The Contradictions of Market Socialism

By Toporowski, Jan | Monthly Review, April 1995 | Go to article overview

The Contradictions of Market Socialism


Toporowski, Jan, Monthly Review


The Polish economist, mathematician, and statistician Michael Kalecki (1899-1970) is best known as a radical figure in the circle around the reforming English economist John Maynard Keynes. Kalecki contributed to the debates sparked off by Keynes's attack on the orthodoxy, as widespread in his time as it is in ours, that economic depression and instability can only be resolved by freeing "market forces" and greater competitiveness. Compared to his so-called "Keynesian" economics, Kalecki's work on the economics of socialism appears fragmentary and seemingly confined to Eastern European problems, even to sympathetic commentators like Osiatynski and Nuti.(1)

However, his working-class sympathies and the clearly Marxist origins of his analysis of capitalism, based on class divisions of power and income, made many left-wing Keynesians, most notably Joan Robinson, see him as the key link between Keynesian economics and Marxism. This is a critical issue because there were fundamental differences between the respective views of Kalecki and Keynes on capitalism. The English economist sought essentially an enlightened state-managed capitalism, while Kalecki clearly favored the replacement of capitalism by a system in which key industries would be nationalized, and the economy would be planned centrally for the benefit of all. As long as Kalecki is regarded as a mere left-wing Keynesian, it is understandable that his views on how a socialist economy should operate, and his clear opposition to market socialism, do indeed appear fragmentary and somewhat eccentric, especially in our time when Eastern European socialism, in which Kalecki lived and worked from 1955 to 1970, appears so signally to have failed to satisfy the aspirations of the working people of that region; when laissez-faire capitalism appears to many to be the only sensible way to run an economy; and when many socialists have reconciled themselves to seeking only to incorporate welfare state provisions in the capitalism in which they live. But once Kalecki's views on socialism are placed in the context of his critique of capitalism and his critical understanding of Keynesianism, his economics of socialism comes out as a strong and reasoned case for socialism and a consistent view of how a socialist economy should operate, incorporating a strong critique of market socialism. From this emerges a clear understanding of what went wrong with the Soviet and Eastern European management of their economies, and a way forward for socialist economics that avoids both wishful thinking about socialism, and fatalism about capitalism and its institutions.

The economics of socialism dates back to the foundation of the Soviet Union when Lenin, Bukharin, Preobrazhensky, and Feldman were faced with the practical problems of establishing socialism in an economically backward society. They took for granted the political victory of socialism and proceeded to examine more systematically the economic problems of industrialization, rural infrastructure such as electrification, and the establishment of basic social-welfare facilities. The main problem of socialism, in their view, was how to maximize investment in order to achieve a better material standard of living for all citizens. More orthodox Western critics of socialism identified the coordination of economic activities as the main economic problem facing a socialist regime. In various guises, the core of Western economic criticism of socialism continues to be that a socialist economy is doomed to shortages and inefficiency because it abolishes the free price system and entrepreneurship that are supposed to characterize dynamic capitalism.

In contrast with both of these approaches, Kalecki began his socialist economics implicitly with the problems of capitalism. When discussing the economic problems of socialism, he refers repeatedly to the capitalist economy to show how differently adjustments to particular problems occur in the two types of economies.

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