The Profit Motive Behind New Alzheimer’s Treatments

We should start by asking what the traditional understanding of socialism was. Karl Marx and his followers in the first, say, thirty to forty years after his death thought of socialism as the abolition of private property and the abolition of the market.

What do we mean by private property? We don’t mean things like owning cars, shoes, or televisions. It’s property that is a productive asset, the control of which allows you to have control over other people, because they now have to come to you to make their own living.

The reason socialists objected to that was it gave capitalists enormous power over other people, their workers, and enormous power over society as a whole because they control the wealth and the investable surplus of society. That was fundamentally an undemocratic outcome. And they saw that capitalists use this to their own benefit and to the detriment of everyone else. So any humane society would have to do away with private property.

The second thing was abolition of the market. Why? Partly they thought if you do away with private property, it automatically means doing away with the market, because those two things went together. But there was an independent argument for this as well, which is that markets, such as the labor market and market for goods, end up being harmful to people’s well-being.

The case against the labor market is obvious. What’s the labor market? It’s people having to essentially sell their own labor power for a price, the way you sell any good for a price. Why is that bad? It’s because everybody’s fortunes and ability to get the money they need to get food, shelter, water, and other essential things are dependent on finding a job. And you may or may not find a job. There’s no guarantee.

What socialists said was that if getting the goods you need to survive depends on getting a job, that’s fundamentally unjust because no one asks to be born. Once you’re born, you should have a right to certain basic goods, to certain basic needs being met. So the labor market should not exist. What should exist is the provision of jobs, the provision of employment, but that should come as a right.

The idea in traditional socialism was, we do away with private property, we do away with the labor market or with markets as such. What do you replace it with? You replace it with something called cooperative planning.

Instead of having people’s needs met through the profit motive, you have people’s needs met directly through planning what people actually require, what they need to survive, and providing it to them directly — cutting out the middleman, which is the market.

It’s worth pausing to consider what this means. What was the justification for the market and the profit motive for people like Adam Smith? The justification was that the market has this amazing ability to produce what people need without anyone directing producers as to what they ought to make, how much of it to make, where to send it. Nobody’s telling them what to do. They’re simply following their own individual interests.

That sounds pretty awful. It’s a society in which people are just out for themselves. But Smith and economists after him have argued that while in many ways it is awful, somehow through this mechanism of the market, producers end up making that which people need, and what’s produced is mapped onto what people’s needs are.

What Smith is saying is, for any society to be an acceptable society, it has to meet people’s needs. He said, we previously tried to do it in other ways; we tried it in feudalism and other systems. The market does it effectively, and it ends up being efficient in terms of reducing costs and using society’s resources wisely.

The point is that the market is not an end in itself. Even for Smith, it’s not a good in and of itself. It’s something that’s tolerated because it serves people’s needs. Marx’s point was, yes, it serves people’s needs, but in a very warped way. It serves people’s needs mainly through extortion and an abuse of power.

Marx’s thing was, if you can find a way of meeting people’s needs, providing them the goods they need without subjecting them to abuse — the way the capitalists do, the way employers do, the way the hierarchy in the workplace does, the way the government does when it’s captured by capitalists — then there’s no justification for having that market at all.

Planning was therefore desirable because it cut out the middleman, got rid of the market, and went directly to people’s needs. Now, Marx famously had very little to say about how that planning would actually work. He just assumed it would. But it’s important for us to understand that the whole point of justifying planning was that it would meet people’s needs. That was the idea.

The Soviet Union, as the first socialist society, tried to do just this. It tried, really heroically in some ways, to institute a new system in which, at least on paper, you would minimize the extent of the market, if not eliminate it altogether. And you would, through a centralized planning apparatus, figure out what to produce, how much of it to produce, where to send it, all that sort of stuff.

Of course, that system collapsed. We can have arguments as to why. The immediate question for socialists was, what do you do if you want to continue your movement, if you want to stick to your guns and replace capitalism with something more humane? What is on offer here?

There are two options. One is to say, planning could work. It should work. We just need to do it better. The other option is to say, there might be some deep flaws in the very idea of a centralized plan system in which everything is decided through people on committees and planning boards and so on.

If that’s the case, then we need a different system, which is still constrained — that is to say, has to meet the moral worries and advance the goals that socialists have for what a humane society should be.

So we can think of market socialism as a fallback. If planning doesn’t work, then what do we do? Do we just throw up our hands and say, “The only game in town is some civilized version of capitalism, maybe like social democracy.” Or do you think of another way of organizing the economy of a society, which might not be as ambitious as planning, might not try to replace the market altogether with a fully planned economy, but might have elements of both? That’s what market socialism does.

Basically, at the highest level of generality, market socialism tries to have elements of the traditional socialist model but reduces the burden on that model by reducing the scope of planning, or eliminating it altogether. But whichever of the two it does — whether it eliminates planning or just reduces its scope — it nevertheless abides by the moral goals of socialism, which are to reduce or eliminate exploitation, to give people certain basic guarantees, to democratize [society], to reduce hierarchies.

