A Marxian Farewell to "Market Socialism"

A Marxian Farewell to “Market Socialism”

Tibor Rutar

Introduction

At the end of the 1990s a few more or less prominent Socialists had a rather extensive debate

on the topic of “market socialism” and how it relates to Marx and Marxism. The debate was

published as a collection of articles and reciprocal responses in which two theoreticians were

defending the notion of “market socialism” and the other two were attacking it. One of the

defenders, James Lawler, tried to show not only that “market socialism” is in itself a

consistent, sensible notion, but also that Marx himself was a “market socialist” and that there

is nothing in the Marxian theoretical framework that would prohibit upholding such a notion.

This is what he says:

The thesis of this paper is that, contrary to most traditional interpretations, it is the

latter concept [i.e. “market socialism”] that comes closest to the viewpoint of Marx

and Engels on the nature of the newly emerging post-capitalist society. […] It is

implied that the post-capitalist society must be divided into two stages. There is a first

stage in which market relations involving capitalist enterprises continue to exist, while

property passes gradually into the hands of the proletarian state primarily through

economic means, with socialist enterprises successfully competing against capitalist

ones. (1998: 24, 33)

Anyone who is at least somewhat familiar with Marx’s works and Marxism in general is

probably thoroughly unconvinced by the end of the cited passage. However, the notion of

“market socialism” is not only present (and perhaps even prevalent) in radical (and even

Marxist) literature, but is also on the rise at least since the crash of the so-called 20th

century

Communist societies. It would probably not be too hard to show that most proponents of

“market socialism” are either leftish neoclassicals, neoclassical-inspired radical economists or

Sraffians, and that this political position follows directly from their physicalist economic

theories, which disparage (and directly contradict) one of the most fundamental Marx’s

notions – the law of value, according to which value is determined by the socially necessary

labour time. Because this would be rather easy to show it is not the task that will be

undertaken here. Our primary goal is, rather, to show that (1) Marx wasn’t, personally, a

proponent of “market socialism” but was, in fact, one of the greatest critics of it, and that (2)

the notion of “market socialism” is, independently of what Marx was for or against

personally, a conceptually incoherent notion – at least from the non-physicalist, temporalist

Marxian perspective. It is incoherent because it conceptualizes socialism (which is a negation

of capitalism) as based on capitalism’s most fundamental law – the law of value.

Marx’s Critique of the Gotha Programme

Let us delve right into it and reproduce the oft-cited passage from Marx’s Critique of the

Gotha Programme, which will help us show – both exegetically and conceptually – that

Lawler is mistaken in his assessment of “market socialism” in connection with Marx and

Marxism:

Within the co-operative society based on common ownership of the means of

production, the producers do not exchange their products; just as little does the labor

employed on the products appear here as the value of these products, as a material

quality possessed by them, since now, in contrast to capitalist society, individual labor

no longer exists in an indirect fashion but directly as a component part of total labor.

The phrase “proceeds of labor“, objectionable also today on account of its ambiguity,

thus loses all meaning.

What we have to deal with here is a communist society, not as it has developed on its

own foundations, but, on the contrary, just as it emerges from capitalist society; which

is thus in every respect, economically, morally, and intellectually, still stamped with

the birthmarks of the old society from whose womb it emerges. (Marx, 2009[1875]: 8;

emphases added)

It is obvious, therefore, that for Marx – contra Lawler – even the earliest phase (the so-called

»lower phase«) of the future socialist or communist society is free from impersonal market

coordination of social production. After all this is, as we shall see, the only sensible definition

of socialism or communism: the disappearance of the most fundamental characteristic of

capitalism, i.e. the disappearance of the law of value.

Let us stop here and consider the above cited passage in more detail. In the passage Marx

provides us with at least three important characteristics of a socialist society: (1) there is no

market exchange of products; (2) products no longer have value in the Marxian sense; (3)

individual labor is directly, not indirectly, social labor. All three points are closely connected,

but to truly understand both their significance and their necessity we have to examine them

more closely. This examination is what we turn our attention to now.

Lawler (1998: 25) claims that, for Marx, “the proposed Communist program will take place

on the basis of bourgeois production. […] [C]ommunist conditions that are first introduced

using despotic inroads on bourgeois conditions do not entirely replace these, so that

'bourgeois conditions' persist.” This is by itself actually true and is even perfectly consistent

with what Marx says in the Critique of the Gotha Programme. However, it does not imply

what Lawler thinks it implies. For him the persistence of “bourgeois conditions” means the

persistence of market competition and coordination, and the persistence of value production.

