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Socialist Planning and a Possible Future

Under capitalism, production is all about profits. What would socialist planning based on meeting human needs look like?

Martín Mikori

July 25, 2022
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Capitalism has long shown itself to be an increasingly dysfunctional system. Some of the most salient expressions of this include the obscene wealth disparity that grows every year between a handful of billionaires and the half of the world’s population their wealth exceeds; the extreme poverty that affects hundreds of millions of people; and the climate crisis that flows from capitalism’s unwillingness to halt stimulating production as cheaply as possible to turn the greatest profit, which in turn leads to diminishing to the greatest degree possible any environmental mitigation. And there are more signs: widespread discontent with the state of affairs this system engenders, creating a future that looks very bleak indeed. It is no surprise that many young people, even in that bastion of capitalism known as the United States, are increasingly favorable to socialist ideas — what has been called “millennial socialism.” This is why it is fundamental to discuss how we can achieve an alternative to capitalism, and why that alternative must be socialist.

A lot of effort goes into presenting socialism as a failed, impoverishing system that is responsible for the misery of more than one country now in the capitalist orbit. In the best of cases, socialism is presented as utopian, as a system that cannot work and is impossible to achieve.

Those of us who support and fight for socialism can help by spelling out some elements of the society we seek to build, in which the planning of production is key and where the means of that production are collective property. Of course, to achieve the communist future that Marx described, a transition will be necessary — one that begins with a workers’ government.

Why is socialist planning a model that is far superior to the capitalist one, and is socialism possible? In short, the production of goods and services decided upon collectively, and employing socialized means of production, will enable us to satisfy social needs and planning. It is the best approach precisely because it will allow for estimating those needs and making sure we produce what is necessary with the least number of work hours possible, while using natural resources in a rational way.

Profit-Oriented Production or Socialist Planning

In the capitalist society in which we live, decisions about what to produce are in the hands of the minority who own the means of production. This mode of production allows for the private appropriation of the social surplus.1Translator’s note: The “social surplus” is another term for “surplus value” in Marxism, although the latter tends to be used more specifically to describe the money product of surplus labor.  The objectives behind decisions about what to produce and how to produce it are based on maximizing profits.

Capitalists produce goods and services as long as they generate sufficient profits that meet their expectations. If they don’t, the capitalists either choose not to produce them or they pare back their investments in them — even if that leaves social needs unfulfilled. This is because most of society lacks the material means to express itself as “effective demand” because of income inequality. Real demand in no way expresses what individuals really prefer, only what they can actually consume.2Translator’s note: In economics, effective demand is the level of demand that represents a real intention to purchase a good or service by those with the means to pay for it. Real demand is when individuals are actually willing and able to pay for a good or service that satisfies a want or need.

What if the working class made the decisions about what and how to produce? It may seem obvious, but the working class — a much larger population than those who own the means of production — has the capacity to take into its own hands the management of those means and, in doing so, spell out what needs to be done.

Such socialist planning could help organize the production of goods and services to satisfy actual social needs. In his 1932 work “The Soviet Economy in Danger,” Leon Trotsky — understanding the weaknesses of planning in the USSR — proposed that to achieve this required combining three factors that are vital to thinking through a planned economy. The equivalent today would include:

(1) Master plan: preparation of a plan — that is, a prior allocation of resources articulated between central and local departments — that considers the goods and services that need to be produced, and that accounts for work hours, inputs required, a time schedule, and the environmental impact. From this, a production projection can be drawn up.

(2) Commerce: depending on the stage of transition to socialism, it will be important to compare planning with reality, to see what might go wrong and be able to make adjustments as problems or changes in social needs arise.

(3) Workers’ democracy: this guarantees information that is clear and easily understandable so that the population as a whole can understand what is happening and why. Based on such information, the plan can be adjusted as each change becomes necessary. It will be vital to have permanent workers’ control over the use and openness of information. There can be no ruling class that seeks advantages, no bureaucracy, and no police state a bureaucracy uses to perpetuate itself and avoid being challenged.