The challenge for socialists is this: Whatever those models of market socialism happen to be, can they fulfill and abide by the moral goals and moral principles that socialists have, or will they fail to do so? And if they fail to do so, then we have to say, “Okay, we’re back to a choice between a civilized capitalism and centralized planning.” And then, we’ll have to think through that.

A good way to think through this is by delineating what socialism should avoid and what it should promote. Let’s start with the fundamental idea of what motivates socialists. What have they always wanted?

Socialists have wanted a society in which people, from the moment they’re born, don’t have their future dictated by illegitimate power or authorities and whose lives are not wracked with insecurity, infirmity, and a lack of autonomy. The idea is that if you really want to give people the opportunity to develop their abilities and to flourish, to set their own goals and conception of what’s good, what’s desirable, and you want them to have the capacity and the resources to do that, you have to give them the freedom to do it.

But freedom cannot be had when you’re living in a society where one group of people has all the power and everybody else has to be at their service, which is what a class society is. The people who control the means of production and the resources of society also have all the power in society, and everybody else is basically dominated by them and has to serve their interests as a precondition to developing their own interests.

Fundamentally, what socialists say is any humane society has to first of all eliminate this kind of incredible inequality in power, both at the macro and micro level. At the macro level, rich people dominate and control the state. Then there’s the micro level, which means the individual level.

When you go to work every day, your boss has power over you. He decides how long you work, how fast you work. He decides when you can take your bathroom break. He decides your wage, how much money you’re going to have. He decides how you’re going to live your life outside, because the money determines where you get to have housing, how much health care you’re going to have, and so on.

Exploitation basically means the wealthy not only have power over the poor, but they derive their own income from the labor of the poor. That’s really how that power is both exercised and reproduced. When you go to work for your employer, you’re making a product, but the employer has the power to decide how that revenue from the product is going to be distributed, how much he keeps, how much he gives you as a wage.

Not only is that an exercise of power; it means that he’s actively making you poor because he’s taking the money that could have gone to you in a more democratic setting. That’s called exploitation. Exploitation is when one group of people coercively extracts labor from another group of people. You cannot have that and still have democracy and still have any kind of equality between people. You have to remove exploitation. A humane society reduces or eliminates exploitation, social domination, and inequalities in power.

Socialism wants to promote giving individuals sufficient resources so that they can have security and the ability to pursue their own ends. This is also the foundation for a society in which people treat each other with basic respect.

You cannot have that if everybody’s scrambling for jobs, looking at everyone else as a threat, and through that, seeing everyone else as a potential enemy. You cannot have that if I as an employer seek you out only because you will give me the labor to maximize my profits. It basically means I’m looking at you as just a means to an end, and I will happily throw you under the bus if it means getting profits for myself.

If we want everyone to flourish and have a decent life, and for society to be stable, calm, and one where people are humane to each other, then we have to create the material conditions for them to treat each other with respect. We want to maximize security, we want to give people resources that they need, and we want to encourage or create the conditions where people treat each other with mutual respect. These are the moral parameters of socialism.

Here comes the key point. The reason you want planning is not because planning is this glorious thing in and of itself. The only reason you want planning is if it maximizes these moral goals. And in the way planning was actually implemented historically, it didn’t fulfill those goals.

How dare you be against planning? If you’re not for planning, you’re not a socialist, blah, blah, blah. . . .  I mean, that’s kind of like saying if you oppose human beings having wings, you’re not a socialist.

Either it can be done, or it can’t be done. You can’t turn it into a menu of options and then pretend that you have all the freedom in the world to choose your preferred combination.

Let’s tease that out a bit. One reason why people who admit that the model didn’t work in the Soviet Union nevertheless still pin their hopes on a planned economy is that they say, “This is one instance of planning. This is one variant or kind of planning. That doesn’t mean that you can extrapolate from this that it’ll never work.” And that’s true.

We can also say that, not only was it just one instance, it was carried out in very difficult and inhospitable conditions. Planning was supposed to have taken place in an advanced capitalist country. But instead, we saw it in the poorest country in Europe by far.

All that’s true. Nevertheless, it is also the case that a lot of what the Soviet Union did — the features of its model, how it went about planning — are going to be present in any model of planning. So I don’t think it’s a good idea to just dismiss that model altogether and say it doesn’t count because it wasn’t carried out in the way we would like, or because it was in a backward country.

It’s better to say that it’s a warning to us that there’s aspects of planning that make it very difficult to carry out. Therefore, it behooves us to at least think of what another kind of socialism might look like that would be consistent with our goals.

