industrial-policy/]
The Enigma of Capital: And the Crises of Capitalism by David Harvey [http://books.google.ca/books?id=sJMpuI3mdkMC&printsec=frontcover]
The Real “Third Way” by Michal Polak [http://www.sok.bz/index.php?option=com_content&task=view&id=49&Itemid=49]
"Stakeholder co-management": replace "workers control"? [http://www.revleft.com/vb/stakeholder-co-management-t145117/index.html]
“I have always had a visceral revulsion for the idea of ‘false consciousness’. As a student radical in the early 1970s, I was continually being warned about the dangers of this social disease. Many on the left argued that the general public, specifically the working classes, did not understand what their real interests were. The self-appointed carriers of true consciousness pointed to certain areas of plebian behaviour, such as seeking solace in football or voting for the UK Conservative Party, as proof of the widespread nature of ‘false consciousness’.” (Frank Furedi)
Many who subscribe to the notion of “false consciousness” see their relationship with more ordinary workers as one between parents and preteens. When considering that many of them in turn do not have working-class backgrounds or occupations, one cannot help but consider their attitude to be as patronizing as the more blatant attitudes of the better-off classes. In political reality, however, the analogy of social adolescents is far more appropriate. Social adolescents are maturing, may physically live on their own upon individual graduation, but will live their own lives upon maturity. In this period, parents tend to have a generally passive relationship with social adolescents, while high school teachers expect more maturity. Likewise, more ordinary workers tend to have high and sometimes erratic and mixed aspirations, but no advanced game. A more slang, provocative, yet light-hearted equivalent of this would be horny teenagers.
Meanwhile, academic Andrew Vincent summarized the evolution of Marxist attitudes towards “false consciousness” in Modern Political Ideologies:
Engels in particular coined the now notorious term "false consciousness" for ideology, something that Marx did not do [...] The problem of ideology in Marxism is further complicated when we move into the twentieth century [...] In Antonio Gramsci we see the most sophisticated, if equivocal, treatment of ideology. For Gramsci, domination under capitalism is not achieved simply by coercion, but subtly through the hegemony of ideas [...] Gramsci thus called for a struggle at the level of ideology.
“False consciousness” gave way to plain ideology, yet Antonio Gramsci focused too much on the superstructure in Marx’s base-superstructure analytical framework and also stuck with the reductionism of that framework. It simply does not describe the motion, flux, shifting balances of forces, and other changes that form the dynamic reality of human civilization, as opposed to analogies like the internal structure and atmosphere of the Earth, along with their specific dynamics and interrelationships.
Meanwhile, behavioural economics and behavioural finance have emerged in recent years with insights from psychology (such as cognitive dissonance, of which “false consciousness” is in fact a narrower but more political form), in an attempt to provide greater understanding of individuals’ and organizations’ economic decisions, specifically why less rational ones are made. Relatedly, however, new forms of bourgeois paternalism have emerged, as noted by Guy Standing in his work on the newest, cross-sectoral, cross-age (from youth to midlife and beyond), and growing part of the working class that is the precariat:
A new perspective on social and economic policy is behavioural economics, which has produced libertarian paternalism. Nudge, an influential book by Cass Sunstein and Thaler 2008, two Chicago-based advisers and friends of Barack Obama, was premised on the idea that people have too much information and so make irrational decisions. People must be steered, or nudged, to make the decisions that are in their best interest.
[…]
The new buzz word is ‘conditionality’. There has been a remarkable growth of conditional cash transfer schemes or CCTs. The leading examples have been in Latin America, led by the Progresa scheme (now Oportunidades) in Mexico and Brazil's Bolsa Familia, which by 2010 was reaching over 50 million people. Seventeen Latin American countries have CCTs. The essence of these schemes is that people are given small state benefits, in the form of cash, only if they behave in predetermined ways.
Conditionality has been imported into rich countries, including the United States, and CCTs have been widely used in Central and Eastern Europe. One of the most detailed was Opportunity New York – Family Rewards, an experimental scheme with incredibly intricate financial incentives and penalties for doing and not doing certain things. The premise of all CCTs is that people need to be persuaded to behave in ways that are best for them and for ‘society’. Thus the World Bank (Fiszbein 2009) believes they can overcome ‘persistent misguidedness’; it attributes poverty to an inter-generational reproduction of deprivation, such that CCTs will break the cycle by persuading people to behave responsibly.