To see why this is not the case – at least for Marx – consider the continuation of the above-

cited passage from the Critique:

What we have to deal with here is a communist society, not as it has developed on its

own foundations, but, on the contrary, just as it emerges from capitalist society; which

is thus in every respect, economically, morally, and intellectually, still stamped with

the birthmarks of the old society from whose womb it emerges. […]

Here, obviously, the same principle prevails as that which regulates the exchange of

commodities, as far as this is exchange of equal values. Content and form are changed,

because under the altered circumstances no one can give anything except his labor,

and because, on the other hand, nothing can pass to the ownership of individuals,

except individual means of consumption. But as far as the distribution of the latter

among the individual producers is concerned, the same principle prevails as in the

exchange of commodity equivalents: a given amount of labor in one form is

exchanged for an equal amount of labor in another form.

Hence, equal right here is still in principle – bourgeois right, although principle and

practice are no longer at loggerheads, while the exchange of equivalents in commodity

exchange exists only on the average and not in the individual case. (Marx, 2009: 8–9)

This passage is very dense, so let us unpack it. Marx firstly admits that the socialist society

“not as it has developed on its own foundations, but, on the contrary, just as it emerges from

capitalist society” (Ibid.) is still characterized by certain bourgeois properties – for example,

“a given amount of labor in one form is exchanged for an equal amount of labor in another

form.” (Ibid.) However, as he continues, “[c]ontent and form are changed […,] principle and

practice are no longer at loggerheads.” (Ibid.) This remark might seem trivial on a superficial

reading, yet it is the pivot on which a proper understanding of Marx’s Critique turns. Marx

claims that in a socialist society, even when it is still in its infancy, the exchange of products

is no longer regulated by the category of value (i.e. socially necessary labor time). It is true, as

we have seen, that what is exchanged in such a society are still equivalents (“a given amount

of labor in one form is exchanged for an equal amount of labor in another form”), which

means that the highest communist goal of absolutely egalitarian distribution according to

needs and appropriation according to ability is not yet achieved, but something epochal has

nonetheless happened. This socialist equivalent exchange is profoundly different from

capitalist equivalent exchange. It is different because “the exchange of equivalents in

commodity exchange [i.e. in capitalism] exists only on the average and not in the individual

case [as it does in a socialist society]” (Ibid.; emphases added). This distinction between

“average” exchange of equivalents and “individual” exchange of equivalents requires

additional explanation.

Where there is generalized commodity production (i.e. capitalism), the products of human

labor are exchanged on the basis of the law of value (i.e., on the basis of value as determined

by socially necessary labor time). The law of value and market organization of social

production require that individual labor of the immediate producers is social only in an

indirect way. 5 hours of individual (abstract) labor of some producer in a capitalist society

won’t necessarily count as 5 hours of social (abstract) labor. How many hours of social labor

time an hour of individual labor time will come to represent is going to be revealed only post

festum, after the production period is already finished (more on this later). As Marx says in

Volume I of Capital (MECW35: 83–84; emphases added):

Since the producers do not come into social contact with each other until they

exchange their products, the specific social character of each producer's labour does

not show itself except in the act of exchange. In other words, the labour of the

individual asserts itself as a part of the labour of society, only by means of the relation

which the act of exchange establishes directly between the products, and indirectly,

through them, between the producers.

This means that the amount of abstract labor time, which determines the value of each

specific product, is not individual abstract labor time that was expended on the production of

a specific commodity, but the social, average labor time, i.e. the time that all isolated,

atomized and mutually indifferent producers have expended on the production of the same

specific commodity. If an individual who has labored for 5 abstract labor-hours has produced

only a single product, while all other individuals who have also labored for 5 abstract labor-

hours have produced two products, this means that the value of this same product will be only

2.5 hours of abstract labor time. This holds even in the case where 5 labor-hours of the less

productive producer (who, let’s say, is forced to produce with the help of an obsolete

machine) is qualitatively the same, i.e., it is the labor of same intensity, length and

onerousness, as the 5 labor-hours of the average productive producers (who, let’s say, have

the luxury of producing with the help of an advanced machine). So, in our example, an

individual hour of labor of a producer who simply doesn’t produce with the help of more

advanced machinery will count only as 0.5 hours of social labor.

