Is the USA democratic

Earlier this year, at the height of the controversy over the primary elections in the USA I was asked to contribute an article  to the Beijing Peoples Daily on the decline of democracy in the US. The question was I thought, slightly misleading since I dispute that there ever was a democracy in the USA. I send them in the article that follows, but I am unsure if they published it.  However since sufficient time has elapsed, and with the US election looming, I feel that there is no harm in releasing at least the English language text.

In 2014 a study went viral accross the US press and internet. Princeton scholars reported that, by using modern quantitative political science techniques they had been able to conclusively prove that the USA was a political oligarchy not a democracy.

The authors used data from opinion polls to look at huge sample, 1779 different public policy issues from the 1980s onwards, to see what the opinions of Americans of average income and the opinions of richer Americans ( >$140,000 per year ) were on topics. To this they added data on the public positions taken by business lobbying groups on these policies. Next they looked at the legislative outcomes of these 1779 policy debates and compared the outcomes with what people on average income, rich people and business lobbyists wanted. Using a statistical technique called Multivariate Analysis they looked to see how influential the views of these three groups were in deciding the final content of the laws.

The results were striking. They found that in only 3% of the cases did the views of average citizens have any effect on the laws that were finally passed, whereas the views of the rich were influential in 76% and those of the business lobby affected the outcome in 56% of the time1. They conclude:

What do our findings say about democracy in America? They certainly constitute troubling news for advocates of populistic democracy, who want governments to respond primarily or exclusively to the policy preferences of their citizens. In the United States, our findings indicate, the majority does not ruleat least not in the causal sense of actually determining policy outcomes.2

It is not surprising that this research was newsworthy. On the one hand it contradicted the self image of the USA as the world’s foremost champion of democracy. On the other it chimed with the increasingly widespread popular feeling that politics in the USA was corrupt, and that monied elites and lobbyist were manipulating things behind the backs of the ordinary voter.

But of course to Marxists this came as no surprise. This is what they had been saying since the mid 19th century “the bourgeoisie has at last, since the establishment of Modern Industry and of the world market, conquered for itself, in the modern representative State, exclusive political sway. The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie. Marx and Engels, [1848]”. Here was scientific confirmation of what they had always said. But how does this work?

How are the rich able to so completely dominate a state whose constitution is supposed to be democratic?

The short answer is that the US constitution was never intended to be democratic. The long answer involves looking at the economic and class history of the USA to to see how its politics has operated.

It is a mistake to see the American Revolution as a bourgeois democratic one. It was way different from great democratic revolutions like those in 18th century France or 20th century China. The radical character of the latter came from the peasantry rising up, taking over the estates of the landlords and completely transforming property relations in the countryside. This expropriation removed the economic support for the old ruling classes, allowing a complete new state structure to be established.

The French, English and American revolutions all had a republican and anti-monarchial character, but republicanism was more the political ideology of a landlord class defending itself from the encroachments of the King than anything democratic. In France, the rebelling aristocracy lost control, first to the urban bourgeoisie and were then consumed in the fires of peasant revolt. In America this loss of control never happened. The leadership consisted of men of influence and standing, perhaps the most conservative leadership of any revolution in history3. To understand the constitution the Americans adopted you have to use the methods of On Contradiction4 to examine the class contradictions of the day.

During the revolution, the fundamental contradiction was between the slaveowning class of the colonies on one side and the British state and 4 Iroquois nations on the other. Against Britain, they aimed to gain exemption from taxes and tariffs, to get rid of restrictions that the King was imposing on large landed estates and to protect their holdings of slaves from being set free. Against the Iroquois, they wanted territory.

The fundamental contradiction governed the development of the secondary ones: between slave and slave owner, between landlord and tennant farmer. Because their direct oppressors were opposed to the British, slaves and tennant farmers tended to side with the British against the revolution. There was widespread loyalist ( pro British ) sentiment among the tennantry5. The British Governor Lord Dunmore issued a proclamation absolving the tennantry of their feudal quitrents owed to rebel landlords, and liberating all slaves who would take up arms against the rebels. The British raised several regiments of black former slaves during the war. There was a third order contradiction between free farmers and the local capitalists over debts owed by the farmers to the capitalists. The slaveowning and capitalist leaders of the revolution were dependent on free farmers and artisans as soldiers, but feared that a directly democratic government dominated by free farmers would either inflate the currency or pass laws cancelling debts.

The class structure after independence was unlike anything in early capitalist Europe. You had to go back more than 2000 years to find something similar : the slave republic Rome on which the Americans consciously and deliberately modelled themselves. At the top was the slave owning aristorcracy who did no direct productive work, but lived off the labour of the slaves. Below the aristocracy was a class of free citizens who worked for a living. These would be small family farmers or artisans. At the bottom were slaves with no political or civil rights, the private property of aristocrats. The main class conflicts were between the slaveowners and the slaves on the one hand, and between the slave owners and the free citizens on the other. Since the slaves had no political rights either in Rome or the USA the conflict between them and the slave owners was brutally physical, with the owners dominance enforced by whips and chains. Free citizens on the other hand had civil rights, and the fact that they outnumbered the richer slaveowners meant that the political power of the slave owners was potentially threatened by the free peasants and artisans. The main c onflict between the slave owners and free peasants was typically over land ownership. The progress of slavery meant that more and more land tended to be fall under the control of the big slave estates, theatening to proletarianise the free citizens. In both Roman and the US, the free citizen farmers and artisans were allies of the slaveowners. As with expansionist Rome, the external contradiction was beween the propertied classes of the Republic and the surrounding free peoples. The expansionary imperialism of both states was driven by both the desire of the senatorial classes to acquire further estates, and more significantly, to promote colonies in which a potentially threatening proletariat could be settled as independent farmers. As Weber [2013] argued, the parallels between Roman and American peasantry were exact right down to the geometry of landholding. In both cases the land was divided up on a square grid of farm plots with long straight roads – something that only a conquering empire could achieve.

The American constitution is almost a direct copy of that of Rome. The Roman constitution was cleverly designed to give the semblance of power to these free citizens whilst actually concentrating real power in a senatorial class. The state structure in Rome was made up of :

  1. The two Consuls who were elected for a year and who alternated in office on a monthly basis. They were equivalent to the President of the USA today. They had supreme command of the army and civil administration.
  2. The Senate, which could pass decrees and provide the class from which the consuls were generally chosen. The US Senate was explicitly modelled on this.
  3. The comitia centuriata or assembly of the centuries which elected the consuls by indirect election: almost exactly copied by the US electoral college.
  4. The Plebian Council. This was a mass democratic assembly that could pass laws. It could not however set its own agenda, having to vote on motions put to it by magistrates who were invariably from the upper classes.

The effect of this structure was that executive power in Rome was always held by a member of the slave owning patrician class. The Roman Senate likewise was always made up of slaveowners rather than common people. Similar effects were achieved in the USA. Of the first ten presidents of the USA only two, John Adams and John Quincy Adams, were not slave owners.

