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Equality and Exploitation in the Market Socialist Community*


Historically, critics of capitalism have had a great deal to say about the defects and social ills that afflict capitalist society and correspondingly little to say about how alternative institutional arrangements might solve these problems. One can only speculate about why this has been so. One reason might be a simple matter of priorities. Bertolt Brecht once said that when a man's house is on fire, one does not inquire too closely into alternative arrangements for shelter. The analogy between capitalism and a burning house may seem overwrought today, but in the dark days of the Depression of the 1930s it probably seemed more apt. Another explanation for the scant attention paid to alternatives to capitalism has to do with both the factual and ideological beliefs of capitalism's critics. If one believes (as, for example, Marx and Engels did) that the existing order would be destroyed by a mass movement, that new institutions would be constructed by the people in a democratic spirit, and that furthermore all of this would be a good thing, it would be unwise and counterproductive to try to spell out exactly where history is headed. After all, a genuine mass movement has little use for self-proclaimed prophets of history. Finally, men and women of modest intellectual pretensions might be humbled by the prospects of trying to spell out in any detail social institutions that should exist or might exist but are not as yet found anywhere in the world.

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1 One of the earliest discussions of market socialism can be found in the replies of Oskar Lange and Fred M. Taylor to Ludwig von Mises's challenge that economic calculation in the socialist community is impossible. See Lange Oskar, “On the Economic Theory of Socialism,” and Fred M.Taylor, “The Guidance of Production in a Socialist State,” ed. B.E. Lippincott, On the Economic Theory of Socialism (New York: McGraw Hill, 1964).

2 See, for example, Schweickart David, Capitalism or Worker Control? (New York: Praeger Publishers, 1980); Horvat Branko, The Political Economy of Socialism (Armonk: M. E. Sharpe, 1982); Nove Alec, The Economics of Feasible Socialism (London: Allen and Unwin, 1983); Miller David, Market, State, and Community: Theoretical Foundations of Market Socialism (Oxford: Clarendon Press, 1989); eds. Jon Elster and Karl Moene, Alternatives to Capitalism (Cambridge: Cambridge University Press); and eds. Julian Le Grand and Saul Estrin, Market Socialism (Oxford: Clarendon Press, 1989). There has also been considerable discussion among economists of the Yugoslav economic system, which has relied extensively on the market since the 1950s. See, for example, Pejovich Svetojar, The Market-Planned Economy of Yugoslavia (Minneapolis: University of Minnesota Press, 1966) and Milenkovitch D. D., Plan and Market in Yugoslav Economic Thought (New Haven: Yale University Press, 1971). For the most part, however, this literature is descriptive and analytical and does not directly consider the reasons for choosing market socialism over capitalism or other varieties of socialism.

3 See David Miller, “Why Markets?”, eds. Le Grand and Estrin, Market Socialism, pp. 25–29, for an illuminating explanation and discussion of this point.

4 For example, Antony Flew and Robert Nozick are highly critical of the socialist ideal of approximate equality of material condition. See the former's Equality in Liberty and Justice (London: Routledge, 1989), pp. 174–81, and the latter's Anarchy, State, and Utopia (New York: Basic Books, 1974), chs. 7 and 8, passim. For a representative critique of socialist institutions, see Von Mises Ludwig, Human Action (1949; New Haven: Yale University Press, 1963), ch. 26.

5 The numerous critiques of the right's views on freedom fit the former category. See, for example, Levine Andrew, Arguing for Socialism (New York: Verso, 1988), ch. 1. Allegations of gross waste and inefficiency against the capitalist economic system would be examples of the latter. See, for example, Cohen Joshua and Rogers Joel, On Democracy (New York: Penguin Books, 1983), pp. 2032. Idealizing a little, there has been a division of labor within each camp on these two issues. Philosophers tend to criticize the values or ultimate goals championed by defenders of one or the other system. On the other hand, economists generally take the values or ends as given (no disputing about values for them!) and argue that the relevant institutions cannot achieve those ends.