One of the goals of socialism was to get people, as a right, access to certain basic minimum goods such as health care and shelter, to try to equalize relations between them, to be more egalitarian. On this, the Soviets were good. In fact, there was a dramatic increase in the provision of basic necessities. People could rely on having housing. There was no starvation. They could rely on having health care, on education, things like this. That’s no mean achievement when you compare [the society] to where it was in the early twentieth century before the revolution.

But we have to take the failures seriously. First of all, in the way the Soviet Union carried out planning and the way the political system was organized, it failed on the promise to end political domination. The Soviet Communist Party dominated everything. There was a lack of political rights. There were no basic freedoms that we take for granted in bourgeois society.

Second, it also failed on the promise to improve people’s standards of living as a regular fact of life. What the Soviets did was, they essentially gave you access to certain basic necessities, but not very much over and above those necessities. The reason for that was the system was really bad at engineering growth, at engineering economic efficiency, bringing in new technology, and in being innovative.

So over time, that means that you’re going to have stagnant standards of living, stagnant incomes, which is going to put enormous pressure on the stability of the system because people aren’t satisfied with having just enough. They also want to have more. And that’s not greed. That’s what’s required for people to flourish because our needs grow as society grows. And society has to then be able to meet those needs and not say, “Hey, you’ve got food, and you’ve got shelter. What more do you want?”

If human flourishing is the goal, the Soviet Union averted the disasters of capitalism in that it didn’t constantly threaten people with starvation, but over and above that it really wasn’t able to do much.

That means we have to figure out ways of abiding by the Soviet success in providing people with basic necessities, but also providing them with the political freedoms that they deserve and bringing in the dynamism, the efficiency that the Soviets failed in providing. That’s the idea behind market socialism.

The key is that it’s going to have fundamental elements of both socialism and of capitalism. But the aspiration is it’ll avoid the objectionable parts that come with those fundamental features.

You’re trying to do away with the toxic effects of private property by either eliminating private property altogether, just like in a planned economy, or by reducing its scope to the barest minimum. That means you’re not going to have privately owned means of production. Either you’re going to have the state owning the means of production at the national level; or you’re going to have an economy of workers’ cooperatives, in which there’s no capitalist class that owns things but workers themselves have property rights.

Essentially, what you’re doing is eliminating the capitalist class by eliminating this enormous concentration of property in their hands. This is the socialist element. Notice, I’ve said nothing about planning so far. All I’ve said is you’re going to do away with the capitalist class.

But socialists traditionally also eliminated the market and replaced it with planning. What market socialists say is, we’re going to do away with private ownership of the means of production, but we’re not going to plan what’s made and how much of it is made. That’s going to be basically determined by the firms themselves, whoever is running them, and produced for the market. So, just like in capitalism, firms will be reacting to price signals. They’ll make their own decisions as to what to make. They’ll see if it sells. If it sells, they keep making it; if it doesn’t sell, then they have a choice as to what they’re going to do.

Of course, because market socialism has never actually existed in any full way, when we talk about it and what it looks like, we’re not describing a reality out there. What we’re describing are models on paper of what it might look like or could look like. And there are many such models.

All models of market socialism have a few things in common. It should go without saying, they all guarantee the full panoply of liberal rights that we take for granted in democracy, which the Soviet-style economies did not have. This includes multiple parties, freedom of speech, freedom of assembly, and freedom of the press, and all of the models assume that. And I’m going to assume that in the rest of this conversation as well.

Beyond that, all varieties of market socialism have three things in common. First is doing away with private ownership of the means of production, or at least dramatically reducing it. Second, not trying to plan everything after you’ve taken away private ownership of means of production. You might think of it as market competition in a society where there is no capitalist class, but where workers or community boards or public authorities actually control the means of production.

The third thing that they share in the design of the economy is that they all have mechanisms to prevent huge inequalities in wealth and in income. Now, these are two different things. Income inequalities are allowed to some point — I’ll get into that later. The real action though is on the issue of wealth, which means ownership of assets, ownership of means of production, and also big inequalities in savings and in private ownership of housing and things like that. And the reason for that is the inequalities in wealth end up accumulating over time into inequalities of power and the possibility of exploitation.

The combination of these three aspects of market socialism are also how they differ from social democracy. You have eliminated private property. You have some degree of competition and some degree of price signals in the economy instead of planning. And then you have mechanisms in place that prevent the reemergence of private property through things like wealth and transfer of assets from one generation to the other.

That’s an important question, and it’s a live issue. But the hope is that you won’t because of the particular way that you’re bringing the market back.

What’s objectionable about the market in capitalism? What’s objectionable about it is that everybody has to depend on the market for their livelihood and for their lives. What’s wrong is that capitalism says, if you want to live, you want to have all the things you need, go find a job and then go find the goods you need — for which you may or may not have enough money because you may or may not have a job. And that job may or may not give you what you need to survive.

What’s objectionable about the market is two things. First, there are no guarantees that you’ll have what you need in order to survive — you depend on the market. And second, because you depend on the market, you become vulnerable to domination and exploitation by the people who allow you to have the money to buy the stuff on the market. And that’s the capitalist class. That’s your employer.