But a republic also relied on the free citizens as soldiers. These people had to be given the semblance but not the reality of power. In Rome the two mechanisms used to achieve this were elections, specifically indirect elections, and control over the agenda at the popular assembly by upper class magistrates. Elections, ancient political theorists argued, always favour the wealthy. Aristotle said it is thought to be democratic for the offices to be assigned by lot, for them to be elected is oligarchic Aristotle [1988]. The alternative technique, forming a council from a random sample of citizens as used in ancient Athens was rejected for the Roman oligarchic approach.

The rich can spend to influence elections and have an education that prepares them as orators. Indirect election will increase the effects of any bias : for example Bush won the 2000 election on the electoral college system even though he had fewer popular votes than Gore. Having executive power concentrated in the hands of one elected official is great for the wealthy. It takes a huge sume of money to win the election so the candidates inevitably become dependent on oligarchs.

Whilst ancient Rome at least allowed some element of direct democracy, in the US this element, the popular assembly was removed and replaced by the elected house of representatives, where again, money speaks. Election to this body is often funded by wealthy oligarchsWinters [2011].

There have been 3 periods in US history when there was a danger that democracy might triumph: the Civil War, the Populist movement of the late 19th Century and from the New Deal to the 1960s. But in each case the oligarchy re-established power.

The 1860s Civil War marked the transition between the slave and feudal modes of production in the US. Although the war abolished slavery, int freed slaves soon lost civil rights. Klu Klux Klan terror and lynchings reduced them to the semi-feudal status of voteless sharecroppers. Not until the 1960s was their right to vote re-established. The same happened in Russia in the 1860s where freed serfs also became sharecroppers. Neither Alexander nor Lincoln broke the power of their landlord classes.

The next crisis came with the populist movement grounded in the contradiction between the free peasants and the financial oligarchy. Lincoln had moved America to a fiat currency which helped the peasantry since the inflation that accompanied it depreciated their debts. The bankers pressed for ‘sound money’ and the gold standard, which would have threatened the mortgaged farms of the peasantry. The peasant populist movement fought for cheap money and democratic reforms : popular voting on legislation, the right of recall of officials; demands similar to those of Social Democracy in Germany and Russia. Despite victories at state level, they never gained power at the federal level.

The 20th century the US underwent a transition from a predominantly rural economy of semi feudal black peasants and independent white ones to a predominantly urban waged population. The agricultural depression from the 1930s allowed banks to foreclose on farms driving farmers into cities. In the South, the landlords made use of mechanisation to dispense with and evict their black sharecroppers who also moved into the cities. The creation of a bigger working class population led to a strong labor union movement and black civil rights movement. It appeared by the 1960s, that the battle for democracy in America was at last being won.

The period from the New Deal of Roosevelt to the Great Society of Johnston saw a decline in the share of income and wealth held by the oligarchy and a rise in the share going to the rest of the population but from the 1970s this reversed. Wealth in the US became concentrated in a ever smaller fraction of the population(Piketty and Goldhammer, [2014]) and as the study by Gilens and Page shows, this fraction exercised an almost total political control. The country has a police force that have reverted to their old slave patrol roles exercising internationally unprecedented levels of violence against blacks and poor white people, shooting over 450 dead in the first 5 months of 2015. When people protest this brutality they face police armed like commandos fresh from the war in Iraq.

Will democracy eventually come to the US?

We can not just echo Zhou enlai on the outcome of the French Revolution and say it is too early to tell yet.

After 240 years it is not too early.

It is now certain that as long as the US retains its current constitution, the oligarchy there need have no fear of democracy. In the USA radical popular leaders from Lincoln to King had the delusion that the republic was democratic. I would tend to side with Lenin who wrote that a US type republic was the most perfect form of rule by the propertied classes. Once they gain control of it, no change of leaders or parties can shift them. The solid edifice of the republic will survive until some real cataclysm shakes it; something of the scale of those Japanese victories of 1905 and 1941 which unsteadied Russian and British empires.

If we believe Mao, political power grows out of the barrel of a gun, without a peoples army the population has nothing. The American people have the right to carry and bear arms, one of the key liberties they retain, but they have at no point suceeded, even at a local level, in raising popular militias able to resist the armed forces of the state. The state was able to supress strikes, Black and Indian rebellions and even mass protests by ex soldiers. Until such a day as a defeated, mutinous army allies with a renascent populist movement, makes ‘despotic inroads’ on the rights of private property and expropriates the oligarchy, the American oligarchs’ power will rest secure.

References

[Aristotle 1988]
Aristotle. The Politics. Hutchinson, 1988.

[Gilens and Page 2014]
Martin Gilens and Benjamin I Page. Testing theories of American politics: Elites, interest groups, and average citizens. Perspectives on Politics, 12 (03): 564-581, 2014.

[Marx and Engels 1848]
Karl Marx and Frederick Engels. Manifesto of the Communist Party. 1848.

[Morris 1962]
Richard B Morris. Class Struggle and the American Revolution. The William and Mary Quarterly: A Magazine of Early American History, pages 4-29, 1962.

[Piketty and Goldhammer 2014]
Thomas Piketty and Arthur Goldhammer. Capital in the twenty-first century. Belknap Press, 2014.

[Weber 2013]
Max Weber. The agrarian sociology of ancient civilizations. Verso Books, 2013.

[Winters 2011]
Jeffrey A Winters. Oligarchy. Wiley Online Library, 2011.

[Zedong 1987]
Mao Zedong. On contradiction. Chinese Studies in Philosophy, 19 (2): 20-82, 1987.

Footnotes:

1Table 3, Gilens and Page [2014].

2Page 576, Gilens and Page [2014].

3Page 7, Morris, [1962].

4Zedong [1987], in particular Part III.

5Page 16,Morris [1962].

How to think of the stability of capitalism

The problem of how processes come to take on a stable recurrent form is widespread in science. It has been of particular concern to biologists and biochemists working on the origins of life. They have to explain how, contra the apparent preference of thermodynamic laws for maximal disorder, we do in fact see highly ordered structures; including ourselves. Both [Dawkins(2004)] and [Kauffman(1993)] have made useful contributions to how we can conceptualise the stability of orderly processes. The basic argument they develop is that features stabilise if their existence at time tnincreases their probability of existence at time tn+1. But this probability is a conditional probability, conditional on the features being situated in what Kauffman calls autocatalytic networks. These are networks, initially conceptualised in terms of polymer synthesis[Farmer et al.(1986)Farmer, Kauffman, and Packard], each of whose components, when present, increases the probability of the whole network persisting. A flame or a cell is such an autocatlytic network. A cell is a polymer collection : enzymes, lipids and nucleic acids which, in the presence of an external energy source will maintain itself and perhaps grow. The different enzymes work together to synthesise one another. Current cells depend on DNA, but at a much earlier epoch more primitive self sustaining networks must have existed, from which cells evolved. These networks, in the absence of the directing influence of DNA would have relied purely on enzymatic feedback.

