market socialism - Theoretical basis, Other uses of the term

A variant of socialism which seeks to marry the benefits of the market system with those of socialism and thus avoid the negative aspects of both; associated with the Polish economist Oskar Lange (1904–65). It combines the efficiency of the market-place, as a way of providing the goods and services demanded by the consumers, with the social justice associated with the allocation of profits on the basis of need through some socially controlled mechanism.

Market socialism is a term used to define a number of economic system(s) in which the means of production are owned either by the state or by the workers collectively (meaning in general that "profits" of the economy are distributed more evenly between the population: profit sharing) and the production is not centrally planned but mediated through the market. Its central idea is that the market is not a mechanism exclusive to capitalism and that it is fully compatible with collective worker ownership over the means of production — which is one of the fundamental principles of socialism (socialism being the precursor to the utopian ideals of communism).

Proponents of market socialism argue that it combines the advantages of a market economy with those of socialist economics.

Based on his theory of circulation, it would appear that Marx was a market socialist [see Marx, K., "Money, Or The Circulation of Commodities", being Ch.

Proponents of market socialism include economist John Roemer (who developed the interesting if overly complicated 'Coupon Socialism') and the philosopher David Schweickart, whose version of market socialism is called "Economic Democracy".

Theoretical basis

The key theoretical basis for market socialism is the negation of the underlying expropriation of surplus value present in other, exploitative, modes of production.

An important base for market socialism in economic theory is the Lange-Lerner-Taylor theorem, which states that an economy in which all production is performed by the state, but in which there is a functioning price mechanism, has similar properties to a market economy under perfect competition, in that it achieves Pareto efficiency.

Other uses of the term

Market socialism has also been used as a name for any attempt by a Soviet-style economy to introduce market elements into its economic system. In this sense, "market socialism" was first attempted during the 1920s in the Soviet Union as the New Economic Policy (NEP), but soon abandoned. Later, elements of "market socialism" were introduced in Hungary (where it was nicknamed "goulash socialism"), Czechoslovakia and Yugoslavia (see Titoism) in the 1970s and 1980s.

Historically, these kinds of "market socialist" systems attempt to retain government ownership of the commanding heights of the economy, such as heavy industry, energy, and infrastructure, while introducing decentralised decision making and giving local managers more freedom to make decisions and respond to market demands. The market is allowed to determine prices for consumer goods and agricultural products, and farmers are allowed to sell all or some of their products on the open market and keep some or all of the profit as an incentive to increase and improve production.

However, the Chinese experience with "market socialism" is another situation. His theoretical justification for allowing market forces was given as such:

"Planning and market forces are not the essential difference between socialism and capitalism. the market economy happens under socialism, too.