So the question is, can you have a market without these two objectionable properties, the fact of market dependence and the fact of being subject to extortion by your employer?

The idea behind market socialism is that yes, you can. How? First, if you’ve eliminated the capitalist class and ownership of private property, then when you go to find a job, you’re not beholden to an individual who gives you that job. If the firms are owned by society, then the job is being given to you by who? By your friends and neighbors, by the local community, by the cooperative.

On top of that, every model of market socialism also comes with some guarantees — and they’re quite generous guarantees — in terms of people’s income. Every model of market socialism says people are going to find jobs, they’re going to hold onto their jobs, they’re going to be in firms that sell on the market. But suppose that firm fails; suppose that the firm isn’t very profitable. Most models of market socialism say that you’ll still be guaranteed certain economic rights. You’ll be given something like a universal basic income, rights to housing, rights to education.

Your fundamental needs are taken care of. What the job does is it either gives you something over and above those needs, or it gives you a share in society’s wealth.

From what I’ve described so far, notice you have market competition and price signals, but you have no exploiting class, and you have certain basic guarantees given to people. That’s a way that you can have some elements of markets, but without having market dependence and without having the exploitation that comes with it.

This is getting at one part of the picture I just painted. I said that, in market socialism, people go out and find jobs — but they don’t get the jobs from a class of capitalists. They get the jobs from state-owned firms or cooperatives or something like that. So now, there’s no individual agent exploiting you.

But you might argue that people who run the co-op can exploit you or that the government will exploit you. What does it mean to say there’s no exploitation?

The essence of exploitation is that the money you make, the revenue you make that the boss takes from the market, you have no say in how those revenues are distributed, and that you have no say in the conditions of work that produce those revenues. In other words, in Marxian terms, you create a surplus, but that surplus is taken by the person who owns the means of production, the capitalist. He takes all the profits, and he distributes them as he wishes. You’re essentially just a tool for him.

If you want to do away with that, you have to do the opposite of what capitalism does. If in capitalism, the hallmark of exploitation is the boss coercively taking your labor, doing with it what he wants, spending the revenues as he wants, then what we want in socialism — in any model of socialism — is that you’ll go into work, you’ll still produce profits for whatever firm you’re working in, but those profits are not taken by some person or some unaccountable authority, like in the Soviet Union, the party or the state.

What’s going to happen in market socialism is that either you and the other workers in that firm have total control over what’s done with the profits, or those profits go into what you might call a public kitty, and those are distributed back to the entire community in a way that the community decides. In the Soviet Union, the surplus was also taken and put into a public kitty, but the community had no say over what happened to them. An undemocratic and unaccountable party decided.

All the models of market socialism that have this element in them assume there’s going to be all sorts of public bodies, municipal, local, federal — and you can think of the various mechanisms by which people are elected to them and how they’re accountable to people. Assume for a second that they’re genuinely democratic, then those profits will be redistributed back into the community or maybe even back into that factory; that directly or indirectly reflects workers’ wishes or society’s wishes.

The key thing in market socialism is that surplus now belongs to society as a whole or to the workers who run the firm, not to a capitalist. That’s how we can say it’s not exploitation.

It’s workers producing a revenue, producing profits, and then either those workers in the firm or the local community collectively deciding what’s going to be done with them. On the surface, you’re making products, you’re making money, but the key thing is what’s done with that money: who controls it and who would benefit. That’s where it’s going to fundamentally different from capitalism.

There are two aspects of the labor market in capitalism that are really destructive. One is what we’ve just dealt with, which is the unaccountable power of the capitalists over the workers. I’ve described how in market socialism, you would tremendously dilute that or even do away with it altogether.

The second aspect is that profits take priority over people’s needs and their well-being and their health and all that sort of stuff. Competition is what drives capitalists to prioritize profits over everything else, because if they don’t, they’ll go out of business. Presumably, you’ll have the same thing in market socialism because what we’ve said is that firms will have to compete on the market.

Any viable model of market socialism has to be able to block that. It has to be able to say that profits are going to be at the service of people’s needs rather than being a priority over people’s needs.

One is that when people want to start up a firm, whether it’s as a cooperative or some other kind of labor-managed firm, they’ll approach a community public bank or a community credit agency. And that credit agency, just like a bank today, is going to give them a loan to start up a new firm.

Now, in capitalism, there’s one and only one criterion by which banks give out loans to firms and that is: Will it make any money? The firms then have to make the money to pay back their loan. That’s part of the reason they prioritize profits over everything else.

In market socialism, you might go to these public entities to get loans to start a firm, but because the public entity is not going to be a privately owned bank that’s commercially seeking to maximize profits, it’s going to have a different set of criteria by which it decides whether to lend out the money.