According to Marx this indirect sociality of individual labor will be abolished already in the

lower phase of socialism (or communism), which means that even though in such a society

“bourgeois right” still persists – i.e. exchange is still equivalent exchange –, “principle and

practice are no longer at loggerheads”. This is so because even though people will still be

entitled only to the quantity of products which represent an equal amount of labor time they

themselves have contributed to society (in another form), this equivalent exchange is radically

different than the equivalent exchange of bourgeois society. Namely, amounts of labor time

will no longer be exchanged only “on the average”, but rather “in the individual case”. This

will be so because social production will be regulated by a conscious plan, which will make

individual labor contributions social contributions from the very start; in other words, what is

required to abolish indirect sociality of labor is conscious regulation – planning – of social

production ahead of time.

If in capitalism producers come into social contact only by exchanging their products and

therefore the social character of their individual labor reveals itself only within this exchange,

this is no longer so in socialism because (generalized) commodity production is abolished.

The abolition of this impersonal, reified mediation of social relations is exactly the differentia

specifica of socialism.

Lawler (1998: 31) proceeds without acknowledging any of this and asserts that in the earliest

phases of socialist society there are fewer and fewer producers who also produce surplus

value, because more of them are being integrated into nationalized production. Not only this,

for Lawler producers in socialism are remunerated in accordance with the “level permitted by

the value of their production” (Ibid.). Both assertions are – at least from the Marxian

perspective – fundamentally mistaken.

Firstly, Lawler is succumbing to juridical fetishism when he claims that the nationalization of

production means the abolition of competition between workers and, implicitly, the abolition

of capitalist production relations (Ibid.). In Marxian theoretical framework juridical (i.e.

formal) property ownership is a consequence of social relations of production, not vice-versa.

This means that abolishing certain (capitalist) juridical property forms doesn’t necessarily

entail the abolition of (capitalist) production relations. It is quite irrelevant whether social

production is fragmented into a variety of formally autonomous and distinct entities (i.e.

capitalists) or is – on the contrary – concentrated into a single formally autonomous and

distinct entity (i.e. the state). What does matter for market competition (and therefore

capitalism) to exist is that social production is actually (not only formally) fragmented into a

variety of owners or production units that are subject to the law of value precisely because of

this fragmentation and atomization of social production. Such actual fragmentation can take

place in a social system where there are multiple formally recognized autonomous owners –

as in most historic and contemporary capitalist societies – or where there are multiple

formally unrecognized (yet actually existing) autonomous owners – as was the case in some

20th

century “socialist” regimes, such as Yugoslavia. What is crucial is that the immediate

producers are actually separated from their conditions of production and that they actually

enter into relations of production via the exchange of their products, not via conscious and

democratic deliberation.

Value and surplus-value production are abolished after social relations of production which

enable value production are abolished, not simply after state-law says that capitalist

companies have become national companies. As Marx (MECW22: 335) himself notes in The

Civil War in France:

If co-operative production is not to remain a sham and a snare; if it is to supersede the

capitalist system [then] co-operative societies are to regulate national production upon

common plan, thus taking it under their own control, and putting an end to the

constant anarchy and periodical convulsions which are the fatality of capitalist

production […]

Secondly, remuneration of producers in accordance with the “level permitted by the value of

their production” (Lawler, 1998: 31) is not a socialist, but a capitalist principle. Even if a

worker is remunerated with the full value of her product (which, in capitalism, she admittedly

is not), she has still not received an equal amount of her own individual labor contribution,

but a certain amount of social, average amount of labor which can – as we’ve seen in the

example above – diverge from his own contribution markedly. This is why Marx

(2009[1875]: 8) is so insistent on his claim that even in the earliest phase of socialism the

“labor employed on the products [does not] appear here as the value of these products, as a

material quality possessed by them”. This means two things.

First, in capitalism workers aren’t remunerated by the value (i.e. average labor) of the product

they produce, but are, instead, remunerated by the value (i.e. average labor) of the product

they sell to their employers, their labor-power. This means that they are systematically

exploited because the value of their labor-power – this is determined by the value of all the

commodities a worker requires to reproduce her ability to labor – can be (and usually is)

lower than the value they produce in the production process. It is true that a worker can (and

usually does) receive the full amount of value that her labor-power represents, which means

that the capitalist hasn’t done anything illegal. But the difference between this full value of

labor-power and the full value of the products that have been produced by the worker in the

production process can be (and usually is) substantially large. This difference is the source of

all profits. So systemic exploitation in capitalism is not the product of greedy capitalists that

are scamming workers and paying them less than they should – this, of course, also happens,

but at least in theory it needn’t happen for exploitation to persist. It follows from this that the

first requirement of a socialist society is that the immediate producers don’t sell their labor-

power. Only if this is granted the possibility of abolishing systemic exploitation arises. Yet,

this is not enough.

