Academic journal article Review of Social Economy

Roemer and Market Socialism

Academic journal article Review of Social Economy

Roemer and Market Socialism

Article excerpt

In his articles (Roemer 1992; Roemer and Silvester 1993) and a subsequent book (Roemer 1994), Professor John Roemer has described a model for a market socialist order, and has defended that regime as being able to produce a more egalitarian and environmentally conscious polity than contemporary capitalism without succumbing to the inefficiencies of the centrally planned systems.

This review presents some challenges to the feasibility of Roemer's market socialist conception. It is divided into two sections. Part I discusses and criticizes Roemer's claim, one that has been shared by other observers (e.g., Harrington 1989), that market socialism can produce a broadly based prosperity. Part II raises some questions about Roemer's claim that his market socialist model should be pursued because it will better minimize harmful externalities of production.


Roemer proposes a model for the future market socialist order. In this model, many elements of markets are to be retained. For example, labor markets and consumer product markets are to be free to set prices by mutual consent, subject to the same kinds of regulatory devices that have prevailed in the predominantly capitalist states. However, the capital markets are to be changed substantially. Each citizen is to be issued an equal number of coupons which can be used to purchase stock in enterprises directly, or to purchase mutual funds or related indirect interests in stock. Citizens are not permitted, however, to buy or sell coupons or their stock for currency. The coupons and stock are not subject to inheritance; coupons are forfeited upon death and new coupons are issued to new generations of citizens. Thus, the distribution of stock will be roughly equal among the citizenry, and we will not face the problem of poor people selling their coupons to the wealthy, who would then derive the bulk of the economic benefits from production. The stock will entitle the shareholders to the profits of the firms. (Roemer 1994: 48-50).

In Roemer's model, firms will not raise capital by issuing new stock. Instead, they will obtain capital from banks that are predominantly owned by the state, although kept as insulated as possible from political currents to enable them to operate in an economically rational manner. The main bank in charge of the firm in turn will exert influence over the management of the companies in a manner similar to the Japanese Keiretsu. This will keep the firm management from engaging in poor investments or self-dealing. The state will not intervene in the prices of individual capital goods, which will be determined by free contracting between enterprises. However, the state will seek to direct capital away from certain sectors and toward others by altering interest rates charged to the various sectors. For example, high interest rates could be charged to industries that cause significant pollution.

The principal benefit envisioned from this scheme is that economic dividends will now be paid out to a wider group of persons than before. In a sense, everyone will be a capitalist, although no one will be a very large capitalist. Roemer's regime would allow small firms to develop with private capital, but they would be required to merge those firms into the coupon sector once they reached a certain size. The entrepreneurs would be paid compensation for giving up the companies they had developed, much as entrepreneurs frequently expect to be acquired by larger firms under capitalism. Coupon stock markets would evolve to supply the same kinds of decentralized information about relative values that are obtainable under capitalism.

In some ways, Roemer's model is more moderate than other proposals for combining markets with social ownership of the means of production. For example, he would not require the internal restructuring of enterprises to promote worker management or economic democracy, a frequently stated aspiration of market socialism (Pierson 1995: 99-101). …

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