These concepts are applicable to social forms of production and in particular to those, like capitalism, which develop without a definite directing influence. We should, I think, use these concepts either implicitly or explicitly in our analysis of the different historical modes of production and the social forms to which these give rise.

Any economic system is a process, a process that undergoes constant change at the fine level, but shows relative stability at the coarse level. There is change at the level of all the individual products that are being transformed by labour and are then being consumed or emplaced. The population is made up of mortal members, so its membership constantly turns over. But there are certain suitabilities. From year to year the number of people changes only slightly. Towns grow and shrink but they can endure with the same basic street plan for centuries. Industries and family lines grow up and die over periods from decades to centuries. Firms and households do the same over shorter periods.

But what are these things that grow persist and die?

They are all themselves processes, and their apparent ‘thingness’ rests on repetition enmeshing a homeostasis that preserves a certain basic structure. Production is often directly recurrent, as in the annual agricultural cycle, or the three minute repetition cycle of the original Ford production line. In other industries, like ship building, the repetition is more approximate. The individual ships differ in size, shape and construction time, but still retain a more abstract structural cycle from laying the keel, though assembly to launch and fitting out.

The fleeting stability of units of production rests on their slowly changing work forces and long lasting production facilities. For the domestic economy the slowly changing workforce were one or more generations of family members who gradually replace one another, the long lasting facilities were the buildings, granaries and farmland which, having been originally cleared from forest, had by generations of effort been developed. For a car firm you have employees who, as a collectivity, have the knowledge and skill to cooperate in making cars. The long lasting facilities are the buildings and equipment, which, like the farm, gradually develop over time.

These stable components combine, at any one instant, with material in flux. There is material waiting to be transformed: seed, car parts. There is material undergoing transformation : growing oats, partially assembled cars on the line. At times, there are are transformed products: a full granary, finished cars in the lot. The whole process is impelled by external sources of energy.

Traditional farms are solely solar. Industry has two energy sources. First is the primary motive power, electricity today, but once coal or flowing water. Second is human labour power, energised by food. The domestic farm generated human energy internally, but for a factory it comes from outside. Workers walk in fed and energised for the day’s work. Where the farm regenerated its own inputs, its seed corn, the factory’s components and raw inputs come in the gate. The transport and sale of commodities fits within these, almost, repetitive cycles.

The fact that the factory exists and produces things, constrains the rest of society to be so organised that: there is each day a cohort of workers ready to cross its threshold; that there is a flow of its primary energy source; that there is a stream of components and raw materials being delivered regularly and that there is a regular uplift and transport away of the products it makes.

When we say above that the factory constrains the rest of the society to have certain features we mean:

  1. That a particular combination of embodied technologies and social forms together form an autocatalytic net which tends to persist.
  2. That the actual existence of factories implies that there must exist one of the possible autocatalysis systems that boost the probability of factories.
  3. In this sense the factory, which we know to exist, constrains the rest of society.

In all, the factory implies a much more stringent set of constraints on the rest of society than is implied in the existence of a subsistence farm. The interface between the factory and society is complex. It implies that the society in which it is embedded must be able to generate and sustain the workers who come in each day. It is not enough that the people exist, and have the relevant skills. They must be generated as factory workers not as some other kind of person. They must be free to work in the factory rather than tilling their own farms or being tied up in some quite different activity.

The delivery of primary energy implies a whole organised supply network. At one time this might be something local, an enchanneling of a river by weirs and millraces. Later it is more encompassing: canals to deliver coal, mines to extract it. Now it implies electricity grids, with networks of generators synced to a 50Hz cycle.

The supply of raw materials and components implies a transport network, and a supply chain. It implies other factories. The complexity of the supply network grows, quite literally, exponentially with the the number of inputs to the factory1. This complex of recurrence constraints is the determining role of the productive forces. Recurrence relations select out only certain sets of social forms and relations as compatible.

There is not just a single set of reproductively competent social relations for industrial production. Theory and history teach us that there are at least two, possibly more, characteristic social forms of industrial society. Which set of social relations the factory is embedded within depends on real history. In modern terminology it is path sensitive, dependent on whether the society has undergone capitalist or socialist industrialisation.

We are here only concerned with the former. So we have to assume that there is no overarching social planning mechanism that will deliver the components that the factory needs, no system of general labour allocation that will ensure that fed and clothes workers turn up each day. Instead all of these preconditions must be arrived at by the exercise of private contract. Nothing arrives without a prior promise to pay a monetary equivalent. In the absence of a general social direction of labour and resources, the social power of the state symbolised in money is co-opted by private firms to command2both the living and embodied labour their survival demands. They can demand labour and components so long as they have the cash. Behind these transactions, admittedly, stands the state power, ready to enforce the law of contract, ready to enforce debts in its currency, but the contracts themselves are private. Hence the arguments that we have used earlier to explain the enforcement of another law, what Marxist economists called the ‘law of value’3, express the real dependence of firms’ reproduction on the laws of contract. These themselves are so constructed as to be neutral with respect to the distribution of the social power of money. The state treats both firms in a contract equally and is concerned only that appropriate monetary equivalents are paid for goods delivered. The law of contracts is neutral in the distribution of social power of money between subjects of right4. The survival of the firm as a technical and labour co-operative unit, then depends on its survival as a contractual unit, as a subject of right, an owner of property.

In order to reproduce themselves in the absence of a social plan, factories have to be able to command the delivery of labour and components. The latter implies that they must, albeit indirectly, be able order the allocation of social labour into the making of those components. The statistical laws regulating price, act to make sure that command over money becomes, on average, command over an equivalent amount of labour, thus allowing a decentralised ‘planning’ of the economy to take place.

1  Why is capitalist command mystified?

Finley[Finley(1980)] argues that whereas ancient authors where quite open about the exploitative nature of their society, modern ideology strives to suppress talking about it. The power of command, domination of the slave lord or dominus was open, unashamed and enforced with whips and branding irons. That of the capitalist is presented in the guise of equality on the market and fraternity as citizen. The worker and Ford, the farmer and Tesco meet and contract as legal equals. The fact is of course, that behind the legal facade, they are far from equal. Ford or Tesco have financial resources that are perhaps a million times as great as an individual worker or farmer. The £millions in the accounts of the firms put them in a position of vastly greater bargaining strength than a worker who would be hard put to survive a month without pay, or a farmer who, by harvest time, has run down his assets to almost nothing.

owennote

Figure 1: The labour certificates issued by Owen’s labour exchanges.

The classical economists had unmasked what was happening in this process. They wrote in a still aristocratic Britain, where the common people could neither vote nor, in the main, read. You find in Smith an openness about class and command that came to those with a classical education. He saw that money was the power to command the labour of the lower classes. In his day the coinage was still gold, open fiat money in Europe was yet to come, though the Chinese had long known it. But by the early 19th century, having experienced the suspension of bank note redemption during the French wars, socialist writers started to propose that instead of gold, money should be openly denominated in terms of labour. Instead of having the motto `I promise to pay the bearer on demand the sum of One Pound’ they would promise goods to the value of one hour (Figure 1).