The morality of this approach is dubious […] Already there are conditionalities in many benefit schemes and these are being tightened. Thus in the United Kingdom, doctors are now required to report on their patient's degree of employability if they are receiving disability benefits, turning a confidential doctor-patient relationship into social policing.
One should worry where such trends could lead. In India, following the libertarian paternalists, a cash transfer scheme targeted at economically insecure women promises them cash when their first child reaches adulthood, on condition that they are sterilised after the birth of a second child.
That is not to say that the work of this founding member of the Basic Income Earth Network is immune from paternalism, because its advocacy of unconditional basic income – a scheme which, under bourgeois society, would result in both the monetarization of social benefits through their privatization and a universally downward shift in wages, without yielding either non-mandated skills development or psychological benefits associated with gainful employment – is still inherently paternalistic, as noted by one John Tomlinson:
Is there any difference in the paternalism of such universal payments that makes them less objectionable than the paternalism explicit and implicit in targeted categorical welfare payments or participation income schemes? I think the answer is an undeniable “Yes!” though it is true that under a Basic Income every permanent resident is, from birth to death, guaranteed an income entitlement to which they have not directly contributed. In that sense, the provision of such income support is clearly a benevolently paternalistic act of the government towards each and every permanent resident.
All pretenses to being against paternalism aside, even behavioural economics and behavioural finance are insufficient terms to describe attempts to understand why less rational decisions are made and to provide appropriate solutions. The key lies in the devolution of political economy into mere economics, as noted by the neo-conservative Stratfor founder George Friedman:
For classical economists, it was impossible to understand politics without economics or economics without politics. The two fields are certainly different but they are also intimately linked. The use of the term “economy” by itself did not begin until the late 19th century. Smith understood that while an efficient market would emerge from individual choices, those choices were framed by the political system in which they were made, just as the political system was shaped by economic realities. For classical economists, the political and economic systems were intertwined, each dependent on the other for its existence.
The current economic crisis is best understood as a crisis of political economy.
[…]
The sovereign debt question also created both a financial crisis and then a political crisis in Europe.
[…]
This, then, is the third crisis that can emerge: that the elites become delegitimized and all that there is to replace them.
Little wonder, then, that Marx began working on a comprehensive Critique of Political Economy in the late 1850s – covering capital, land ownership, wage labour, the state, international trade, and the world market – though unfortunately he never outlined this project more voluminously (ultimately focusing too much on Das Kapital), let alone completed it.
In modern times, attempts to understand why less rational decisions are made and to provide appropriate solutions should be called Behavioural Political Economy. In more political affairs, this gets past the notorious “false consciousness,” the very non-political “cognitive dissonance,” and the philosophically near-idealistic “ideology” in attempting to addressing certain phenomena within the working class. One such phenomenon is that of labour aristocracies in the original sense (that is, not related to real or perceived imperialistic superprofits extracted from workers in less developed countries): the parochial unionization of high-paid and high-skilled workers without any interest in unionizing lesser-paid or lesser-skilled workers, as has been the case historically with the American Federation of Labor (AFL). Another such phenomenon is that of workers voting for politically conservative parties especially after their individual situations have been worsened by a combination of privatization, deregulation, and racist discrimination – on top of not having all the facts by drawing only upon certain, like-biased news sources, as if lies told often enough have become truths.
Behavioural Political Economy attempts to address the most important phenomenon within the working class, which goes right back to the very Party Question and Partiinost discussed earlier, and goes against the organizationally defeatist worship of the self’s lack of control over the world. With a workers-only voting membership policy and a proper approach to the democracy question, the classical Social-Democratic relationships of programmatic, theoretical, and other educational authority, of all kinds of charismatic and other agitational authority, and of institutional and other organizational authority – all between the whole mass party-movement as authoritative leaders and all other workers as followers – still apply, because ad hoc organs of agitated action upon agitated action (including the glorified strike committees better known as workers’ councils or soviets) cannot provide long-term governance or accountability, and because only the mass party-movement is the worker class for itself!
Moreover, Behavioural Political Economy provides the policy basis for how whole economic organizations and groups of them, not just individuals, should be “steered” such that they will “make the decisions that are in their best interest” and in the interest of society as a whole. Part of such a comprehensive policy has been described by the non-mainstream development economist Ha-Joon Chang:
Even in a capitalist economy, there are situations – a war, for example, in which central planning is more effective. For example, during the Second World War, the economies of the major capitalist belligerents, the US, the UK and Germany, were all centrally planned in everything but name.