Lessons on Planning

The very idea of planning is scandalous to libertarian economists and other free-market advocates, and yet it is very much embedded in capitalist enterprises. Today, in many capitalist enterprises, planning is a well-oiled machine. Most large corporations have implemented business methodologies aimed at making them “agile,” based on a combination of long-term plans (often much longer than a year), quarterly evaluations, and team planning (weekly or biweekly). In other words, they use a prior allocation of resources rather than relying on spontaneity or internal pricing mechanisms. They also employ economic planning and manage inventory levels to be at the minimum. 

Walmart, Amazon, and Mercado Libre in Latin America are large information monopolies that take advantage of these data to estimate what, how much, and when each product will be sold, and from there, can forecast their needs for logistical workers, product stock, and packaging, as well as identifying what services to offer their third-party sellers and recommending what, when, and how much to sell. They also take advantage of this information to choose the most profitable products on their own platforms, so they can compete. 

This intra-firm planning, which already exists in capitalism as a function of maximizing profits, can be adapted and reformulated to serve the objective of satisfying social needs, but only if we change who owns and manages the fundamental means of production at the root. For this to happen, it is vitally important that we imagine and debate what a different society would be like, taking the best elements of Marxist theory, incorporating the experiences of the workers’ states defeated in the 20th century, and considering the theoretical and technological advances of today that give us more tools for discussing planning, which is a central part of the socialist project.

An Example to Imagine the Socialist Future

Planning should be defined in practice, but to help imagine what it would look like, we can take planning for food as a first approximation. We know, for instance, that global food production — today mega-concentrated in the hands of a few corporations — could guarantee social needs if planned. We also know that since production is governed by the laws of the market, about 30 percent of all food is wasted, while 811 million people suffer from hunger. Of course, the first step would be to socialize the land and the means of production. But then there would also be the challenge of defining what and how to produce.

The first step in food planning would be to establish the quantity and types of food needed to satisfy social demands. This would not have to be overly complex; after all, we could start with current consumption statistics and make adjustments as we understand changing needs. We would also need to establish how to carry out production, which would be based on the land that could be used, the necessary machinery, and the number of work hours it would take. Since the land and the means of production would be socialized, there would be no such thing as agrarian rent or the need to extract surplus value. If carried out at both global and local levels, this democratic division of production would allow for the optimal allocation of resources and a fair distribution of food.

This is how we could guarantee food for the entire planet: by considering the real needs and defining production in this context, while ensuring that what is produced is of a high quality and at a lower cost — the result of the social surplus passing from private hands to socialized hands. Democratic access to information would help us understand the implications of producing each type of food, from pollution to animal abuse to the food’s impact on our health. If we are guaranteeing food for the entire world population, it will be much easier to discuss possible alternatives and to transition to better ways of production and consumption.

Food production offers a clear example that helps us understand today’s irrationality and how it affects us at different levels. Now, add to it other strategic sectors in which planning is completely viable — banking, energy, housing, and transportation, to name just a few — and we can imagine a socialist future that is far more realistic than what the capitalists want us to believe.

This path isn’t possible just by regulating corporations. Under the best of scenarios, with some new restrictions, that still maintains production planning in the hands of private owners. It requires socializing the means of production so that the social surplus is no longer in the hands of the few and instead gets distributed to the entire population.

In Volume 3 of Capital, Karl Marx put forth the perspective of a free society of associated producers who define what and how to produce. He described communism as a planned and conscious control of freely associated people:

Freedom in this field can only consist in socialized man, the associated producers, rationally regulating their interchange with Nature, bringing it under their common control, instead of being ruled by it as by the blind forces of Nature; and achieving this with the least expenditure of energy and under conditions most favorable to, and worthy of, their human nature.