In some models, like David Schweickart’s model, these public credit agencies will still ask, “Is this prospective loan for a workable business model? Is this firm going to make money?” It’s important to realize you have to take that into account because this is public money. If you give it to pet projects or wasteful projects, you are wasting public money. Public banks have to ask, is there a market? Is there a social need for this good?

But banks will also be asking questions like, “Is this an underdeveloped part of the state or country?” They might conclude that Appalachia should be given more priority over New York City, even if it means slightly lower profits. They’re also going to ask, “Is this a good for which there is a pressing social need, even though the market might be quite small?”

One example is in pharmaceuticals. In capitalism today, there are lots of drugs that are very important and target illnesses that are really destructive, but not a lot of people are afflicted with those illnesses, and companies think, “It’s not worth our time or money to produce these drugs.” In market socialism, an essential part of the social contract will be also taking into account social needs that may not have a gigantic market behind them.

That’s one way in which profits won’t take precedence over needs. Because the social contract will be to have profitability be an important part of what goes into deciding on a project, but one part of a larger constellation of concerns that they might have.

The second way in which profitability won’t rule over everything else is that the consequences of firms failing won’t be as dire as they are in capitalism. One reason why capitalists promote profitability is that if they aren’t profitable, they not only go under, but at least in principle, they lose their assets. And then workers who are thrown out onto the labor market have to absorb a lot of the costs.

What market socialists say is that, if there’s going to be firm failure, then the state’s responsibility is to find jobs again for those people who’ve lost the jobs and then take the money that was liquidated and immediately redeploy it to a more productive end. It means that people’s lives are not subordinated to profits in the same way because the loss of profits isn’t as destructive.

In this way at least, you hope that while profits are something that you pursue and you want firms to compete, you want them to be efficient, they will not grind into dust the rest of society that is basically hitched to the wagon of what capitalists are trying to do in order to maximize their profits.

This is another way of asking, is everything going to be market produced, or will there also be some kind of public provision of goods and maybe free services that are given to people as citizenship rights? And on this, there are different answers across the various market socialist models. So let’s say what those different answers are.

At the broadest level, in every market socialist model, there is some place for a public sector. There’s some planning that’s going to happen. Just having public banks who are told that you have to take social needs into account means those banks are going to have to look out into the world and say, “What do we need?” And then they’ll make their decisions.

When you’re making your economic decisions based on your assessment of what needs are, which regions are poor, which cities need more buses, which cities need more restaurants, which cities need more electricity, that’s notionally a kind of planning. That’s a public sector.

Now that’s at one end of the spectrum. Then there are models of market socialism that actually say there’s going to be a large public sector, which will not operate by selling competitively on the market.

This makes a lot of sense. Is there any reason that you should have public utilities and medical care and transportation and things like that be market driven? Even in capitalism, those things have been planned a lot of the time. So certainly, in any market socialist society, there’s going to be a large planned sector of the economy, which might be providing goods that even in capitalism make more sense to be publicly provided, and maybe even as direct services rather than as some kind of market good.

If we say health care, transportation, utilities, education, and probably some kind of public media system is taken out of the market, what does it leave for the market? Mostly consumption goods, services like restaurants, beauty parlors, and things like that.

At the broadest level, where you will absolutely have market provision of goods will be in the consumption sectors. And this is where these principles that I’ve laid out really matter: That those consumption goods will be made by workers co-ops or by worker managed firms, which are state-owned but that are leased out to workers on a kind of fee service, in which there will be hopefully democratically elected management and in which there’s going to be floors on how low workers’ wages can go. And those workers in that unplanned sector producing consumption goods will share with workers everywhere, even those in the public sector, basic inalienable economic rights — the right to housing, the right to childcare, the right to health care, education, and things like that.

So all workers will have certain economic rights. Some of those workers will work in the planned sector; some will work in the unplanned consumption sector. But all those workers will share in certain basic guarantees and will be able to move back and forth.

The criterion should be you plan what you can, and you leave alone what you can’t, at least to start with. You plan as far as you can go. I said earlier that socialists did not go toward planning as an end in itself, but because they thought it would serve the moral goals that they had. It would eliminate exploitation. It would eliminate domination and such things.

So our attitude toward planning is a pragmatic one. If it’s pragmatic, we should say, let’s push it as far as we can in a way that’s consistent with our goals. That means that if planning starts to require some kind of dictatorial, undemocratic, arbitrary rule over the workers or over society, we pull it back.

But if planning can further our goals that we outlined earlier, we should push it as far as we can. That’s on the moral side. And on the pragmatic side, where it starts to fail because it’s too unwieldy, we pull it back again. That’s at the most general level.

This is where we can look back at the experiences of Soviet-style economies and of capitalism. The toughest test for any planning is to do it in capitalism. If it turns out that even within capitalism, there are certain things we can plan, then we know we could do it in market socialism.