But, more importantly, many capitalist countries have successfully used what is known as "indicative planning." This is planning that involves the government in a capitalist country setting some broad targets concerning key economic variables (e.g., investments in strategic industries, infrastructure development, exports) [...]
France had great success in promoting investment and technological innovation through indicative planning in the 1950s and 60s, thereby overtaking the British economy as Europe's second industrial power. Other European countries, such as Finland, Norway and Austria, also successfully used indicative planning to upgrade their economies between the 1950s and the 1970s. The East Asian miracle economies of Japan, Korea and Taiwan used indicative planning too between the 1950s and 1980s. This is not to say that all indicative planning exercises have been successful; in India, for example, it has not. Nevertheless, the European and East Asian examples show that planning in certain forms is not incompatible with capitalism and may even promote capitalist development very well.
Undoubtedly this summarization is a bit misleading, to say the least. Together, the Japanese Economic Planning Agency, National Land Agency, and Ministry of International Trade and Industry practiced the most extensive, centralized, and successful example of indicative planning for recovery and more after the devastation of the Pacific War. Even the Soviet Union during the New Economic Policy, for all the economic historians’ overemphasis on market forces, practiced indicative planning through the State General Planning Commission, in conjunction with more aggressive electrification planning through the State Commission for the Electrification of Russia. On the other hand, the Commissariat général du Plan (General Planning Commission) and other institutions responsible for the more regionalized indicative planning in France came closest to realizing Soviet economist Leonid Kantorovich’s linear programming, along with other forms of mathematical optimization, in operation at levels above mere enterprises and isolated government agencies. The absence of linear programming in the Japanese example and elsewhere in the Asia-Pacific region can be attributed to the preference for “industrial policy” within indicative planning, and this has been known for its inherently sectoral approach and arbitrarily “picking winners,” not to mention increasing the potential for the relevant sectors and “winners” to extract economic rent in the classical sense from society as a whole.
When considering the rapid development of information technology overcoming socialist calculation debates based on planning by pencils and pens, the appropriate policy is one of economy-wide indicative planning based on extensive mathematical optimization. This transcends the mathematical optimizations employed by mere enterprises and isolated government agencies, and also transcends any emphasis on particular economic sectors. One particular problem, and quite a behavioural one at that, to be addressed by economy-wide indicative planning based on extensive mathematical optimization is that of surplus capital or idle capital, regardless of dynamics between this and the tendency of the rates of industrial and non-industrial profit to fall. As noted by the Marxist geographer and critical urban theorist David Harvey:
At times of crisis, the irrationality of capitalism becomes plain for all to see. Surplus capital and surplus labour exist side by side with seemingly no way to put them back together in the midst of immense human suffering and unmet needs. In midsummer of 2009, one third of the capital equipment in the United States stood idle, while some 17 per cent of the workforce were either unemployed, enforced part-timers or 'discouraged' workers. What could be more irrational than that?
For capital accumulation to return to 3 per cent compound growth will require a new basis for profit-making and surplus absorption. The irrational way to do this in the past has been through the destruction of the achievements of preceding eras by way of war, the devaluation of assets, the degradation of productive capacity, abandonment and other forms of 'creative destruction'.
Does this reform facilitate the issuance of either intermediate or threshold demands? Mentioned earlier was the threshold demand for the institution of normalized planning and policy pertaining to additional reductions in the normal workweek and to related increases in labour productivity, but the historic reductions in the workday to ten hours and then eight hours did not require even more rudimentary indicative planning. Also mentioned earlier was the threshold demand pertaining to pro-labour eminent domain and restructuring related luxury enterprises and industries into ones more susceptible to technological advance and more directly sustaining the workers' consumption bundle, but this is within the very realm of “industrial policy,” its inherently sectoral approach, and its “picking [of] winners.” In general, economy-wide indicative planning based on extensive mathematical optimization is quite compatible with a “free” consumer and services market, and also with the capitalism-specific markets of labour and capital, but computerized planning of a methodologically more advanced nature questions the validity of the latter two markets if not eliminates them altogether.