6 Certain people (for example, some literature professors) claim to be socialists without having even vague and indefinite ideas about socialism as an economic system. It is probably a mistake to describe these individuals as socialists. They are more aptly described as ‘socialist sympathizers’, who, like many sympathizers, do not know too much about the doings of those with whom they sympathize.

7 See my Marx's Radical Critique of Capitalist Society (New York: Oxford University Press, 1990), p. 33 for further discussion of this characterization by Marx of the capitalist economic system. See ch. 3 of that work for Marx's account of exploitation by reference to these defining conditions and ch. 2 (passim) for similar accounts of alienation.

8 This list comes from Honoré A. M., “Ownership,” ed. Guest A. G., Oxford Essays in Jurisprudence (Oxford: Clarendon Press, 1961). A useful discussion of the concept of full liberal ownership can be found in Becker Lawrence, Property Rights (London: Routledge and Kegan Paul, 1977), p. 19ff.

9 See note 2 for references to contemporary writers who endorse one or the other of these alternatives. The qualifier about a fully functioning market economy is important. At least until recently, socialist thought has been notorious for its vagueness about the institutions for future socialist society. Because of this, my claim has more analytical than historical reach. For example, syndicalism fits neither of the following models; under syndicalism, entire industries are controlled (owned?) by those who work in them. However, syndicalism does not constitute a counterexample to my claim since, as a matter of empirical fact, there could be no fully functioning market economy in which the every industry is effectively constituted by one firm.

10 Nationalization is particularly attractive if all one really cares about is getting rid of capitalism. The simplest and most direct route to achieving that end is to seize state power and nationalize most firms. This thought must have occurred to Lenin, probably around the age of six.

11 On this latter point, see note 16 below.

12 Socialists might favor this “nationalized market socialism” as a transition system for centrally planned economies (in which nearly all firms are already nationalized), if only because it seems politically feasible. However, it is hard to find many advocates of total (or nearly total) nationalization of the means of production among socialist theoreticians these days.

13 Most of the authors cited in the first list in note 2 favor worker cooperatives of one form or another.

14 It might be argued that the capitalist economic system does not meet this condition either, because of the persistence of an underclass in capitalist society. However, under capitalism this is a distributional problem in the sense that the system can produce the goods but cannot equitably distribute them (or so it is alleged). By contrast, existing state socialist societies cannot really produce the goods, which is the main reason why they are, as of this writing, going through the political version of bankruptcy proceedings.

15 I say “perceived defects” because my own views are more favorably disposed toward capitalism than this part of the present essay indicates. My purpose here is to represent accurately socialist thought, which means I do not endorse all of the arguments of this section. This applies in particular to the arguments about exploitation under capitalism. See notes 18 and 19 below.

16 The locus classicus for this account of alienation is Marx Economic and Philosophic Manuscripts of 1844 (Moscow: Progress Publishers, 1974). For an exegesis and close discussion of this account, see my Marx's Radical Critique, ch. 2. For a more contemporary rendition, see Saul Estrin, “Workers’ Cooperatives: Their Merits and Their Limitations,” eds. Le Grand and Estrin, Market Socialism, pp. 170–71.

17 Marx Karl, Capital, vol. 1 (Moscow: Progress Publishers, 1977), ch. 1; see esp. pp. 4447.

18 I have attempted a comprehensive discussion and critical evaluation of these reformulated arguments in Marx's Radical Critique, chs. 4 and 5. My purpose here is not to endorse this socialist criticism of capitalism. Instead, it is to represent central elements of socialist thought and to provide some insight into the concept of exploitation as it pertains to economic systems. In addition, in what follows I will make no attempt to argue for my representation of Marx's argument as the correct interpretation of what he had in mind. I have argued for this interpretation in detail in ibid., ch. 3.