You ask, how will it be different? The way it’ll be different is, in capitalism, when the government plans, it plans on the investment side, and it doesn’t really say much to workers about what guarantees they’ll have as workers in the planned sector.

In capitalism, if you have utilities or health care that are government-owned, the workers who work in them don’t get any special privileges — sometimes they do, but it’s pretty rare. What you’ll have different in market socialism is that there will be a kind of enumeration of rights that workers have in the planned and in the unplanned sector, which means that by definition, public sector workers in market socialism will have certain rights, certain guarantees that in capitalism they don’t.

In one respect, it’ll look like public sectors in capitalism, because the government central bodies will be deciding on investment, on the extent of it, where to expand it, and so on. But in many of these market socialist models, it’s done through direct input and real power by workers, maybe organized into deliberative bodies inside the public sector. And even if the workers don’t have a say in what’s being decided there, they will have certain guarantees in terms of their wages, their living conditions, and so on. Not as a favor, not as a privilege, and not because they’re organized into unions, but as a constitutional right. In that sense, it’s quite different.

Yes. Every model of market socialism has a labor market, which means in every model of market socialism, people go out and look for jobs. Now, is that a problem? Here’s the biggest reason to think it isn’t a problem, which is that even in the Soviet-style economies, there were never planned labor markets.

What planning means is a central authority decides what the priorities are going to be in terms of investment, and then it tells local authorities, managers of firms, or local planning boards, “Here’s what the plan says you need to do, how much you need to invest, what you need to make, and what quantities you need to make. Now go do it.”

Now, suppose you started planning labor input. So it’s not done through a market, through people choosing their jobs and deciding where to work, but through a planning body telling them where to work. Imagine how dictatorial that would have to be.

For labor and the provision of labor to be consistent with socialist principles, people are going to have to have the freedom to decide where they want to work. That’s on the moral level.

In terms of the practical burden on planners, it’s extremely difficult to imagine you’ll ever have the capacity to, at a micro level, tell people where to work, when to work, how long to work. So on moral and on practical grounds, you have to say, let people go out and find jobs.

But even though market socialism lets people go out and freely find jobs, it must also put measures in place to make sure that the outcomes are not horrible like they are in capitalism. Because again, the basic issue in capitalism is if people go out and can’t find a job, they’re on their own.

In market socialism, if you go out and cannot find a job, the government will have a hand in providing you a job, because there’s going to be a large public sector. Or even if it isn’t a large public sector, another part of the model, as I said earlier, will be public banks taking social issues into account when they make their credit decisions. And one consideration might be rising unemployment in a particular region. So these entities will funnel investment so that people who live there can have jobs for themselves.

One can imagine all sorts of ways in which you could have a labor market but without having the capitalist properties of a labor market. Essentially, people in market socialism will go out looking for jobs, but again, their fate won’t hinge on their success in the labor market.

On both practical and moral grounds, I can’t imagine a desirable — much less a viable — socialism in which you didn’t give people the freedom and the resources to decide on their own which jobs they want. We only need to make sure they don’t suffer the way they do in capitalism if they can’t find a job.

I don’t think you can have equality of wages if you have people going into firms and those firms are competing. Mainly because firms make different sorts of profits. If everybody’s given the exact same wage, then there’s no incentive for them to go to the more profitable firms, which means the more profitable firms don’t benefit from being more profitable.

All the models of market socialism acknowledge this. Again, what they say is that let firms decide how much they’re going to give to people as wages, but then let’s make sure that that doesn’t translate into tremendous inequalities between wage earners.

In capitalism, all your income comes from the money you make in your job. That means that your income is your wage. Now, there are instances where you can supplement that through Social Security, but let’s ignore that for a second. That’s not built into capitalism.

What market socialism says is, let’s separate income from wages. People will have the wage they make; people at more profitable firms will make higher wages, people at less profitable firm will make lower wages, but that doesn’t exhaust their income. Some of their income will also come from a universal income grant. And some of their retained earnings will be affected by taxation.

If you have progressive taxation, people with higher wages might be taxed more, and those with lower wages will be taxed less. Then everybody gets some kind of universal basic income, either through what’s called a capital levy or some kind of national-level profit sharing that supplements your wages. That means that the total income that you have at home will still be unequal, but it’ll be reduced tremendously by the joint effect of these extra monies that you’re getting.

On top of that, keep in mind, there are all the direct public services you’ll be getting. You’ll getting health care for free, education for free. So your wage only accounts for a fraction of all the stuff that goes into your standard of living.

It’s because you want to have some incentives. You want to give people an incentive to work hard, to work well. You want firms to have an incentive to recruit good labor. If I’m recruiting someone who happens to be a really good worker, she’s going to want that work to be acknowledged. She’s going to want to be compensated for that. And if she isn’t compensated for that, why should he go and work at a profitable firm? This is part of retaining what’s positive in capitalism, but trying to reduce or eliminate the negative side effects of that.

