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# PostCapitalism-_Paul-Mason_-_z-library.sk_-1lib.sk_-z-lib.sk_

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But there was a catch. In the first place, just like the market, the state can’t calculate what’s needed in advance. So each year’s plan is in effect an experiment – and not on a small scale but on a very large one. The market could correct itself in realtime; the plan would take longer. A collectivist regime would be just as anarchic as the market, but on a bigger scale, according to Barone. And in practice the state can never have perfect knowledge, nor can it do the calculations fast enough, so the whole debate remained, literally, academic.

It was the upheaval of 1917–21 that made the issue of ‘socialist calculation’ a concrete question for economics. In 1919, Germany and Austria had begun their ill-fated ‘socialization’ drives, the early Soviet war economy was being hailed as a form of communism – and in the short-lived soviet republic of Bavaria they had seriously discussed trying to abolish money immediately. Planned economies were no longer a thought experiment, they were an imminent possibility, and being pursued with some fanaticism.

This was the context of Ludwig von Mises’s book Economic Calculation in the Socialist Commonwealth (1920). The market, Mises said, acts as a calculating machine: people make choices, they buy and sell things at a given price, and the market works out whether their choices were correct. Over time, this ensures the most rational allocation of scarce resources. Once you remove private property and begin planning, the calculating machine breaks down: ‘Without economic calculation there can be no economy. Hence, in a socialist state wherein the pursuit of economic calculation is impossible, there can be – in our sense of the term – no economy whatsoever.’<sup>15</sup>

As to the far left’s determination to abolish money, Mises explained that it did not matter. If you go on using money while overriding the market mechanism through planning, you reduce money’s ability to convey price signals. But if you abolish money, you abolish the measuring stick for supply and demand: distribution becomes inspired guesswork. ‘Thus,’ said Mises, ‘in the socialist commonwealth every economic change becomes an undertaking whose success can be neither appraised in advance nor later retrospectively determined. There is only groping in the dark.’<sup>16</sup>

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Mises targeted three critical weaknesses of planning in reality: a state can’t calculate as fast as a market can; a state can’t reward innovation; and when it comes to distributing capital between major sectors then, without a finance system, this becomes unwieldy and haphazard. Mises predicted that as a result planning would lead to chaos, specifically to the overproduction of shoddy goods that nobody wanted. It would work for a while because the ‘memory’ of the appropriate prices would be imprinted on to the system, but once that memory faded, it would collapse in chaos. Because his predictions were proved right, by both the life and death of the Soviet economy, his book has become a hallowed text of the free-market right. But it was not hugely influential at the time.

Only in the 1930s, amid the Depression, fascism and the USSR’s second Five Year Plan, did the debate on socialist calculation take off. The USSR was inefficient for all the usual reasons cited, said Mises’s pupil Friedrich Hayek: no consumer choice, clunky allocation of resources, no reward for innovation. But on Mises’s main point – the inability of the state to calculate as well as the market – Hayek retreated. A socialist state could mirror the market effectively, as Barone had said, provided that it had the right information. The problem was that it could never do the calculations fast enough.

Hayek’s collaborator, LSE professor Harold Robbins, complained that, to calculate the plan properly, ‘would necessitate the drawing up of millions of equations on the basis of millions of statistical data based on many more millions of individual computations. By the time the equations were solved, the information on which they were based would have become obsolete and they would need to be calculated anew.’<sup>17</sup>

This sparked a brisk exchange. The left-wing Polish economist Oskar Lange pointed out Hayek and Robbins had effectively made a big concession to the left.<sup>18</sup>

Lange was part of a school of moderate socialists who rejected Marxism and believed socialism could be implemented using the principles of

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marginal utility theory. He showed that if you retain a consumer market, and leave people free to choose where they work, but plan the production of all goods, then the process of trial and error in a socialist economy is conceptually no different from the one that operates through prices. Instead of being signalled through price movements, the unmet needs of the economy are signalled through shortages and surplus goods. The central supply board simply reorders production quotas in response.