Because, secondly, even if workers were remunerated by the actual amount of value they

produced (i.e. average labor time expended on the production of their products) – not with the

value of their labor-power – this would still not be what Marx had in mind with regards to the

lower phase of socialism. For Marx workers would be remunerated by the amount of labor

they themselves have (in the individual, not average case) contributed to the society. And this

would actually be possible in a society where producers themselves plan production, because

of the absence of the value-category.

To summarize, in the Critique of the Gotha Programme Marx explicitly says that in a socialist

society – as it has just emerged from the capitalist – producers don’t change their products on

the basis of (the law of) value, even though they still exchange equivalent or equal amounts of

labor, which is at least in principle a bourgeois right. The important question, therefore, is

what kinds of labor are these equal amounts. The answer is that they are equal amounts of

individual, actually expended labor. Individual labor in a socialist society is – precisely

because of the lack of market mechanism (or, more precisely, the law of value) – immediately

or directly, not indirectly, social. This means that the category of socially necessary labor-

time, which asserts itself through competition, does not exist anymore. 5 hours of individual

labor won’t count as 5 hours of social labor only if this individual amount of labor happens to

be the same as the average of all individual labors, but will count as 5 hours regardless of

what the average is.

Grundrisse and Capital

In this section we’ll look at a few passages from the Grundrisse and Capital in which Marx is

very detailed and explicit about the aforementioned distinction between “bourgeois” labor-

time – where individual labor counts as social labor only on the average – and “non-

bourgeois” labor-time – where individual labor counts as social labor in every individual case,

regardless of the average. We’ll turn our attention to these passages for the distinction

between both “types” of labor-time is crucial for understanding why Marx’s most

fundamental category – value – exists only in capitalism. Value as a “bourgeois” category

exists only because of the existence of indirect sociality of individual labor, which – in turn –

exists only because of the bizarre fact that dead things (i.e. commodities) mediate relations

between living people.

Marx’s preparatory manuscripts from 1857–58 which we have come to be know as

Grundrisse contain a relatively log, yet very accessible passage that is crucial to our analysis.

To understand more clearly the distinction between individual labor that becomes social

indirectly, and individual labor that becomes social directly, we’ll examine the passage bit by

bit. This is how Marx (MECW28: 107–8) starts:

The labour of the individual, considered in the act of production itself, is the money

with which he immediately purchases the product, the object of his particular activity;

but it is a particular money, which of course buys only this particular product. In

order to be general money directly, it would have to be not particular but general

labour from the outset, i.e. it would from the outset have to be posited as part of

general production.

What Marx says here is that under the circumstances of generalized commodity production

individual’s labor in the sphere of production is only particular (i.e. individual) labor, which

has to reveal itself as universal (i.e. social) through exchange. If we wanted this particular

labor to be universal in the very same moment (i.e. already in the sphere of production), we

would have to posit it as such from the start. We would have to know how much of such

particular labor society requires and we would expend exactly so much of this particular

labor. As Marx continues (MECW28: 108; emphases added):

Now, if this assumption is made, the general character of labour would not be given to

it only by exchange; its assumed communal character would determine participation

in the products. The communal character of production would from the outset make

the product into a communal, general one. The exchange initially occurring in

production, which would not be an exchange of exchange values but of activities

determined by communal needs and communal purposes, would include from the

beginning the individual's participation in the communal world of products.

In a socialist society, individual’s participation in the whole social product would be

determined on the basis of individual’s actual, i.e. individual labor contribution. This is so

because,

[o]n the basis of exchange value, labour is posited as general labour only through

exchange. On this basis [of the exchange of activities in production], labour would be

posited as general labour prior to exchange, i.e. the exchange of products would not in

any way be the medium mediating the participation of the individual in general

production. (Ibid.; emphases in the original)

Marx then repeats what he has already stated above:

The labour of the individual is from the outset taken as social labour. Therefore,

whatever may be the particular material form of the product that he produces or helps

to produce, what he has purchased with his labour is not a definite particular product

but a certain share in the communal production. Nor has he, therefore, a particular

product to exchange. His product is not exchange value; it does not have to be first

converted into a particular form to acquire a general character for the individual.

