We continue our series of sample essays from Go2Essay.com. Today we’re publishing a sample essay comparing market and planned economy.
In the early 1920s one of the famous Russian revolutionaries, Trotsky, argued that a state plan should be established in the Soviet Union. The primary role of this body would be to manage the state and socially owned sectors of the economy to guarantee a regular and balanced industrial growth.
Under the Stalin’s government, however, the state plan evolved into a huge governmental monopoly. Instead of coordination between industrial sectors, the centralized bureaucracy caused considerable misbalances disregarding the need for consumer goods and by distributing huge resources to military production. Factory directors were receiving strict instructions on what should be produced. It was the bureaucratic parasitism that smothered and eventually strangled the idea of planned economy, leading to the eventual renewal of capitalism. Although the bureaucracy strictly controlled the surplus produced in the economy to guarantee prosperity, much more damage was done through its economic incompetence and inability to justify the means.
Obviously, the concept of state planned economy did not turn out the way it was initially proposed and developed by its father, Karl Marx. Marx believed that “the politics of his time were based on a clash of interests which were the results of the material and social conditions of the society”. (Bottomore, 1963) The most important social convention was how people were earning their living or the mode of economic production. For Marx, “the mode of economic production determined the form in which wealth was created and distributed in a society.” (Bottomore, 1963) Marx believed that people should be capable to control their economic life the same way they their political life.
According to the Western leftist-neomarxist, T.B. Bottomore, “the more the worker expends himself in work, the more powerful becomes the world of products in which he creates, while the more poorer he becomes in his inner self, and the less he belongs to himself, he becomes a slave of the object” (Bottomore, 1963), that is, he receives work, and receives a wage for his work done. Nevertheless, alienation takes place not solely in the outcome, but also in the production process. “The work becomes external to the employee, outside of his world, it is not a part of him, and he does not feel as himself, and begins to feel remote. He does not develop freely his mental and physical well being, but is physically exhausted and mentally distressed. The external characteristics of work are finally shown by the fact that it is not his own work, but work for someone else. It is another’s activity, and a loss of his own spontaneity”. (Bottomore, 1963)
Marx also was convinced in power of socialism, which is a “social structure in which the major elements of production, distribution and exchange are the everyone’s common property” (Bottomore, 1990), or in other words, a society where there is common democratic ownership of the production means. Marx underlined that this kind of democracy is of equal interest and favor both the individual and the whole community, and that the equal rights and powers granted to individuals within such society would determine who should rule the community.
If the Soviet workers could be organized in their own political unity with an action plan based on these ideas, capitalism would not have a chance to be restored, instead the planned economy could be developed from the new progressive perspective. Paradoxically, one of the institutions that could have been abolished on the way would have been the so called ‘state plan’, the bureaucratic centralized monopoly with its granite red headquarters in Moscow. Most probably, it would have been overthrown by system of workers democracy at every social level, which would propose the planning of the economy in the interests of working class. (Bottomore, 1990)
Bottomore argues, in a way, that the concept that planned economy leads to hierarchies, unproductive outcomes and bureaucratic haughtiness even in conditions of democratic workers management. He suggests that planned economy must be reviewed and discussed with the new progressive approach. (Bottomore, 1990)
He supports the assumption that ‘allocation’, where people are given free goods and services rather than pay for them, means that the ‘free’ goods and services are paid for out of higher taxes and consequently people become limited to the choice of what they spend their money on. (Bottomore, 1990)
Equally Bottomore supports arguments that a planned core of the economy, that is a socialized market, will reduce the negative influence of the “gross inequalities and crisis ridden nature of capitalism, while maximizing local control and creativity”. (Bottomore, 1990)
Bottomore supports the idea that socialized market differs from the free market. According to his writings, it is driven by need and not profit maximization. For the various sectors of the economy (transport, water, finance, communication systems, etc), the benefits of the central planning have more power over disadvantages. As for the rest, larger industries and services should be governed by a combination of workers, users and ‘the state’ in whatever form seems appropriate. This way no group would be in a majority, so that those who “plan” would have to argue their rights. In other words planning would direct. It would indicate what was needed, not what each enterprise had to produce and whom they had to deliver it to. Using the market mechanism, decision-making power would continually be pushed down to the base. A world based on human solidarity rather than money, is better achieved by this route than the imposition of general central planning. (Bottomore, 1990)
Bottomore in his Social Economy emphasizes the ideas and practical experiences in a way they have influenced present-day conceptions of how a socialist economy should be organized and managed.
It’s true that the market economy doesn’t provide solely positive outcomes for all social classes and often discrimination or unequal treatment does take place in a quite concealed representation. At this point I agree with Bottomore on his suggestion to review the existing system. However, I am inclined to argue that we need a socialized market economy, because once we do implement it, any new achievement or technological discovery will be discouraged at its root.
Let’s suppose I were to live in the free market economy. I am an ambitious young engineer who is about to invent the new power engine that would save a lot of resources and allow to cut much more expenses. I am about to receive the expected reward and profits once I finish my work on this engine and suddenly I learn that this engine will be “socialized” and given for the benefit of all people without any individual right on it from my side. I at this point I feel that I would rather destroy the engine than give my work and efforts for free without any word of appreciation, as if that’s what I was supposed to do for the benefit of all nation, as if it was my obligation to them.
This is the core of market economy in the way I vision it. And if this core is taken out, I hardly imagine which path our progress will take further.
- Bottomore, T.B. Karl Marx: Early Writings. McGraw-Hill, NY 1963.
- Bottomore, T.B. The Socialist Economy: Theory and Practice, Guilford Press, 1990.