Most independent observers thought Lange had proved his point. After the war, even the CIA’s expert on Soviet economics concluded: ‘Of course socialism can work … On this Lange certainly is convincing.’<sup>19</sup>

However, we need to revisit the calculation debate for a reason that should be obvious: technology is today eroding the price mechanism without the parallel rise of a planned economy. And supercomputers plus big data are putting within reach the kind of realtime calculations Robbins thought were impossible. Robbins asked for a million, million, million. That is a petabyte, which just happens to be the unit we use to measure the performance of a supercomputer: petabytes of instructions per second. This has revived the idea among some leftists that ‘planning could work’ – if only you could solve the problem of calculation through technology. In fact, however, there is no calculation problem in a postcapitalist economy – for a reason that was suggested by Mises in 1920.

In the ‘calculation debate’ of the 1930s, both sides rejected the labour theory of value. Lange the socialist and Hayek the ultra-capitalist both believed that marginal utility was the only explanation of what creates value. So for both sides, the idea of a transition – in which a system based on scarcity gives way to one based on abundance – is unexplored territory. If capitalism and state socialism are just two different ways of allocating goods rationally until you reach equilibrium, the transition between them is merely a technical challenge, not a revolution.

But as Mises had already pointed out, if the labour theory of value is correct, there is no calculation problem at all. The problems of allocating goods, deciding priorities and rewarding people who innovate can all be captured within a system based on labour values, because everything can be measured against the same yardstick. Socialism was possible, Mises admitted, but only if there was a ‘recognizable unit of value, which would permit of economic calculation in an economy where neither money nor exchange were present. And only labor can conceivably be considered as such.’<sup>20</sup>

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Yet Mises dismissed the labour-theory for the standard reasons accepted in Vienna in the 1920s: it can’t be used to measure different skill levels, and it can’t be used to apply a market value to natural resources. Both these objections are easily overcome; they are in fact misunderstandings of Marx’s theory. Marx clearly explained how high-skilled work can be measured as a multiple of low-skilled work – and that the labour value embodied in raw materials was simply the work it took to extract and transport them.

And Mises’s work on calculation contains a second valuable insight: it is not trading between enterprises that is the true mediator of supply and demand in a market economy, it is the finance system – which puts a price on capital. This was a perceptive insight, which has relevance today: if we want a postcapitalist economy, not only do we need something better than the market for distributing goods, we also need something better than the finance system for allocating capital.

TRANSITIONS HAVE THEIR OWN DYNAMICS

It was only the Russian left opposition – above all its leading economist Evgeny Preobrazhensky – which understood the centrality of the labourtheory to the transition. For them the goal of the transition was quite simply a rising supply of free, abundant things and the erosion of ‘necessary labour’ as the yardstick of exchange. As in Red Star, the early Soviet planners aimed to produce as much as possible so that work would be delinked from wages and the ability to consume. In Marxist terms, this was understood as ‘abolishing the law of value’.

But the Russian left could only achieve this by promoting heavy industry and state control. By the early 1920s, there was a shortage of everything: to make consumer goods you needed heavy industry and electrification; to

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feed people you needed to industrialize agriculture. So they urged the concentration of resources in the sectors that would become iconic in Soviet propaganda – power stations, steel works, big machinery. However, they showed great awareness that equilibrium was unlikely to be achieved, and that planning was likely to be anarchic.

In economic terms, the most important thing the Russian Trotskyists left us was probably the idea that a transition phase generates its own dynamics; it is never just the fading of one system and the rise of another.

Trotsky argued that in the first phase of the Soviet-style transition, both a private business and a consumer sector had to be maintained. It was hubris to suggest the plan could, at this stage, allocate better than the market in consumer goods. Plus, the rouble had to remain exchangeable on the world market. Furthermore, all plans were effectively hypotheses. ‘The plan,’ said Trotsky, ‘is checked and, to a considerable degree, realized through the market.’<sup>21</sup>

To make even the crudest adjustment requires realtime information feedback. But in a heavily bureaucratic society, where to dissent was to invite a one-way ticket to the gulag, such feedback was strangled. Hence Trotsky’s emphasis on reviving workplace democracy. You needed a rolling plan: a combination of plan and market, with money used as both a medium of exchange and store of value. And you needed workers’ democracy.

Money, said Preobrazhensky, would function normally in those sectors you could not plan, while in the planned sector of the economy, money would start to function as a technical accounting device. And while the aim is for the plan to swamp the market, the market could be expected to constantly ‘pollute’ the plan.

