This article hopes that the audience will indulge the author as she writes about socialism from a philosophical perspective as opposed to an economic one.
From time immemorial many ideologies and philosophies have attempted to contribute to the universal debate about how individuals, societies and countries must optimally organize and interact amongst themselves. Ingrained in these debates, the discourse around human rights, human nature, efficiency, equity, nationalism and justice play the driving roles.
One such philosophy that human civilization has encountered so far is that of socialism. A lower form of communism as Karl Marx describes it; Socialism is essentially a transition system that systematically ushers capitalism into pure communism. The virtues of a socialist organization of human society are extolled by many of its proponents like Marx, Engels and even political leaders like Nehru. At the heart of socialism are the principles of equity for all through public ownership of productive resources and abolishment of the class divide.
One has only to look at certain trends of the world today for one to get drawn to these tenets of socialism. Societies around the world are headed towards unprecedented levels of consumerism and materialistic lifestyle. Serious environmental concerns are on the rise along with aggressive exploration of non-renewable energy sources. Individuals and organizations with money are increasingly influencing politics and governance structures and increasing their power. Business ethics and practices are based on the quickest and largest returns. Although, globally the poverty levels have been steadily improving the disparity between the rich and the poor is ever increasing.
In light of these realities of the modern world, we may even observe an undercurrent of anarchy in the capitalist society with regards to the uncontrolled exploitation of the world’s resources and the blind and rapid pace with which the world is moving towards production and consumption. Capitalist societies in today’s world have a dangerously myopic view in the way they have organized their economies and societies. Issues around global warming and critical environmental concerns are not just sidelined but are seriously compromised with in the face of short-term economic gains. This is where a system like Socialism presents a more sustainable and far-sighted approach. This is essentially the strongest argument for Socialism.
The points below argue ways in which socialism has the potential to foster the kind of environment which promotes society’s resource efficiency and creates sustainable solutions.
Efficiency gains from socialism under a planned economy
1.Efficiency gains in the use of natural resources:
In a planned economy, in the presence of an efficient administration, the state decides the quantity, method and type of production. This could potentially eliminate several defects of capitalism that can be observed in the world today. The capitalist economy is based on the sole principle of maximization of profits. The agents of the capitalist economy, the owners of capital, are only motivated by economic gain in their decision-making calculus. They are therefore incentivized to exploit scarce natural resources, with no limits, for short-term gains.
For instance, a vast majority of the fashion and retail industry today produces sub- standard products, which only last one season. These clothes are made by vast numbers of cheap labor and use electricity and other resources in their production. A large portion of this production goes to waste due to over-production, as retailers are not able to sell all of these clothes. The large fashion business houses still make large profits and over- production actually enhance their business model. Industries like these not only waste valuable labor and resources in creating sub-standard items which provide no substantial value to consumers but also create a large and damaging carbon footprint.
The need for energy to fuel the various industries like the retail businesses mentioned above has led the capitalists towards extensive and aggressive oil drilling expeditions, coal excavations and practices like fracking in remote environmentally sensitive places. This is not only jeopardizing the environment and depleting precious non-renewable resources but the intensity of the capitalist greed has led to political and civil unrest in many resource rich societies.
Under socialism and planned economy, the state can guide and limit the use the non- renewable resources to the production of essential goods. Most importantly, only the state- a central planner- can control the ballooning materialistic society and the market for luxury goods. Therefore, to a large extent, such waste in large magnitude can be avoided.
Proponents of a market economy may be opposed to such state intervention citing the right for every individual to make their individual choices. To that end, I wonder how logical is it to think that people are “free” to make a choice in a capitalist world where they are under a barrage of marketing and media outlets that are consciously and unconsciously shaping their interests and thus their choices? Also, more importantly, the planned economy in this case would be attempting to protect communal resources that would otherwise be exploited by a few people for their private gains
2.Efficiency through labor organization:
Under a planned economy, labor as a vital factor of production would be efficiently utilized. One of the many ways in which this will be realized in socialism is by providing an environment where there would be a much lesser need for administrative and judicial bodies than in a capitalist society. In a capitalist economy where the rights of capital ownership and contracts need to be enforced and maintained, there is a requirement for a substantial labor force to achieve this. In a socialist economy, the conflicts between individuals will diminish to a large degree as socially and economically everyone will be equal and therefore the need to steal or compete is avoided to a large degree1. The lesser need for administration translates to the freeing up of a significant labor force that can then contribute towards the actual production of essential goods.