There are two reasons why this idea has never been implemented. One of these is minor. Although prices are regulated by labour, it is approximate, so there is around a 10% margin of error above and below, so there would never be an exact equality between the labour performed and the price obtained. But that pales to insignificance compared to the much bigger political obstacle. Were such notes to be introduced they would highlight that behind the apparent equality of employer and employee there is in reality a deeply unequal relationship. Such notes would be little short of revolutionary pamphlets. They only made sense, in the context of Owen’s exchanges, if they were to be part of a process of moving the whole economy over to communist operation.

References

[Bordiga(1954)]
Amadeo Bordiga. Dialogue avec staline. Paris, Editions Programme Communiste, 1954.

[Bordiga(1975)]
Amadeo Bordiga. Structure économique et sociale de la Russie dáujourdh́ui: Développement des rapports de production après la révolution bolchevique, volume 2. Editions de l’Oubli, 1975.

[Dawkins(2004)]
R. Dawkins. Extended phenotype-but not too extended. A reply to Laland, Turner and Jablonka. Biology and Philosophy, 19 (3): 377-396, 2004.

[Farmer et al.(1986)Farmer, Kauffman, and Packard]
J Doyne Farmer, Stuart A Kauffman, and Norman H Packard. Autocatalytic replication of polymers. Physica D: Nonlinear Phenomena, 22 (1): 50-67, 1986.

[Finley(1980)]
MI Finley. Ancient Slavery and Modern Ideology ,London. Penguin, 1980.

[Kauffman(1993)]
S.A. Kauffman. The origins of order: Self-organization and selection in evolution. Oxford University Press, USA, 1993.

[Reifferscheidt and Cockshott(2014)]
Michael Reifferscheidt and Paul Cockshott. Average and marginal labour values are O nlog(n)—a reply to Hagendorf. World Review of Political Economy, 5 (2): 258-275, 2014.

[Smith(1974)]
Adam Smith. The Wealth of Nations. 1974.

Footnotes:

1[Reifferscheidt and Cockshott(2014)] shows that the number of inputs to an industry grows proportionally to the logarithm of the number of industries in the economy. Inverting this relation it follows that the number of other industries in the economy grows exponentially with the number of inputs to the average industry.

2“Wealth, as Mr. Hobbes says, is power. But the person who either acquires, or succeeds to a great fortune, does not necessarily acquire or succeed to any political power, either civil or military. His fortune may, perhaps, afford him the means of acquiring both, but the mere possession of that fortune does not necessarily convey to him either. The power which that possession immediately and directly conveys to him, is the power of purchasing; a certain command over all the labour, or over all the produce of labour, which is then in the market. His fortune is greater or less, precisely in proportion to the extent of this power; or to the quantity either of other men’s labour, or, what is the same thing, of the produce of other men’s labour, which it enables him to purchase or command. “[Smith(1974)]

3This phrase is widely used by Marxian economists. Some have taken it to simply mean contractual equality between agents in the market[Bordiga(1975),Bordiga(1954)], but more generally they seem to mean the law that labour time determines price.

4Actual inequalities, which are of course massive, arise outwith contractual enforcement.

Not even wrong

By the classical theory, we mean the theory that labour is the source of value. This was generally accepted from the time of Ibn Kaldun through Adam Smith down to that of Karl Marx1. But if you have had an economics course at school or college, this is unlikely to be the theory you were taught. Instead you would have been taught the neo-classical theory which was developed in the late 19th century by writers like Jevons or Marshall. It is arguable that this theory gained its popularity because the classical theory, having by then been adapted by socialist writers, had a rather disreputable image in polite society. The neo-classical theory appeared considerably more sophisticated. It was more mathematical and had a sciency feel2. Its plausibility to young students is enhanced by a beguiling use of diagrams. For those of you who did not do an economics course at school, Figure 1 is what millions of school students have been given as the theory of price.

 sdcurve

Figure 1: The theory of price taught to millions of students.

 

There are two lines, sometimes they are drawn slightly curved, one is called the supply function the other the demand function. The demand function rests on the commonsense notion that if something is cheap, people will buy more of it, so it slopes down. Teachers have little difficulty getting this idea across to their class.

The other line, called the supply function is shown sloping the other way. What it purports to show is that as more is supplied, the cost of each item goes up. Teachers have more difficulty with this, as common knowledge and experience will have taught students that actually the reverse is the case: as industries ramp up production they find they can produce more efficiently and supply the output at a lower cost. Such objections provoke some hand waving at the blackboard and excuses3.

The great thing about a classic diagram is that it is both memorable and intuitively understandable. If you can present maths this way you leverage the processing ability of our visual cortex to understand it. That is why Venn diagrams are so much easier for students to grasp than axiomatic set theory[Lakoff and Nunez, 2001]. Our brains tell us that if it looks right, it not only is right, but it is real. So having seen the diagrams students come out thinking that supply and demand functions are real things, after all they have seen them. Not only that, one can see that the intersection of these functions exactly predicts both the quantity of the commodity sold q, and its price p.

Had the theory been presented entirely in algebraic form it would be both more confusing, less appealing, and more subject to critical analysis. We will demonstrate that once you convert it to algebraic notation it is evident that the theory violates two cardinal principles of the scientific method. Its sciency feel is faked.

Occam’s razor   is the principle widely credited to the monk William of Ockham in the middle ages, who is supposed to have said that in an explanation entia non sunt multiplicanda praeter necessitatem or entities must not be multiplied without cause. His dictum has been widely adopted by scientists who interpret it to mean that when constructing a hypothesis you should keep it simple4.

Why is this a good principle for science?

Beyond philosophical beliefs that the laws of nature are simple and elegant, there are pragmatic reasons why sticking to Occam’s razor is good scientific practice. The main one is that if you make your theory complicated enough you can make it fit any particular set of observations, but this is at a cost of loss of generality predictive ability. A famous example is the way that the Greek geocentric theory of astronomy was extended by adding epicycles to account for the retrograde apparent movement of Mars5. Ptolemy was able to get good predictions, something that classical economists signally fail to do, but he got them at the cost of a theory with little inner logic, and which, we now know was totally inside out.

The neoclassical supply and demand theory does multiply entities without cause. Each of the functions has at least two parameters specifying its slope and and position6. But the real observed data only has two parameters : a price and quantity on a particular day. So the theory attempts to explain two numbers and in the process introduces four new numbers – entities lacking necessity.

For Ptolemy the epicyclic complexity bought precision in predicting planetary motion, and in the sense that there were no more epicycles than was necessary to achieve that precision, Ptolemy’s theory obeyed Occam’s razor. But the profligacy with which the economists strew free variables around, brings the opposite effect. Their price theory is underdetermined and makes no testable predictions at all.

Testability   is another cornerstone of the scientific method. A causal theory should be testable to see if it is true. For that to work, the entities you use have to be measurable. But what testable predictions does the neoclassical theory make about the structure of industrial prices in, for example, the US economy?