In a memorable passage, whose relevance to the twenty-first century will be clear, Trotsky wrote:

If a universal mind existed … that could register simultaneously all the processes of nature and society, that could measure the dynamics of their motion, that could forecast the results of their inter-reactions – such a mind, of course, could a priori draw up a faultless and exhaustive economic plan, beginning with the number of acres of wheat down to the last button for a vest.<sup>22</sup>

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The absence of such a ‘universal mind’, he said, requires instead the promotion of workers’ democracy – which had been abolished. Only if human beings, with freedom of speech, became the sensors and feedback mechanisms for the planning system could this crude calculating machine work.

Preobrazhensky, Trotsky and their collaborators were the last Marxists with any political power who conceived the transition in terms of labour value. Preobrazhensky was executed in 1936 and Trotsky assassinated in 1940. But their ideas contain powerful implications for the world we face today.

Under neoliberalism, the market sector is immensely more complex than in the 1920s and 30s. The USA in 1933 was vastly different from Russia in 1933 – but they were much closer to each other than the America of today is to the America of thirty years ago. Today’s consumer sector is not only much bigger, it is much more atomized. Production and consumption overlap – and the economy already includes information goods whose marginal production cost is zero. We also have Negri’s ‘social factory’ to contend with: a highly financialized and granular consumer society, in which what we buy has become a question of identity.

So lesson one is: the market sector is much more complex and therefore more difficult to replicate or improve on through planning.

Next, we have to consider the state sector. The modern state as a service provider is massive compared to any capitalist state in the 1930s. Whether it spends its tax dollars on services from private companies or those provided by the state itself, the state pushes the true private economy – private companies producing for privately employed individuals – into a smaller space. In addition, the peer-to-peer economy is large, though not measured in terms of profit and GDP. So lesson two is: any attempt to move beyond the market is going to start from a different place than it would have in the 1930s.

But we can learn from both the calculation debate and from the Russian left’s planning experts, if we know how to read them properly. Before that, however, we have to understand that, even with the best supercomputer and the biggest data farm, planning is not the primary route beyond capitalism.

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ATTACK OF THE CYBER-STALINISTS

Over the past twenty years, Paul Cockshott and Allin Cottrell – a computer scientist and an economics professor – have worked tirelessly on a problem we thought we didn’t have: how to plan an economy. Though not well known, their work is rigorous and performs an invaluable service; it is a textbook outline of what we should not do.

Cockshott and Cottrell argue that improvements in computer power, together with the application of advanced maths and information theory removes, in principle, the Hayek/Robbins objection: that the planner can never have better realtime information than a market. What’s more, unlike the left in the calculation debate, they say the computer model we would need for planned production should use the labour theory of value, and not try to simulate the results of supply and demand.

This is a crucial departure from the work of Lange. Cockshott and Cottrell understand that the labour-theory gives you a measuring stick against which both market interactions and non-market ones can be compared, and a way of calibrating the transition. They see the planning process as similar to a modular computer program. It would collate the demands of consumers and producers; work out the cost and resources needed to meet them; formulate targets; calculate in advance the resource implications; check the feasibility of the plan; and then instruct producers and suppliers of services to hit the targets.<sup>23</sup>

But unlike the Russian left of the 1920s, Cockshott and Cottrell don’t see the plan as provisional, or something for the state sector alone to execute; it has to be drawn up and tested in detail, down to enterprise level and individual products.

Once you remove the market, they argue, there are no other signals for the boss of a factory, or care home, or coffee bar to rely on. They have to know exactly what they’re supposed to be producing. Theirs, in other

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words, is the methodology for a completely prescriptive plan, as imagined (and ridiculed) by Trotsky in the 1930s.

Historically, of course, sophisticated planning at this level is something the Soviet Union never achieved: by the 1980s there were 24 million different products in the USSR but the entire planning apparatus could track the price and quantity of only 200,000 of them, and the actual central plan just 2,000. As a result, factories met the targets for the small number of goods they were supposed to make, and fulfilled all other requests chaotically or not at all.<sup>24</sup>

In Cockshott and Cottrell’s model, money exists in the form of ‘labour tokens’ which are paid to everybody according to the amount of labour they do, minus a flat tax to pay for state services. This allows for consumer choice. Where supply and demand for a product get out of kilter, the central planners adjust the price to achieve a short-term rebalancing. Then, over a longer period, they compare the prices commanded by a sector, or production unit, to the actual amount of labour it is doing. In the next round of the plan, they boost production in the areas where prices are higher than the labour used and cut them where lower. Planning is ‘iterative’; it is adjusted constantly. But it is not mere trial and error: Cockshott and Cottrell believe the inputs and outputs can be calculated in advance, and they propose a detailed algorithm to do so.