The transitional formation that was the workers’ state of the Soviet Union offers an example of this potential. Between 1930 and 1960, even with the bureaucratization that prevented the development of a democratic planned economy, the USSR managed over only a few decades to transform from a backward capitalist country with remnants of feudalism into the planet’s second-greatest economic and industrial power. Of course, due to Stalinism and bureaucratic twists such as forced collectivization (which was preceded by a policy that happily fueled the enrichment of capitalist peasants while nationalized industry was degraded), these transformations came about traumatically. The Soviet Union suffered great difficulties, both because of technological backwardness and because the bureaucracy imposed more and more deformations and prevented the population from exercising true deliberation and control over production and the destiny of the economy. Despite these limits, however, there was an advanced process of industrialization. 

To be sure, we want to assimilate the common-sense perspective of the negative impacts of the process in the Soviet Union into our conception of the socialism we aim to build. At the same time, it is important to note the elements of the socialization of the means of production and the planning of the economy that generate these unprecedented advances for backward economies. In The Revolution Betrayed, Trotsky convincingly pointed to the undeniable successes in Soviet production:

The vast scope of industrialization in the Soviet Union, as against a background of stagnation and decline in almost the whole capitalist world, appears unanswerably in the following gross indices. … In December 1913, the Don basin produced 2,275,000 tons of coal; in December 1935, 7,125,000 tons. During the last three years the production of iron has doubled. The production of steel and of the rolling mills has increased almost 2 1/2 times. The output of oil, coal and iron has increased from 3 to 3 1/2 times the pre-war figure. In 1920, when the first plan of electrification was drawn up, there were 10 district power stations in the country with a total power production of 253,000 kilowatts. In 1935, there were already 95 of these stations with a total power of 4,345,000 kilowatts. In 1925, the Soviet Union stood 11th in the production of electro-energy; in 1935, it was second only to Germany and the United States. In the production of coal, the Soviet Union has moved forward from 10th to 4th place. In steel, from 6th to 3rd place. In the production of tractors, to the 1st place in the world. This also is true of the production of sugar.

Gigantic achievement in industry, enormously promising beginnings in agriculture, an extraordinary growth of the old industrial cities and a building of new ones, a rapid increase of the numbers of workers, a rise in cultural level and cultural demands — such are the indubitable results of the October revolution, in which the prophets of the old world tried to see the grave of human civilization.

Trotsky continues, debating with those who had contended that socialized production was impossible and spelling out that even if the process of bureaucratization were to continue, the experience of the Soviet model would still be a school for future generations:

With the bourgeois economists we have no longer anything to quarrel over. Socialism has demonstrated its right to victory, not on the pages of Das Kapital, but in an industrial arena comprising a sixth part of the earth’s surface — not in the language of dialectics, but in the language of steel, cement and electricity. Even if the Soviet Union, as a result of internal difficulties, external blows and the mistakes of leadership, were to collapse — which we firmly hope will not happen — there would remain an earnest of the future this indestructible fact, that thanks solely to a proletarian revolution a backward country has achieved in less than 10 years successes unexampled in history.

To recap, it is the workers who produce, but it is the owners of the means to produce who decide what and how. What do we revolutionary socialists want? We want the working class as a whole to take the lead in a profound transformation of society, socializing the means of production (factories, strategic infrastructures, transport, etc.) so that production is determined not by profits but by social needs. And at the same time, we want this to be done democratically, taking into consideration the amount of work necessary to produce the volume of goods and services required, and also accounting for the environmental consequences.

First published in Spanish on July 24 in Ideas de Izquierda

Translation and adaptation by Scott Cooper

Notes

Notes
1 Translator’s note: The “social surplus” is another term for “surplus value” in Marxism, although the latter tends to be used more specifically to describe the money product of surplus labor.
2 Translator’s note: In economics, effective demand is the level of demand that represents a real intention to purchase a good or service by those with the means to pay for it. Real demand is when individuals are actually willing and able to pay for a good or service that satisfies a want or need.
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