How Markets & Central Planning Will Work Together in a Socialist Society.
Capitalism ≠ markets and socialism ≠ planning.
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Earlier this week, my “Dream Jobs for All” article was shared by the prominent Substack writer. While I’m always grateful for the visibility, this brought a cadre of non-socialists into my comments, who immediately critiqued socialism with standard lines about the superiority of “the free market” over central planning.
While I’ve previously mentioned the dichotomy between markets and planning in passing, I find this the perfect opportunity to fully explain the false choice between markets and planning, clarify some misconceptions, and explain how both markets and central planning could be utilized in a socialist society.
First, it’s important to clarify that the belief that “capitalism is markets and socialism is central planning” is entirely false. Markets have existed since cavemen decided to barter fish for rocks. They’ve existed in hunter-gather, feudal, and slave-state societies, meaning they are not unique to capitalism.
Second, central planning exists in many capitalist societies, including the United States. For example, Americans don’t get electricity to their homes by choosing the best provider through the market and having it run power lines to their house. Instead, the electric grid has been planned by state, local, and federal governments, which private companies operate for profit. This is one case of capitalist central planning. Other examples can be found in America’s subsidization of the gas consumers use for their cars, the past and present planning done on behalf of for-profit railroads, and the distribution of COVID vaccines.
Markets & Planning
“Why do some people always insist that the market is capitalist and only planning is socialist? Actually, they are both means of developing productive forces. So long as they serve that purpose, we should make use of them. If they serve socialism they are socialist; if they serve capitalism they are capitalist.” - Deng Xiaoping
At their core, markets and central planning are both methods of intaking inputs and producing corresponding outputs. With markets, the inputs are sales: higher sales of blue cars mean more consumers want blue cars, so more should be produced. With planning, the inputs are democratic votes, which central planners use to make production and distribution decisions. Markets distribute goods and services through currency exchange while central planning distributes goods on a predetermined basis. Neither method is, in and of itself, capitalist or socialist. That characteristic is determined by the relationship between the people and the means of production — the factories, businesses, and natural resources that are put together to make products and services that will eventually reach consumers through either the market or planned delivery.
Capitalism is a system in which the means of production are privately owned for the purpose of turning a profit, such as Bill Gates’s ownership of 270,000 acres of farmland. Socialism is a system in which the means of production are owned collectively by the people who are impacted by their operations and outputs. This can take the form of a nation owning an industry, such as Mexico’s state-owned oil company Petróleos Mexicanos, grocery store workers owning City Market in Burlington, VT, or any form of collective ownership in between.
As both markets and planning are a means of collecting inputs and providing the proper outputs, not a stone-set relationship between the people and the entities that produce those goods, both can be used to facilitate a hypothetical socialist society.
How Planning & Markets Could Be Used In Conjunction Under Socialism
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