It can make none, since the supply and demand functions for the various commodities are not only contingently unknown, but are in principle unknowable. The theory says that the two functions uniquely define the price and quantity that will be sold on a particular day, but there are infinitely many pairs of lines that could be so drawn as to intersect at the point (q,p) in Figure 1. It is no good trying to look at how the prices and quantities sold vary from day to day, since the theory itself holds than any changes in price or quantity must be brought about by ‘shifts’ in the functions. What this means is that the economics teacher goes to the board with her ruler and draws two more lines intersecting at the new price and quantity. This, she tells the class, is what happens in a real market, prices change because the supply and demand functions move about.

But splatter any arbitrary set of points on the price quantity graph, and you can obviously draw intersecting lines through each an every one of them. Let these points be prices on successive days, there could never be a sequence of these price value measurements that could not be ‘explained’ by suitably shifting a ruler about and drawing pairs of intersecting lines. So the theory is unfalsifiable. It makes no specific operational predictions about prices and quantities. It is true by definition and vacuous by definition. It is not even wrong[Woit, 2002].

References

[1]
Ibn Khald¯un, Franz Rosenthal, and Nessim Joseph Dawood. The Muqaddimah: an introduction to history; in three volumes. 1. Number 43. Princeton University Press, 1969.

[2]
G. Lakoff and R. Nunez. Where mathematics comes from: How the embodied mind brings mathematics into being. Basic Books, 2001.

[3]
Karl Marx. Value, price, and profit. CH Kerr & Company, 1910.

[4]
P. Mirowski. More Heat Than Light: Economics as Social Physics, physics as Nature’s Economics. Cambridge University Press, 1989.

[5]
Isaac Newton. The Principia: mathematical principles of natural philosophy. Univ of California Press, 1999.

[6]
Adam Smith. The Wealth of Nations. 1974.

[7]
Peter Woit. Is string theory even wrong? American Scientist, 90 (2): 110-112, 2002.

Footnotes:

1Ïf all this has been established, it should be further known that the capital a person earns and acquires, if resulting from a craft, is the value realized from his labor. This is the meaning of ‘acquired (capital)’. There is nothing here (originally) except the labor, and (the labor) is not desired by itself as acquired (capital, but the value realized from it).

Some crafts are partly associated with other (crafts). Carpentry and weaving, for instance, are associated with wood and yarn (and the respective crafts needed for their production). However, in the two crafts (first mentioned), the labor (that goes into them) is more important, and its value is greater.

If the profit results from something other than a craft, the value of the resulting profit and acquired (capital) must (also) include the value of the labor by which it was obtained. Without labor, it would not have been acquired.

In most such cases, the share of labor (in the profit) is obvious. A portion of the value, whether large or small, comes from (the labor). The share of labor may be concealed. This is the case, for instance, with the prices of food­stuffs. The labor and expenditures that have gone into them show themselves in the price of grain, as we have stated before. But they are concealed (items) in regions where farming requires little care and few implements. Thus, only a few farmers are conscious of the (costs of labor and expenditures that have gone into their products).

It has thus become clear that gains and profits, in their entirety or for the most part, are value realized from human labor. The meaning of the word ßustenance” has become clear. It is (the part of the profit) that is utilized. Thus, the meaning of the words “profit” and ßustenance” has become clear. The meaning of both words has been explained.” Khald¯un et al. [1969],Book 1, Chapter 5, Section 1

Ät all times and places, that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.” Smith [1974],Page 136

Äs the exchangeable values of commodities are only social functions of those things, and have nothing at all to do with the natural qualities, we must first ask: What is the common social substance of all commodities? It is labour. To produce a commodity a certain amount of labour must be bestowed upon it, or worked up in it. And I say not only labour, but social labour. A man who produces an article for his own immediate use, to consume it himself, creates a product, but not a commodity. As a self-sustaining producer he has nothing to do with society. But to produce a commodity, a man must not only produce an article satisfying some social want, but his labour itself must form part and parcel of the total sum of labour expended by society. It must be subordinate to the division of labour within society. It is nothing without the other divisions of labour, and on its part is required to integrate them.

If we consider commodities as values, we consider them exclusively under the single aspect of realized, fixed, or, if you like, crystallized social labour. In this respect they can differ only by representing greater or smaller quantities of labour, as, for example, a greater amount of labour may be worked up in a silken handkerchief than in a brick. But how does one measure quantities of labour? By the time the labour lasts, in measuring the labour by the hour, the day, etc. Of course, to apply this measure, all sorts of labour are reduced to average or simple labour as their unit. We arrive, therefore, at this conclusion. A commodity has a value, because it is a crystallization of social labour. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it; that is to say, on the relative mass of labour necessary for its production. The relative values of commodities are, therefore, determined by the respective quantities or amounts of labour, worked up, realized, fixed in them. The correlative quantities of commodities which can be produced in the same time of labour are equal. Or the value of one commodity is to the value of another commodity as the quantity of labour fixed in the one is to the quantity of labour fixed in the other.” Marx [1910],Section 6

2Mirowski [1989] argues that it deliberately borrowed from the the then relatively modern Lagrangian formulations of physical field theory.

3 These tend to be to the effect that the class must distinguish between the short term equilibrium of supply and demand shown in the diagram, and long term processes which involve something quite different, a shift in the supply line to the right. This is a classic example of historians of science call adding an epicycle to a theory to cover up embarassing conflicts with evidence.

4“We are to admit no more causes of natural things than such as are both true and sufficient to explain their appearances.

To this purpose the philosophers say that Nature does nothing in vain, and more is in vain when less will serve; for Nature is pleased with simplicity, and affects not the pomp of superfluous causes.”Newton [1999],Rule of reasoning I

5Since Fourier we have known that any function can be well approximated by a sum of sine waves. We use this routinely now in things like digital TV. What adding epicycles to an astronomical model does is put in additional harmonic components. Since you can approximate any function by such harmonic components, with enough epicycles upon epicycles you can, by Fourier’s theorem, get an arbitrarily good approximation of any apparent celestial motion.

6If we assume straight line functions then we have two equations

p = a −dq

for demand and

p = b+sq

for supply, where d and s are the absolute gradients of the curves, and a and b the positions where they intercept the Y axis. Clearly these equations have 4 parameters.

Interview Part 2

This is the second section of the interview with Jo Cotenier.

You pretend that using this method under socialism exploitation would be ruled out and that a more egalitarian society would be installed, with mainly the small minority of people driving their income from property losing.

Yes, let us look on it at two levels. One is why Marx poses the issue of payment according to labour first. It’s because the fundamental inequality in capitalist society comes from the exploitation of labour. Almost all inequalities come from that. That is the fundamental thing that has to be abolished in the socialist society. The way Marx want to abolish it, is by abolishing the wages system, which means you abolish the purchase of labour power, which means you no longer have the labour power’s price determined by the cost of reproduction. Instead the principle of paying according to labour is what, in fantasy, bourgeois economy claims already happens, that the people are paid the value of their labour . It is never what actually happens. You dont get paid an hour for an hour, but what people get is always, consistently and necessarily, under capitalism much less than an hour.