There are models of market socialism with stock markets. John Roemer’s model has that. Others don’t. But let’s take the broader issue, which is, are things like a stock market or a market for company shares, or banking or credit markets, are they intrinsically bad? I think we’ve already answered that by saying markets aren’t intrinsically bad.

The worst market ever constructed was the market for labor. And if we’re allowing that in market socialism, surely you can allow for things like a stock market. In this episode, it doesn’t make much sense to go into the details of how you might have a stock market without all the bad stuff. But I’ve laid out the principles by which you might do so, which is to allow for the efficiency-enhancing components of a stock market but block its negative side — which is that by accumulating shares in companies, people can get controlling power in them.

It’s easy to see how you can block that. In future episodes, we should go into that. But let’s stick to the broad principle, which is that the challenge for market socialism is to bring in the efficiency-enhancing effects of markets, and even, you might say, some of the freedom-enhancing effects of markets, while eliminating the oligarchy-inducing effects of those markets, and the way in which markets sometimes corrode and instrumentalize people’s social relationships. I really do believe it’s possible.

This is the key thing, and this is the reason you want market socialism. The biggest failure of the planned economies was the inability to innovate, and the absence of innovation, efficiency, dynamism. The whole motivation to move toward a market socialist model is to give managers of firms, producers, an incentive to consistently innovate. And that incentive comes from competition.

So when we say that these worker-managed or worker-leased firms — whatever the particular model is — when you say that they’re going to be competing on the market, we’re essentially saying, we want them to innovate and that competition is going to force them to do it just the way it does in capitalism.

With all these cushions and airbags, the net effect could very well be to somewhat dampen that incentive toward innovation. We don’t know to what extent that will be a dampener on growth. And I do predict that if it starts dampening growth a lot, some of those protections will be loosened.

This is an important point: there is no viable model of socialism that tends toward economic stagnation. This is a pipe dream on the Left that you can just have a stagnant or flat economy and people are going to be happy. There’s zero evidence that’s true. So you want to build into the models an incentive to innovate.

Now, models and reality are different. It might turn out that all the protections we’re giving to firms and to workers would dampen that somewhat. And if it does, we’ll have to change it. The great thing about market socialist models is that they have room for adjustments, because you have both a market and planning, and you can adjust their relative size — unlike planned economies, which were basically all or nothing.

To my mind, the strength of market socialist models is precisely the urge, the compulsion to innovate. I would say the worries are all on the other end, which are: Will they reduce exploitation the way we want? Will they in fact reduce domination the way we’re saying? We’ll have to figure that out through experience.

It’s an absolutely fundamental goal of socialism. As I said earlier, the Marxist objections to capitalism wasn’t just that it involves exploitation and domination but also that it pits people against each other. People end up treating each other as means to ends and even as potential enemies. Because that’s what competition does.

Now there are, in market socialism, elements of competition. Firms are competing on the market to sell their goods, and people are going to vie for jobs. Some people won’t get the job they want that’s on the top of their list, and that means they’re competing with other people for those. Again, it kind of looks like capitalism.

Is the goal of having healthier social relationships going to be possible? And one fancy way of saying it is, will market socialism be able to eliminate or even substantially reduce alienation?

I think the answer is yes. Because again, what is it that makes people’s social outlook and social relations so unhealthy in capitalism? It is the incessant competition, the domination, the instrumentalization of relationships, the constant insecurity, worrying whether this particular person will steal the job from me, things like that.

In market socialism, you certainly have a labor market; you certainly have competition over goods. But when you reduce the implications of failure, then, people don’t think that they have to climb over everyone else to get what they need because failing to do so means they go back to the bottom of the heap.

When you have a labor market but also have ironclad guarantees in terms of housing, education, health care, and so on, you also have some kind of guarantee that a loss of job doesn’t mean a loss of income. You also have protections on the job from arbitrary authority and power and such things. And you’ve taken away private means of production, so that workers aren’t subjected to this arbitrary authority of their employer. Now, they aren’t as worried about everybody else being a threat to them, to their jobs, to their livelihood.

So you can have what’s called healthy competition. The capitalist labor market is toxic competition, but when you have high school sports or friends playing a pickup basketball game, it’s healthy competition. It brings out the best in people, and it actually can strengthen relationships. We should try to shape competition and markets in market socialism so that it’s a kind of healthy competition rather than a destructive and toxic one.

All we can do is try to describe the way these institutions will be and anticipate what the effects will be based on what we’ve seen in the world around us. And there might be aspects of competition in a market socialist model that we don’t fully appreciate just yet, but I’m confident that we know something about how competition works and how it affects people’s psyches.

I’m pretty sure that if you took away these toxic elements of capitalism, you would have sociability, the possibility for people treating each other with respect, and the possibility of people having healthy attitudes to each other, even though there’s some elements of competition in their lives.

