Free Market Socialism

A lot of the problem when debating capitalism and socialism is that people perceive and define them both differently. Sometimes a person will be arguing against 'command and control' policies employed by the state, such as fixing wage and price controls and eliminating private property, i.e. authoritarian socialism/communism. On the other hand, an advocate of socialism may simply be arguing for progressive taxation and universal health care, yet still support capitalist exchange and private property.

Conversely a socialist may be arguing against modern day economies in the world, defining these as capitalist. While an advocate of capitalism may reject what we have now as true capitalism, rather defining it as either 'state capitalism' or a 'mixed economy'. I am one of these people, I define true capitalism as 100% full reserve banking, no central bank (lender of last resort) and private currency backed by specie or other commodities, depending on peoples choices in the market. Therefore definitions are important.

Okay with that said, here I will expose one form of socialism. That is, voluntary socialism (which I am not against people practicing) but is in respect to focusing on the loss of incentives and inefficiency that results without a functioning price system. The particular example I wish to draw on, is with the historical example witnessed in New Harmony Indiana, conducted by the great farther of socialism: Robert Owen (No it wasn't Marx or Engels); who started one of the worlds first collectivist experiments.

You can watch this excerpt from the documentary: Heaven on Earth - The Rise and Fall of Socialism





The experiment was established in 1825 and dissolved in 1829 due to constant quarrels. The town banned money and other commodities. Individualist anarchist Josiah Warren, who was one of the original participants in the New Harmony Society, asserted that the community was doomed to failure due to a lack of individual sovereignty and private property.

He wrote of the community:



Are advocates of socialism aware of these problems? Feel free to discuss the topic and try and keep it civil.

no we're not. we just live in a naive wonderland.

are you aware of somalia?

No my knowledge is not sufficient to comment on Somalia.

Feel free to elaborate.

I will ignore your other comment because it's sarcastic and not very constructive. Exactly the sort of snide, impulse based reaction I was expecting from you though.

I'm sorry, are you asking are people aware of the problems involved with extreme communal planning? As practiced by Welsh utopians in the 19th Century?

Yes, I think most people are?

I don't actually believe you G-dub, I think if you polled a lot of the youth today, they would have absolutely no idea about these examples. Do you honestly believe that most people are aware?

If we started a poll in the lounge, what do you think the result would be?

Also it's an open discussion, if someone wants to discuss anything regarding capitalism or socialism, they are welcome to contribute. I would like to see some input on Israeli Kubitz for instance.

Sorry, just not sure I'm following - what would the poll ask?

Because if you asked people if a small, contained utopian community formed on the basis of communal labour was likely to fail I think most (not all, bit most) would say yes. Have you SEEN Big Brother?

^Also just on this comment above, what is "extreme" about it? This really is what free market socialism will be like. No prices, no money, no private (just personal) property.

It's only extreme if it is forced upon people, although I assume you must be comparing it to something in particular? I.e. extreme compared to what we have now.

No, I agree with you here.

If you did poll your above statement, most would probably vote in favour of your position. What I meant (although it wasn't exactly postulated clearly), was that if you asked if people were aware of Robert Owen along with other arguable founders of socialism (Saint Simon, Fourier and Mably in France, if you don't class Plato's Republic in Greece as a form of socialism), and that Owen in particular started a free market socialist experiment, most would probably be quite ignorant.

Clarification: Plato's Republic was a conception and contribution formed in Ancient Greece, not an actual place or attempt. I know of no place in history that has actually implemented his Republic. I did read an argument (in passing) that some Islamic Caliphate, tried to implement it somewhere, but know no other details.

Another "version" of "socialism" is described by Arrighi in 'Adam Smith in Beijing'.

I don't have a good grasp on this, but following Adam Smith what he identifies is a society in which the state retains overall control of the business environment and forces capitalists into intensive competition with one another, substantially lowering their rate of profit. This style of market economy is totally different from a Soviet style planned socialist economy becasue it relies upon market mechanisms to determine whether a business sinks or floats. It is also different from the Western capitalist path of development because business interests do not gain control of the state. In effect business remains subordinate to society, instead of the Western pattern where business dominates society.

The Chinese pattern is also identified as focussing mostly upon agriculture, then on manufacturing, and only in small proportion on foreign trade. This is the opposite of the Western capitalist pattern, where most profit comes from overseas trade and peasants are forced from the land into cities.