Secondly, from the Communist Manifesto, the Draft Program of the French Workers Party and the Critique of the Gotha Program, whenever Marx talks about income, he says there has to be income tax. And the public expenditures should be met out of income tax. The point here is that the entire value of labour, the hours that you work are accredited to you and then income tax is taken off. This is quite different from the mechanism that was used in the Soviet Union, where although they had some income taxes it was very low level and only covered a small part of State expenditures. Most of State expenditures came from the profits of the enterprises. Therefore the actual return to workers was much less than the level they could have been. They received back in kind, in goods and services, but these where funded out of the profits of State enterprises. As such, the origin is hidden, the people don’t see where the value comes from, it doesn’t appear that it comes from human labour, it appears it is something created by the State. That inhibits democratic debate over how the surplus product is to be allocated and how it is to be spent. Because labour costs were represented to soviet enterprises only as wages which were an even lower fraction of the working day than under capitalism, because of the free or subsidised goods, it often did not appear profitable to use labour saving machinery, leading to labour hoarding by factories.

You say that many of the techniques needed for performant planning are yet applied by market systems (barcodes, input-output matrices, feedback-systems….). What is finally the most distinctive characteristic of the planning system you propose, in opposition to the market systems?

The most significant thing is that you have common ownership of all enterprises, there is no profit income, all value is appropriated by the producers and they collectively decide what percentage of the hours they work will be used for other purposes. That is why the principle of labour-accounts is central when Marx talks about it. He says they, labour accounts, can only operate on the basis of directly social production, which means that the individual unitss of production do not reproduce themselves by selling at a profit or loss. The individual units of production are just branches of common organism, they are not independent juridical subjects which own property and which, to survive, must sell property.

Then you have to plan the production. Can you explain how you resolve the calculation problem.

You have to distinguish short term from long term planning. What you require in the short term is not that different from what is now logistics. Which is what the bar code system provides, it provides just-in-time delivery of the many different products. That is what maintains the actual coherence of the capitalist economy, it is not the price mechanism. It is the quantity order mechanism that maintains its coherence . If all the things that each supermarket is going to deliver each day had to be obtained by bidding on the market by each manager of each supermarket by the price mechanism the smooth level of stocks would not work. That aspect, the infrastructure, is already there.

The longer term problem is how do you make sure the things are

a) correctly valued when they go to the consumers and

b) how do you work out implications of changes in the structure of the economy.

This is something which the Austrian economists concede, that if you just continue production and allocation at the same scale and do not change, there would never be any difficulty in a planned economy. The difficulty they said is the deciding on the correct valuation and therefore correctly choosing the most efficient future options in the organisation of production. As to the correct valuation, the correct valuation of things is if everything is valued at the amount of time that takes to produce it. The market economy approximates that in prices, it approximates it quite closely, but its an approximation. The first problem therefore is to be able to calculate the number of hours in each product.

Then people can rationally decide whether, if I consume this thing am I consuming the same amount of or a proportion of work that has been done by me. Clearly the decisions of all consumers have to be such that all consumers have to choose to consume no more than the amount of values , or hours, the society has allocated in consumer goods. That level of correctly valuing is essential to maintain a balance in the economy. That balance is disrupted if you systematically undervalue certain consumer goods like the Soviet Union and other countries did. Therefore you get a lot of shortages if things are undervalued.

The question of the long term plan for change can only be done if you have a model of the economy: in computer language, what you have to do is simulations. Let’s take issues just at present, at the moment. It is clear that we cannot go on using fossil fuels at the level that the society is using them before. You therefore have to shift society to using renewable energy resources. This has a whole series of implications downstream of all things that will have to be changed. That kind of all-round planning requires you to be able to simulate different structures of the economy and choose which of those is going be the most efficient. And already to some extent in capitalist society the pressure of climate change means that studies of that sort are being carried out by the International Panel on Climate Change. They have to calculate how society is going to reorganise its material reproduction in order to survive. That is the kind of issues where planning is going to be more efficient than a market system. Because the market system has been trying to control the amount of carbon emissions and because it is done in terms of carbon price we don’t actually get a direct control over the real amount that is coming outside in the atmosphere. What you need to do planning like over a twenty year period how you will have to reduce the production of coal and the production oil by 5% a year over this period, what is the implication of this in the number of nuclear power stations, the number of solar panels you have to produce, and you have to advance the resources to build the factories of solar power, nuclear power factories etc, and comprehensively restructure the economy in that way.

Therefore it is the kind of situations which is analogous to the rapid restructure that the Soviet economy had to undergo in the nineteen-thirties where growing directive planning has been so effective and these is becoming a matter of potential survival for humanity. Current models predict that by the mid 2020s in tropical areas you will have passed beyond their current climate statusand in northern Europe you will have it by the twenty fifty. When we say pass beyond the climate status the average temperature in a normal year will be higher than the records that have been in the worst hot year. When that happens the implications will be huge for food and populationand dramatic. These are issues in which only a directive and calculated planning is a feasible solution.

You have also elaborated concepts about democracy, linked with the issue of planning.

If you are going to have democratic control of the economy, this democratic control can only be carried out at the level of perception the population in general can handle and understand. You always will have to delegate some things to technical management committees or State executives to decide things, but you have to always at least pose the outcomes of it in a way that everyone can understand. One of the advantages of posing things in terms of labour hours you can put the questions to people in a meaningful way. It’s not meaningful if you ask how many billion euros a year should the European Union spend on solar power. If you ask how many hours a day or how many hours a week should your wages been reducted by, for environmental change, that converts it into a meaningful poll. You can have referendum style votes either to increase or reduce the number of hours a week that everyone has deducted from their wages for several broad headings of expenditures.

You can’t expect the whole population to vote on every fine detail but they have at least to be able to control the surplus product, control what they don’t consume. If it is not to be exploitation, it has to be a voluntary decision taken collectively how it has to be used and you have to present that in a way that it is democratically intelligible and you have to hold popular votes. The only way .you can know everything is by serious accounting of what is the broad issue, what should be the magnitude of the general budget headings, how much overload in terms of resources is going on education. That kind of issue.

At your university department you have elaborated a lot of methods to apply direct democracy by means of electronics, smartphones, etc. How does it function?

We have done a number of prototypes by student projects to allow, first, a secure system of voting on yes/no questions by mobile phone. Basically the idea is everybody is given a voters card with a number on it like your credit card number. Nobody knows what the number is, except for you. When we have try-outs at the university we go round with them in a box and each person selects a card and we don’t know who has which card. When you vote you send a text message either to a yes telephone number or a no telephone number and your voters card number. When the message comes in it is checked that it is a valid voters card number. The voters card number is made up of two fields, the first is the public field and the last is the secret field. That is like the number you type in to a bank machine.