Does this reform enable the basic principles to be “kept consciously in view”? On the one hand, indicative planning was never implemented without pressing conditions. On the other hand, without the very specific form of political struggle known as class struggle, indicative planning has been used exclusively for bourgeois interests. That points to the necessity of class struggle. Both today’s capital mobility and some imposition of capital controls require a transnational perspective, since surplus capital and other problems to be tackled by economy-wide indicative planning based on extensive mathematical optimization are transnational problems. On the general thrust of social labour, the systemic establishment of worker management (i.e., planning, organization, direction, and control) and responsibility over an all-encompassing participatory economy, most market-socialists are in fact in favour of indicative planning. Some, however, dismiss this and by extension the systemic and participatory aspects of social labour, as noted by the socialist Michal Polak:
On the other hand, there are also market socialist models that address the issue of entrepreneurship and discovery explicitly. A prime example of this strand is Brus and Laski's […] The model differs from the "neoclassical" ones mentioned above in that there is no attempt by the center to monitor, regulate, much less plan the economy – that is, there is not even 'strategic' or 'indicative' planning. Instead, major investment decisions are taken by publicly owned but independently operating firms themselves, i.e. there is a real market for capital goods (just as there are labour and consumer markets).
This last model really reveals the prime source for dissatisfaction with market socialist models. Brus and Laski note that while they themselves have in the past advocated more 'socialised' version of the market socialist model, practical experience shows that […] once that model is specified as above, the 'socialist' component of the model reduces purely to formal state ownership of the assets. That ownership, however, amounts to practically nothing, given that firms must be free to have complete operational control over these assets. The retention of state ownership is thus itself "artificial and redundant", as Adaman and Devine (1997) note. Brus and Laski (1989) themselves conclude that "the pure logic of the fully-fledged market mechanism seems to indicate the non-state (private) enterprise as the more natural constituent of the enterprise sector".
Similar lesson is drawn by Kornai in his (1990a). The conclusion seems inescapable. Market socialism, however modelled, is not a stable formation. There is an inner logic within it which points toward independence of the decision-making units whose goal is profit maximization. The greater that independence, the more capable they are of simulating the entrepreneurship within the capitalist economy.
Also, because economy-wide indicative planning based on extensive mathematical optimization requires at least some input by the likes of suppliers, creditor institutions, government agencies for regulation and taxation, local and higher-level communities, and activist groups – in addition to management and non-management employees – it is a far superior “school of planned economy,” to quote Trotsky in relation to both computerized planning and participation, than mere “workers control” of production processes at the workplace, which excludes the aforementioned stakeholders.
REFERENCES
[i]Defending moral autonomy against an army of nudgers by Frank Furedi [http://www.spiked-online.com/index.php/site/article/10102/]
Behavioural economics and finance: where’s Marx? [http://www.revleft.com/vb/behavioural-economics-finance-t97546/index.html]
Modern Political Ideologies by Andrew Vincent [http://books.google.ca/books?id=igrwb3rsOOUC&printsec=frontcover]
The Precariat: The New Dangerous Class by Guy Standing [http://www.bloomsburyacademic.com/view/The-Precariat/book-ba-9781849664554.xml]
Basic Income: Comprehensive paternalism pursuing autonomy by John Tomlinson [http://www.sinteseeventos.com.br/bien/pt/papers/JohntomlinsonBasicIncomeComprehensivepaternalism.p df]
Global Economic Downturn: A Crisis of Political Economy by George Friedman [http://www.stratfor.com/weekly/20110808-global-economic-downturn-crisis-political-economy]
23 Things They Don't Tell You About Capitalism by Ha-Joon Chang [http://books.google.ca/books?id=qUqoS7MTwPwC&printsec=frontcover]
Comparative economics in a transforming world economy by John Barkley Rosser and Marina Rosser [http://books.google.ca/books?id=y3Mr6TgalqMC&printsec=frontcover]
Re-Thinking Industrial Policy by Philippe Aghion, Julian Boulanger, and Elie Cohen [http://www.bruegel.org/publications/publication-detail/publication/566-rethinking-industrial-policy/]
The Enigma of Capital: And the Crises of Capitalism by David Harvey [http://books.google.ca/books?id=sJMpuI3mdkMC&printsec=frontcover]
The Real “Third Way” by Michal Polak [http://www.sok.bz/index.php?option=com_content&task=view&id=49&Itemid=49]
"Stakeholder co-management": replace "workers control"? [http://www.revleft.com/vb/stakeholder-co-management-t145117/index.html]