In a recent column on “Socialist Market Economy,” Erwin Marquit argues for the merits of market-based economies and against the deficiencies of planned economies. Since the collapse of the Soviet Union and the European socialist community, this position has found a significant following among left intellectuals. My strong impression is that there has been a decided swing away from supporting planned economies in favor of market-centered economies.

In addition, self-professed socialist countries like China and Vietnam seem to embrace the notion of markets, though it is not always clear to what extent, in what way, and to what purpose.

For these reasons alone, advocates of socialism should examine the thinking behind these developments.

An honest appraisal of markets and planning must begin with the warning that they are not two mutually exclusive options. Stalin characterized the Soviet economy – at its most rigidly planned moment – as still a commodity producing, exchange-based economy. Conversely, the modern transnational corporation wholeheartedly embraces planning. With the development of information technologies, corporate executives develop extensive and detailed plans involving product development, production and marketing, plans that extend forward many years. Ironically, as advocates for socialism retreat from planning, the captains of industry welcome it.

Friends of the market accept other myths. Professor Marquit asserts that previous socialist economies suffered from non-cyclical crises, a failure to meet goals, balance distribution, and achieve productivity, suggesting that these factors caused the decline and collapse of the Soviet Union and its allies. The collapse of the Soviet Union was largely a political collapse brought on by political failures. Even today, opinion polls show strong support among Eastern Europeans for the benefits of the now-dismantled socialist economy.

Of course there were economic problems in the Soviet Union, some associated with planning, some not. For example the war in Afghanistan proved to have enormous economic consequences much as the U.S. war in Afghanistan and Iraq is demonstrating for our economy. Likewise, Chernobyl was a profound setback for the Soviet economy. Neither can be laid at the doorstep of planning.

Of course, capitalist enterprises are inefficient, fall short of goals, and fail in spite of the market. Market advocates explain this as a victory since the market is rationalizing production and distribution. But should socialists and Communists welcome this rationalization process? Should socialists and Communists celebrate the dislocation and unemployment of workers? The useless production of vulgar and frivolous products? The profit-driven merging and selling-off of enterprises? The competitive drive to reduce costs including wages, benefits, and safety?

But these questions are precisely the issues that Marquit (and other defenders of the market) evade. In their zeal to defend the efficiency of the market, they ignore entirely the issue of justice.

For example, by making productivity the centerpiece of the success of the market over planning, market advocates shrug off the unemployment, intensified exploitation, and dangerous working conditions that may accompany gains in productivity. U.S. economists are in awe of the productivity increases we have “enjoyed” over the last two years, gains that were achieved through massive layoffs and increasingly grueling and dangerous effort on the part of the remaining workers.

Professor Marquit faults planned economies because of they are incapable of “competing with a capitalist economy on the world market.” But should a socialist economy compete on the world market? When socialist economies first emerged, they were neither allowed nor particularly motivated to compete in the world market. All socialist economies were, and in the case of Cuba are, interested in fair and mutually beneficial trade. But where does the notion of competition take us? Historically, competition brings low labor costs, intense exploitation, and poor working conditions. Is this the vision of “market” socialism that Marquit espouses? Have we forgotten that the big fish eats the little fish?

While we follow market experimentation in China and Vietnam with great interest, we should not lose sight of the many danger signs: increased unemployment, rapidly expanding income differences, labor migration, individualism, alienation, crime, poor health, and foreign exploitation. These problems have increased dramatically as inefficient public enterprises have been replaced with efficient private businesses under pressure from the world market. But who will pay for this elusive efficiency? It would be a great tragedy if debates over the future of socialism revolve around growth rates, competitiveness, productivity and technical innovation and not health and welfare, cultural opportunity, equality, solidarity, peace and security. We should judge both market mechanisms and planning initiatives against these standards.

The author can be reached at