At the end of the vote, all the numbers that voted yes and all the numbers that voted no are listed on a webpage and the secret number fields are hidden, but you can go and see if your card has been correctly listed in the yes or the no. You can also see if the telephone number is correct. Anyone can download the listed votes and count by his own computer and see if account is correct.

This is very important because you see in countries where you have electronic voting, like the United States, that there are repeated allegations there is fraud going on. In one of the last votings in the primary between Bernie Sanders and Hillary Clinton, people are reporting that the votes initially at one stage in the evening showed Sanders ahead by 60% and a few minutes later the TV shows numbers are switched. There is no independent way anyone can count votes, it is just software, and the software can print a different number out. People also say that they tried to vote for one candidate and that the system refused to vote for that candidate. There is no way that people can audit the voting system used in the United States. The machines are black boxes, you can vote on them and you just have to trust the software company which plans the software, to believe these results are not completely made up. The statistical studies are showing in the elections that Bush won that there was systematic biases between what the opinion polls said and the results, only in those States that used the electronic system. So our aim is to come out with a verifiable voting system, that can be verified by the public, that is completely open but still anonymous.

Finally, you have a view of a fluent and fast transition between socialism and communism. Do you mean this is due to the actual possibilities of technology?

The transition from the first to the upper stage could be achieved almost immediately in Europe. The difficulty is the first stage, it is not the transition to the second stage. The difficulty is to get rid of private property, to move to the system of labour-accounting and get rid of the money.

If you have done that, the second stage is almost achieved by social-democracy. It is accepted in the principle by social-democracy that their should be some compensation if you have children. The sick shouldn’t be charged for the medicine. These principles of Marx have mainly been achieved in many European countries. It hasn’t been achieved in the United States, it hasn’t been achieved in the third world. The second international parties were able to bring this measures in the nineteen-fifties and sixties. It’s easy to say the State will make payments to people with children. The bourgeoisie doesn’t mind that so long as it comes out of the taxes on the working class in general. What they were not able to do was to challenge exploitation itself. So that is the key political question, it is much harder to do.

Interview by Jo Cottenier PTB

Part 1

Interview with Paul Cockshott – 21 June 2016 Glasgow

You wrote the first version of your book in 1989, just before the fall of the Soviet Union. Why?

We didn’t know the Soviet Union was going to fall. It may seem that with the benefit of hindsight, it was well timed. What was clear there was a big debate going on in the Soviet Union over the question of market socialism. And we thought this was a mistake. And in order to establish that it was a mistake we had to explain how an improved planning system could be more viable. A similar debate was taking place in the labour movement in Britain due to the publication of Alec Nove’s book Towards A Feasible Socialism. Therefore it was critical important in Britain, but our primarily objective was to get a translation into Russian and get published in Russia because one of us was actually staying in Russia, Alan (Cottrell) was in Russia. Once we finished the book we were unable to find anyone to translate it to Russian before the Soviet Union crashed. So it was published first in English. I also attended to get it translated in Hungarian before the collapse and went to Hungry because I knew some social scientists in Hungry and thought maybe I could convince them to get it done. But I discovered that they had become liberals by then.

At that time planning was considered as disabled forever. You had the fall of the Soviet Union, you had Alec Nove who said ‘it is impossible’, you had China switching to a market economy, but you were convinced that planning was still actual and necessary?

Well, it wasn’t a new view, it had been a traditional and huge banner of Marxism, an essential part of the socialist economy. It struck me that the arguments that where put against planning and the about the impossibility of planning by people like Nove, were ones that it was easy to see through if you knew enough about computing and algorithms. To see that , their claims about the difficulty in computational terms of planning were entirely wrong, if compared to problems that computers were already beginning to undertake, like the weather forecasting. Computers that have been used for weather forecasting would have been good enough for planning and valuation in the Soviet Union.

You consider that the Soviet Union lacked technology but that they also could have done better than they have done.

At the time I didn’t have a very good grasp of exactly what the level of the technology in the Eastern bloc was. I visited Bulgaria and Czechoslovakia and Poland and went to computing centres there to see what kind of resources they had. But until the last ten years I didn’t really get a sound assessment about what the capacity of the Soviet own-design machines were. What struck me was, talking to engineers in Prague, the old nineteen sixties’ and seventies’ BESM machines were technically superior to the copies of IBM computers they were then using. One of the things that was brought out by Spufford’s book, Red Plenty, is how the decision to copy IBM technology actually set them back seriously, it was a serious strategic error not going to develop their own technology.

But you say that there was also some ideological resistance and that there were some obstacles against introduction of more elaborated and mathematical planning methods in the Soviet Union.

It is complicated. In part, the mathematical economists set themselves overambitious goals, they were too perfectionist in what they wanted to achieve, rather than aiming for techniques which where just good enough to solve the problems. I’m relying on Allin’s knowledge he says that the Russian mathematical economists tried to pursue excessively optimal solutions which are much harder to do than solutions which are just good enough. This idea of settling on techniques which are just good enough for the computational resources you have available was ironically used more successfully by western economists who used linear programming in the nineteen-forties and -fifties who realised you didn’t need to get a perfect solution, you needed not optimalisation but sufficisation. There is a good American historian of economic ideas, Judy Klein, who has done an account how in the nineteen-forties American economists applied Soviet ideas of planning successfully to logistics problems that the US Airforce and US military had and the key point is to go for just what was just good enough for what you could do with the computer resources available at that time. So one thing was overambitious aims.

A second thing is that any improved planning system would have meant more influence for Gosplan and less influence for the Industrial Ministries and possibly less influence for particular plant managers. Gosplan was actually quit a weak organisation compared to the Ministries, after Khrushchev reforms Ministries became much more important. Gosplan only had maybe 3000 staff, so the agency which would have to push it through was not the strongest part of the government apparatus in the Soviet Union. That’s likely to have been another obstacle. It is not that these ideas have not been promoted, the Ukrainian cybernetician Glushkov was promoting this kind of ideas in the late fifties early sixties, at the point when Khrushchev was ambitiously predicting the Soviet Union would reach communism by the mid nineteen-eighties, he said this is the way you have to do it: you have to create a network of computers across the whole country, you have to create data terminals in all libraries where everyone can access economic data. In a sense he was calling on the Soviet Union to build what later became the internet. And he tried to persuade Kosygin of this. They had discussion about it and they had estimates of the costings. He said it is not going to be cheap, it will cost as much as the moon project and the hydrogen bomb project put together at least and it will take maybe fifteen or twenty years before the system is operational. And Kosygin said that is for to much of a risk, we won’t do that.

You pretend that the crisis of world socialism was primarily due to economic failure. Most in the left mostly see it primarily as political.

