More Schweickart, II

Is market socialism (MS) the next thing?

(Somehow I forgot to publish this. I found it in draft. It was a successor to this post.)

I keep coming back to the central problem in this commentary: how is investment determined? We could expand this to the question of how labor needs are determined as well. It’s too easy to say that labor-managed firms under MS will sell what consumers want, at prices that are determined in a market. Or that all firms would do so. I say the market efficiency pretensions are misleading.

The availability of consumer or intermediate investment goods depends on how production is organized, sometimes described as ‘upstream.’ Consumer demand to be realized has to feed into the organization of production in supplier firms that sit behind retail vendors. Even if all goods are sold in markets, how are the initial enterprises’ labor forces and capital stocks determined? Under MS, these further decisions are made by boards or public banks. Planning prevails. Moreover, such planning is supposed to be democratic, which makes it more difficult.

A note about meetings. I’ve been in a lot of them, so I’m a cynic about “democratic planning,” about which I claim no expertise. In meetings, no small amount of oxygen is used up by people who either don’t know much and/or who just want to hear themselves talk.

More broadly, really-existing, undemocratic planning bodies have been vulnerable to bad actors who were a combination of incompetent and corrupt. This is also the case in existing corporations and government departments. Even with the best of intentions all around, planning is burdened by massive information requirements, the classic objection raised by economists like Friedrich Hayek. Nevertheless, planning goes forward, including in large public agencies and in nations with social-democratic systems, not to mention in the Peoples Republic of China (PRC). My friend Bill Niskanen used to say the second largest planned economy in the world was the U.S. Department of Defense.

A subset of democratic planning is planning by selected officials supplemented by public participation, which means meetings where outsiders are able to speak their piece. I used to call this “death by outreach.” More cynicism on my part. A dirty secret about such proceedings: the bodies running them are not looking for substantive, technical advice; they are taking a political temperature. Open participation also opens the door to narrow interests who can deploy professional advocates.

Under certain versions of MS, the workers in enterprises reap the entire profits made by their firm, after a deduction for maintenance of capital. In some versions, there is a rental charge for capital, the entirety of which is owned by the state. One problem I have mentioned myself is that workers, especially younger workers, could prefer higher compensation to viable longer-term investment.

One possible question I’ve been avoiding is how the workers could seize ownership of firms and their capital? Technically this could also be a simple matter. The state could incrementally accumulate ownership stakes through taxation. Governments already own significant shares of private corporations. The difficulty is not the means, it’s the politics.

Norway’s government owns $2 trillion of private sector assets through its Sovereign Wealth Fund (SWF), fed, by the way, from the profits of offshore oil extraction in the North Sea, which comes out to $340,000 per citizen. The state of Alaska’s Permanent Fund is around $89 billion, also founded on oil revenues.

I did a piece on this subject, pointing out that in taxaphobic U.S., the problem for an SWF is how the money to buy assets would be raised. It is all well and good to propose a universal basic income financed by an SWF. But who paid for the SWF?

Why not build up a fund for the U.S., incrementally transferring ownership of the means of production to the state? The increments could be large, politics permitting. Leave firms under current management, but incentivize worker participation in management, as in certain European countries?