The difference is, market socialists are not reformers. Progressive reformers are of course very well-intentioned. They’re trying to moderate and regulate capitalism so that they can reduce its most destructive elements. And they have done that to some extent. But the problem has always been that as long as you keep the capitalist class and the sanctity of profit maximization intact, it puts severe limits on how far you can go in reducing the brutality of everyday relations between people.

Progressive reformers are in the position of trying to regulate a barbaric system while keeping intact the fundamental roots of the barbarism. Within market socialism, you’re not trying to reform it to make it better. It has in its very constitution eliminated the worst elements of capitalism.

Now, you might still try to reform it to make it even better, but you’re starting at a point that the even most advanced social democracies were never able to achieve. So it has a leg up in a way that no reformed capitalism ever could.

It’s one of the most important things to think about. What happened in social democracy? What happened in social democracy is they made enormous improvements in people’s livelihoods and quality of people’s lives. And they had tremendous success in pushing back the worst elements of free-market capitalism. Everybody except the very, very richest in America today would be very happy to be in a Nordic-style social democracy if they could. It was a tremendously popular system, and yet, it has been dismantled to a significant degree.

The main reason I think it happened was that, even though all these systems pushed back the worst elements of free-market capitalism, the means of production still remained in the hands of the capitalist class, which meant that they still called the shots at the end of the day. Social democracy survived and maintained itself only as long as it could keep capitalists happy. And once capitalists decided that for whatever reasons, it no longer suited their purposes, they used their power to either attack it directly, the way they did in the United States, or to chip away at it the way they have in the Nordic countries. And they substantially recommodified things and brought back markets and brought back insecurity and the like.

At the heart of social democracy, private property was kept intact, but the distribution of income was changed, and the provision of services was changed. This is where market socialism is very different from social democracy, because the fundamental change is doing away with private property.

The second key difference is that market socialism will put mechanisms in place that block the reemergence of wealth inequality. So far, we’ve mostly talked about how income inequality might still be around, such as with people getting different wages or receiving different levels of income. We didn’t touch the issue of the income possibly becoming wealth. That is to say, what if someone puts their money in a bank? Can they hand it down intergenerationally? Can they use the wealth to buy up new means of production?

If someone can do all those things, now they’re getting real social power. And that social power can be used to change not only policy but even the core social architecture like the constitution.

Presumably in market socialism, you’ll have a constitution that says, “We do not allow private ownership of the means of production, or we only allow it in such and such instances.” That would seem to block any movement back toward capitalism. In social democracy, the various constitutions essentially said, “We protect private ownership of the means of production. It is sacrosanct.”

In market socialism, you’ll start by saying, we don’t recognize it, and we will not allow it. That itself is a big block. You can compete; you’ll have all the liberal freedoms; you’ll have elections; you can pass any policies you want, but they have to stay consistent with our constitution. And the constitution doesn’t allow X, Y, and Z, part of which is private property.

But now, let’s imagine: Suppose you had enormous wealth inequality, and people bought up some means of production, and then they actually got enough influence to change the constitution. Couldn’t we then be sliding back into capitalism?

There should not be any real intergenerational transfer of wealth. There should not be private ownership that goes above a certain ceiling. Roemer’s model says people can start up privately owned firms, but once those firms grow beyond a certain size, they become nationalized. Whatever else you think of that, that is explicitly designed to make sure that you don’t get a powerful class of capitalists emerging who will then try to push the system back toward capitalism.

So the basic answer to your question is, anything is possible and nothing is guaranteed in life. But every model of market socialism has, at the top of its list, the desire to prevent the reemergence of a class of people who will try to push the system back toward capitalism. And that class of people is capitalists.

So how do you prevent the reemergence of capitalists?

You start by saying you cannot have private ownership of the means of production, or it has to be at a very small level. Second, you also say we will not allow huge inequalities of wealth, even though we might allow inequalities of income. Then you say we won’t allow people to hand down their wealth from one generation to the other. For instance, I might actually have large savings and be able to even earn interest of those savings. But when I pass away, either all or 90-some percent of those savings will go back into the public funds.

So every generation starts at the same line with a guaranteed income, with guaranteed provision of goods. They are allowed to accumulate savings for themselves and have higher wages. But when they die, because they were using society’s resources, society’s capacities, other people’s labor, they don’t get to keep all the fruits of that labor for themselves. It goes back to society.

And it’s okay, because their kids aren’t going to start out poor. Their kids are going to start out with all the guarantees that other kids have. And everybody works, not just as an act of altruism — people don’t just work for the social good. They work for their own good. And they are able to benefit from it, but they don’t get to accumulate power on the basis of it.

If the models of market socialism are actually implemented, they’ll be far, far more stable than social democracy ever was. This was the chief flaw of social democracy. It made huge achievements, but it got rolled back. And the reason it got rolled back was they kept the capitalist class. The first step in market socialism will be to eliminate and to block the reemergence of a capitalist class.