The computing challenge is, first, to calculate what the value of an hour’s labour should be. That is – how much work is going into each product, as listed on a giant spreadsheet. The researchers argue this is doable with a supercomputer, but only if it uses data-processing techniques that prioritize the most relevant information.

For Cockshott and Cottrell, working out the value of an hour’s labour is the hard part. The plan itself – the allocation of resources – is an easier calculation to do, because you do not run the program blind. You ask it feasible questions such as: how much of a product is going to be sold this year; how much of the various inputs do we normally use; what’s the seasonal variation, what’s the expected demand, how much should we order within the boundaries of past experience? They conclude: ‘With modern

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computers, one could envisage computing an updated list of labor values daily and preparing a new perspective plan weekly – somewhat faster than a market economy is able to react.’<sup>25</sup>

In an ambitious application of these principles, Cockshott and Cottrell proposed an outline for a planned economy in the European Union. They explained not just how you would calculate the plan, but also how you would have to restructure the economy to implement it. And it is here that the assumptions behind their methodology become clear: for all their dislike of what went wrong in the 1930s, this is still a form of cyber-Stalinism.

In their model, the de-marketization of Europe would be driven not primarily by nationalization, but by reforming the monetary system so that money began to reflect labour value.<sup>26</sup> Banknotes would be overprinted with a ‘labour time figure’, allowing people to see the mismatch between what they were being paid for their labour and what they were being charged for products. Over time, the authors expect people to choose products closer to their true value; consumer choice becomes a mechanism for squeezing profit out of the system. A law banning exploitation would allow workers to claim against excess profit-making; the final aim being to eradicate profit altogether. Banking would effectively cease to be a means of building up capital, which would be done by the state, using direct taxation. The finance industry would be wiped out.

The huge service Cockshott and Cottrell perform here is not the one they intend. They show that to fully plan an early-twenty-first-century developed economy, it would have to be stripped of its complexity, see finance removed completely, and have radical behavioural change enforced at the level of consumption, workplace democracy and investment.

Where the dynamism and innovation would come from is not addressed. Nor how the vastly enlarged cultural sector would come in. In fact, the researchers make a strong case that, because of its decreased complexity, a planned economy would need fewer calculations than a market one.

But that’s the problem. In order for the plan to work, society in this project has to go back to being ‘plannable’. Workers interface with every aspect of Cockshott and Cottrell’s plan via ‘their’ workplace – so what happens to the precarious worker with three jobs; or the single mum doing sex work on a web cam? They can’t exist. Likewise, the financial complexity that has come to characterize modern life has to disappear – and not gradually. There can be no credit cards in this world; no payday loans; probably a much-reduced e-commerce sector. And of course there are no network structures in this model and no peer-produced free stuff.

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Though the researchers decry the dogmatic idiocy of Soviet planning, their world view remains that of a hierarchical society, of physical products, of a simple system where the pace of change is slow. The model they’ve produced is the best demonstration yet of why any attempt to use state planning and market suppression as a route to postcapitalism is closed.

Fortunately, another route has opened up. To follow it we must exploit a granular, spontaneous micro-process, not a plan. Our solution must map comfortably on to a world of networks, info-goods, complexity and exponential change.

Of course, on the route to postcapitalism, we will have need of planning. Large parts of the capitalist world are effectively planned already – from urban design and construction projects through to the integrated supply chains of a large supermarket. It is the advance in processing power, the use of big data and the digital tracking of individual objects and components – using barcodes or RFID tags – that make this possible. That part of our project which requires planning would be well equipped because of this.

But the nature of modern society alters the problem. In a complex, globalized society, where the worker is also the consumer of financial services and micro-services from other workers, the plan cannot outdo the market unless there is a retreat from complexity and a return to hierarchy. A computerized plan, even if it measured everything against labour values, might tell the shoe industry to produce shoes, but it could not tell Beyoncé to produce a surprise album marketed only via social media, as she did in 2013. Nor would the plan be concerned with the most interesting thing in our modern economy: free stuff. Such a plan would see time spent curating a Wikipedia page, or updating Linux, exactly the same way as the market sees it: wasteful and incalculable.

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