Also, a large part of the workforce in a capitalist society is engaged in non-productive activities such as speculative businesses, marketing of products and strategizing the expansion of profits. Under a planned economy, such valuable manpower and capability could be utilized to produce goods that have intrinsic benefits for the society as a whole. A planned economy can thus organize labor such that the wastage of “middle-man” activities is curtailed to a large extent.
In a planned economy, more than the avoidance of wastage of labor, the most important value in labor mobilization comes in the form social collective power. Engels states that, “the greatest saving of labor power lies in the fusing of the individual powers into social collective power and in the kind of organization which is based on this concentration of powers hitherto opposed to one another”2. This is perhaps the essence of labor mobilization, i.e. the creation of a communal family where the interest of the members are aligned and not opposed to one another. This kind of collective power could pave the way for various efficiencies like communal housing where a lot of amenities are shared amongst families thereby reducing wastage.
Criticisms of planned economy:
The information argument
Hayek would present an objection to central planning by insisting that the central planner doesn’t have the incentive to respond to information. Central planner may not have all the information to make the right decisions. Hayek would further argue that only competition could solve the complexity of modern conditions and the coordination of affairs around it.3 He would point out that no single group could keep track of these various complexities. Moreover, the central planner would not be adequately situation to be informed of all the changes in the market forces at play, the demand, supply and the economic transactions and transformation. Hayek would contend that only a market oriented system with the decentralization of power and price signals would be able to tackle these problems.
However, I would argue that in a planned economy, it would be easier for the planner to know about production and consumption of the economy at large, as they would have the eagle’s view of the entire economy. The planner could know on average how much one person needs and then extrapolate that to the population.4
The social planner- in- power argument
Another aspect of planned economy that might be criticized is the role of power in selecting and maintaining a social planner. Hayek is concerned about the control of power that the central planner needs in order to achieve their objectives. The success of the social planner depends on this power. Hayek is very wary of the power of the social planner as he sees a strong polarity: the heightening of power with the full reins in the sole hands of the planner. Only a capitalist system, Hayek argues, safely decentralizes power to reduce absolute power and minimize the “power exercised by man over man”5.
Hayek’s criticism is not baseless as he points out to the historical rise of the Nazis. One cannot completely sideline this potential problem in a planned economy. I do not have an adequate response to this critique and in fact, I do share Hayek’s concern about the selection of the planning body that is one of the most sensitive issues in the discussion of Socialism.
Conclusion: By virtue of the efficiencies that a socialist system of society can accrue, a planned economy would be better suited to lead a society in the long run. The amount of resource wastage from capitalism that proper planning can prevent can then be used towards more productive initiatives. Most importantly, a socialist planner can avoid undue exploitation of natural resources and can promote a more sustainable society.
The views expressed here are solely those of the author and do not in any way represent the views of Nepal Economic Forum. Yanki Ukyab is Senior Economist at Nepal Economic Forum. She holds a double masters in Economics and Public Policy from the University of Missouri-Columbia and University of Oxford respectively.
1. Frederick Engels. First speech in Elberfield, 8 Feb 1845. p6
2. Frederick Engels. First speech in Elberfield, 8 Feb 1845. p9
3. Friedrich Hayek, The Road to Serfdom, condensed version. London: Institute of Economic Affairs, 2001. pg 59
4. Frederick Engels. First speech in Elberfield, 8 Feb 1845. pg 5
5. Friedrich Hayek, The Road to Serfdom, condensed version. London: Institute of Economic Affairs, 2001. pg 41