19 See ibid., ch. 3 (esp. pp. 74–86), for an argument in support of this harsh judgment on the labor theory.

20 See Becker Lawrence, Reciprocity (London: Routledge and Kegan Paul, 1986), p. 143.

21 For a comprehensive critical evaluation of various versions of the charge that there is a systematic failure of reciprocity implicit in capitalist relations of production, see Marx's Radical Critique, ch. 4.

22 See Cohen G. A., “The Labor Theory of Value and the Concept of Exploitation,” Philosophy and Public Affairs, vol. 8 (Summer 1979), pp. 338–60; Brenkert George, “Cohen on Proletarian Unfreedom,” Philosophy and Public Affairs, vol. 14 (Winter 1985), pp. 9198; and Gray John, “Against Cohen on Proletarian Unfreedom,” Social Philosophy and Policy, vol. 6 (Fall 1988), pp. 77112.

23 Saul Estrin, “Workers’ Cooperatives,” eds. Le Grand and Estrin, Market Socialism, p. 171.

24 See, for example, Horvat, The Political Economy of Socialism, p. 270.

25 This story is complicated by the fact that the workers are also supposed to be the managers. To focus the discussion on the value of the workers’ contribution as workers — that is, the value of their labor services — assume that the workers hire managers or that each worker participates equally in management and that the returns to management are spread equally across the firm. Taking management services and the returns to management into account in this discussion would complicate matters considerably but would not change the main points, so I shall ignore them.

26 For an entree into the relevant empirical literature, see Deutsch Morton, Distributive justice: A Social-Psychological Perspective (New Haven: Yale University Press, 1985), ch. 15. See also the next note.

27 Pfeffer Jeffrey and Langton Nancy, “Wage Inequality and the Organization of Work: The Case of Academic Departments,” Administrative Science Quarterly, vol. 33 (1988), pp. 588606, esp. pp. 592–94.

28 In a capitalist system, there is also pressure from labor markets in that skilled workers could go elsewhere if managers permitted too much wage compression. Why the same pressures would not exist under market socialism is discussed below.

29 Support for this claim comes from Robert Nozick's useful discussion of judgments of self-esteem. See Nozick, Anarchy, State, and Utopia, pp. 239–43.

30 I owe this objection to Daniel Hausman.

31 Allen Buchanan claims that just such a distinction is implicit in Marx's writings on exploitation. See his Marx and Justice (Totowa: Rowman and Allenheld, 1982), pp. 38ff. He attributes to Marx a broader, generic conception of exploitation, as well as a narrower, economic conception of the sort discussed earlier in this essay.

32 It is also likely that new firms cannot be launched as easily in market socialism as they can be in a capitalist system. The reason for this has to do with state control of new investment. A full discussion of these issues would take us far afield.

33 The absence of robust labor markets would also drive down the opportunity costs of discrimination by racial, ethnic, or religious majorities. The latter would be able to indulge their prejudices against disfavored minorities in determining income criteria. It is quite possible that in some areas this would be the predominant manifestation of exploitation. I owe this point to Richard Arneson.

34 Arnold N. Scott, “Marx and Disequilibrium in Market Socialist Relations of Production,” Economics and Philosophy, vol. 3 (April 1987), pp. 2346.

35 For references to the major writings of the Ricardian socialists and for a more elaborate discussion of this point, see Ryan Cheyney, “Socialist Justice and the Right to the Labor Product,” Political Theory, vol. 8 (November 1980), pp. 504–7.

36 On the various deductions that have to be made, see Marx Karl, Critique of the Gotha Program (Moscow: Progress Publishers, 1971), p. 16. Marx maintained that distribution in the first phase of post-capitalist society would be in accordance with labor contribution, with the latter following the dictates of the labor theory of value. See ibid., p. 17.

* I should like to thank Harold Kincaid, Ellen Frankel Paul, and the contributors to this volume for helpful comments on an earlier draft of this paper.

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