These systems eventually clashed in the late 18th and early 19th Centuries (when Britain decided that it was an outrage for China to close itself to foreign business, while dragging all the silver from Europe in exchange for Chinese luxuries). At that time the overwhelming military superiority of the West - which grew out of the necessity for economic power to reply upon military power so that trade routes (the source of the greatest profits) could be controlled - quickly bought China to its knees.

While China today swings between its traditional economic system, which gives priority to society over business, and emergent capitalism leading to increasing inequality, for much of its history China has been not only an extremely wealthy nation (far wealthier than the capitalist west), it has also been a far more equal society than those of the West. In the latter half of the 20th Century for example, a resurgent China, achieved far superior improvements in the welfare of its population than other poor countries. This today is one of the competitive advantages that China has. Its workforce is not only cheap, but highly educated and disciplined - the result, paradoxically maybe, of putting the needs of society before those of business.

I am interested, how does the state force companies into extreme competition?

isnt the real question as to whether we could actually model a planned society efficiently now that we have so much computing capability.
Couldnt we actually determine demand more easily now and not be plagued by lagged price signals. Couldnt we react to demand quicker now that JIT supply models have been developed.

JIT supply models?

Are you talking about High Frequency Trading Peat? Could you elaborate on this? I would rather have your honesty than a google search, that's all.

To respond to your overall point, sure I think technology such as computing can improve capitalist markets and increase or assist in the efficiency of resource allocation.

I'm not sure it will ever be able to substitute all our decision making though.

rival: is your objection solely on pragmatic grounds or on ideological grounds?

JIT = Just In Time

Basically you have a system with flexibly redeployable resources so that the system (e.g., a manufacturing system) can respond rapidly to situations as they arise.


Something sorely lacking in, for example, soviet attempts at central planning.

You mean my objection to free market socialism? I am merely bringing it to peoples attention (who may be ignorant, no, not necessarily you) that it fails in practice.

There are little incentives and without a functioning price system, it has very sever limitations. This thread was more about 'true socialism' the idea theorized where there is no money, interest, inequalities or private property et al.

However I object to socialism on moral grounds (when it is forced) and economic grounds, but that's not really the point of this thread, however I have left the thread open to discussing any aspect of socialism or capitalism. Onehappy posted something constructive above for instance that I found interesting.

In part this was by not allowing wages to be forced down. In the West on the other hand, while we had a 'pay explosion' (in the late 60s early 70s i think), this was reveresed when economies went into crisis so the profitability of businesses could be propped up.

Another factor (a more recent one) is the collectively owned Township and Village Enterprises which allowed peasants to move off the land and into urban employment. Their expansion, unregulated, forced both SOEs and existing urban enterprises to become more efficient in an atmosphere of heightened competition.

This explanation probably begs as many questions as it answers

Just a general rule if wages can't fall through natural market conditions (wage controls) then prices will increase to compensate. It's a dynamic trade off, unless you place price controls on too, which causes numerous other problems.

Also the 'pay explosion' in the late 60s early 70s, was caused by the over stimulation of the economy by government paying for guns and butter. The problems involved with Military Keynesianism and unions prevented the adjustment required when economies went into crisis.

Profitability does come into it though.

Arrighi seems to emphasise military spending consequent of the Korean war as the factor which in 1950 kicked of the boom of the 60s/70s (for some in US politics the war was a godsend). That was what finally got America to spend the huge wealth it had amassed by the end of WWII.

The pay explosion i think has usually been explained through a labour shortage at a time of high profits (which weakened the bargaining power of labour relative to capital). As the pay explosion was reversed in the 70s/80s we entered a period still in process today where senior executives salaries are being multiplied time and again over that of workers.

The differentiation in pay between workers and management might not apply so much to middle management, but it's interesting that Chinese workers have far less need compared to their US counterparts for direct supervision and management - a product of their expanding education system, and maybe also the fact that Chinese workers have tended to retain control over production, and knowledge (and motivation) therefore of how to run a business, rather than being reduced to a proletariat as has been the pattern generally in Western nations.

Agree with all of that, although I am new to this analysis of China though. Interesting aspects to consider. What you describe about the pay inequalities in America, has a lot to do with corporatism and how the model for military economics has changed. I'm not sure if you read that article I posted a while back, but there has been a transition away from Military Keynesianism towards Global Neoliberal Militarism.

Corporatism is ugly.

Yes i read those articles, they were very good.

should read "capital relative to labour"