The political failure could only come about because there was an economic failing, both in practical policy and a failing in economic theory. The failing in practical policy lead to the perception that the socialist system and economy was underperforming compared to what would be possible in capitalism and this discredited it ideologically. Critical I think was the fact that a section of the intelligentsia in the Soviet Union changed side during the nineteen-eighties as a result of what they saw as a stagnation taking place. This was a combination of a real slowdown, a quite significant slowdown, of the Soviet economy, with a particular class viewpoint of this section of the intelligentsia who knew that they could have had higher salaries in a capitalist economy. People in their position were better paid in capitalist society. That was bearable, if as during the nineteen-fifties and early sixties, the Soviet Union was growing rapidly and their own standard of living although it was not better than that of an industrial worker, it was still getting better fast…. If the rate of growth slowed down, and they could see and believed that the American technical middle classes were better of than they were, it no longer seemed plausible that catchup was going to be achievable by steady growth of the Soviet economy and therefore it only could be achieved by income differentiation. In fact, the paradox was, that in terms of improving people’s living standards from the nineteen-seventies to the start of nineteen-ninety, the Soviet economy outperformed the United States but that was not the comparison the people where making, they were making the comparison with the nineteen-sixties and the nineteen-fifties in the Soviet Union, when it was growing much more rapidly.

In 1993 you published the paper ‘Socialist Planning after the Collapse of the Soviet Union’, when everyone spoke about the final bankruptcy of the planned economy. Your ambition was to prove that another planning would be more performant and possible. But you began by going back to the historical controversy between the Austrian liberal school with Von Mises / Hayek on one side and the Polish socialist Oskar Lange at the other side. Why is this important?

Because that still provides the starting point for the justification that bourgeois economists commonly use for saying that socialism is unfeasible. They still refer back to these proofs that have supposedly been carried out by Hayek and Mises. They say Hayek and Mises said this in the nineteen-twenties and -thirties and look the Soviet Union collapsed and they have proven why. The questions then are ‘were these arguments valid’ and ‘did the events really prove they were right or not’? We set out to show that ‘no’ the basic arguments weren’t valid and events haven’t proven they were right.

Can you explain briefly what the technological means of today could do better than in the Soviet times and what problems of Soviet planning could easily be solved today?

Using basically administrative techniques, with almost techniques like military command and control, it was certainly possible to carry out rapid industrialisation. And the Soviet industrialisation happened faster and was more successful than any other one. From that point of view the Soviet system was very successful. However that kind of directive command and control by manual administrative means, meant it was difficult to regulate more than maybe one or two thousand products and set plan targets for these products. Within this plan broad categories of products, each one of them would be made up of many individual products within that category were used, but the plan targets were not expressed in quantities of particular models of good from that factory to be delivered each year.

They were in terms of so many roubles of this product category to be delivered this year and the control system therefore had a mismatch with the number of different products to be produced. If you just were planning large commodity like categoreis, concrete, pig iron, aluminium ingots it works fine, but for finely detailed industrial products you could hit plan targets in rouble terms but have an inappropriate mix in the fine details of the products. And that is the point Nove made. So you needed to be able to plan down to the individual product code.

Nowadays capitalist economies have the information processing techniques to do that. Every time we buy something in the supermarket the bar code, the individual product code of that thing is scanned and is recorded on the supermarket computers and orders are issued at the end the week for the exact goods that have been sold. And that requires an information processing capacity that can only be achieved through informatisation. That detailed bar code level planning developed themself. You have to plan from the consumer side in a sense of human consumers but also , much more critically, from the standpoint of industrial consumers. The right parts or equipment have not always been available and delivered.

Didn’t you get the critics that you defend a technocratic concept of socialism? Is performant planning only a question of better calculation and informatics?

Some people were saying that any system of centralised planning is inevitably antidemocratic and puts a bureaucracy in control. I think this is a fantasy, it is not actually what happens. If you look at the Soviet Union the planning apparatus was not the apparatus that had political power or political direction. The economy, even in the Stalin period was not a dictatorship of Gosplan. The administrators of Gosplan had relatively little influence on overall economic policy. The overall economic process was settled by the government which was appointed by the communist party and it was the political apparatus that was determinative. If you focus at the political level, you have to talk about changes at the political level to insure that the government of the country represents the interests of the majority and the majority has some control on that. That is a quite separate question from whether you have a planning system or another system.

You exhume an old idea of Marx in the Critique of the Gotha Program, an idea that has never been applied and tested: the payment in labour-tokens, or in a labour-account today. Can you explain what it means and why it is so crucial in your argumentation?

The first point is that you have to take into account this idea was not unique to Marx. It was a widely accepted view by socialists of these times, that some form of labour account payment must exist, at least among the more radical part of the movement. Why it is so important?

It is important because in any society you have to be able to use human labour efficiently. Because it is the fundamental resource that the society has. Nobody of us lives forever, we are all mortal, the amount of time we have is limited. That is the resource that humanity has. That can only be spent in particular ways.

In a capitalist society calculations in terms of money are indirectly calculations of time, behind money is always time. The reason why the capitalist economy is able to operate is that by doing monetary calculations it is eventually calculating the efficient allocation of labour. However by making money a separate thing, a separate object, coins, banknotes, which can move around physically, they acquire a mystified character. People don’t see that what they are actually doing, is calculating human time. It seems that it is tokens which are being valued. Because these tokens can be privately appropriated you inevitably get the accumulation of the money in the hands of a minority of the population who therefore get control over the labour of the rest. But it been done indirectly in the form of money. Money becomes a social power over labour, it is just the representation of labour, but it is the means by which society calculates and oppresses labour.

Coins are means of calculation, but because of their physical properties, they can be picked up and carried away and one person controls it. From the moment of their invention you got the domination of human labour by money, by what Aristotle called chrematistic, the search for money. You get the paradox, that we get in the fable of Midas, the king of Phrygia, who touched everything and turned it to gold. Why do the Greeks tell the story, it’s because the Phrygians invented money, they invented coins. What is the fable telling you?

It is telling you that the search for money negates itself, you cannot eat gold, so he starved to death from eternal greed . That is lost in modern society, we don’t have the close contact with natural economy, to see that contradiction. So people see wealth as being money. As soon as you do the calculation in terms of money you are doing it in terms of social power of one person over another. You inevitably mystify the allocation of labour and end up with basically exploitive relations. But you cannot do away the need to calculate and allocate labour.

Marx said that a natural law cannot be abolished, only the social form can change. One of the most pernicious misrepresentations of Marx, that is prevalent very widely among Western Marxists is the idea that under communism everything is to be given away free to every need irrespectively if they work or not. There is nowhere in Marx where he says everything is going to be given away to each and everyone. He speaks of allocation according to labour time as the first principle. And then he says it is modified later to the extend that society is richer and more prosperous. It is modified so that those who have greater need they receive a disproportionate rate of pay. He is very specific about this, he speaks about people with a larger families or people who are sick, someone with a larger family to support receives a higher rate of pay. This is turned into fantasy land by most Western Marxists who completely ignore what it means when he talks about payment according to need and think it to mean everything will be available for people nothing according to ones whims. And someone’s whims are not needs. Needs are something objective, which society can ascertain. You have more needs than someone else and therefore you get more. It doesn’t mean that you can sit on your ass all day, do no work and get as much as someone who works hard.

Thanks to Jo for asking the questions, and transcribing the recording.