What he says is, to put it in slightly different words, that in a socialist society individual’s

labor contribution does not become a part of the social aggregate only by realizing itself as a

particular sum of money, value – as it does in capitalism. “His product is not exchange value”

(Ibid.), because “the social character of production is [not] established only post festum by the

elevation of the products into exchange values and the exchange of these exchange values.”

(Ibid.) “Instead of a division of labour which necessarily arises from the exchange of

exchange values, labour would be organised in such a way that the individual's share in

common consumption would directly follow.” (Ibid.)

This, of course, does not mean that products are no longer exchanged (via the exchange of

activities). What it means is that the exchange of products (or activities) no longer plays the

social function of mediating individuals’ participation in the aggregate social product. How

much an individual is entitled to participate in the social product is not determined by her

individual labor contribution being transformed into social, average labor, a transformation

that is realized via the mechanism of (competitive) commodity exchange. If an individual has

contributed 8 hours of her actual, individual labor, she is entitled to retrieve the amount of

social product that corresponds to those 8 hours. In capitalism something completely different

is at work. In capitalism 8 hours of her individual labor can turn out to represent only 4 hours

of social labor, or, say, 8, 16 or whatever other amount of social labor-time is established

through exchange.

Marx (MECW35: 89–90) says something very similar to what we have been discussing above

also in Capital. The quote is long but it's worth considering in full.

Let us now picture to ourselves, by way of change, a community of free individuals,

carrying on their work with the means of production in common, in which the labour

power of all the different individuals is consciously applied as the combined labour

power of the community. […]

The total product of our community is a social product. One portion serves as fresh

means of production and remains social. But another portion is consumed by the

members as means of subsistence. A distribution of this portion amongst them is

consequently necessary. The mode of this distribution will vary with the productive

organisation of the community, and the degree of historical development attained by

the producers. We will assume, but merely for the sake of a parallel with the

production of commodities, that the share of each individual producer in the means of

subsistence is determined by his labour time. Labour time would, in that case, play a

double part. Its apportionment in accordance with a definite social plan maintains the

proper proportion between the different kinds of work to be done and the various

wants of the community. On the other hand, it also serves as a measure of the portion

of the common labour borne by each individual, and of his share in the part of the total

product destined for individual consumption. The social relations of the individual

producers, with regard both to their labour and to its products, are in this case perfectly

simple and intelligible, and that with regard not only to production but also to

distribution.

The crucial part is this:

Labour time would, in that case, play a double part. Its apportionment in accordance

with a definite social plan maintains the proper proportion between the different kinds

of work to be done and the various wants of the community. On the other hand, it also

serves as a measure of the portion of the common labour borne by each individual, and

of his share in the part of the total product destined for individual consumption. (Ibid.)

Conclusion

We've shown that Marx has explicitly rejected – in Grundrisse, Capital and the Critique of

the Gotha Programme – the concept of “market socialism”, even in the case of the “lower

phase” of socialism, i.e. in the case of socialism as it has just emerged under capitalism. Our

examination of Marx’s “mature” texts was actually an overkill, as it should be obvious to any

reader of Marx’s Poverty of Philosophy that “market socialism” (as first formulated in a

slightly different form by Proudhon and utopian socialists in general) is – at least for Marx – a

vulgar economic idea. However, and more importantly, what should be examined with

regards to “market socialism” is whether this concept – totally irrespective of Marx’s personal

declarations about “market socialism” – is theoretically consistent with the Marxian

framework. In other words, what needs to be determined is not so much whether Marx himself

was a proponent or opponent of “market socialism” (though, as we’ve seen, we can say with

great confidence that he was a most emphatic opponent of it). What needs to be determined is

whether the concept of “market socialism” can be consistently defended from the Marxian

theoretical perspective, regardless of what Marx himself claims.

As we’ve seen especially in the first section, the answer to this question is negative; it is

precisely the Marxian theoretical perspective with its distinction between directly and

indirectly social labor that clearly reveals how incoherent a notion “market socialism” is.

More specifically, it shows that “market socialism” is akin to trying to have your cake and eat

it too; it is a conception of socialism (i.e. non-capitalism) as a society based on the law of

value (i.e. capitalism). It is now on Marxian proponents of “market socialism”, such as

Lawler, to try and show otherwise. However, they have not (because they cannot) shown

otherwise. The most they do in their texts is to try and show – exegetically, not theoretically –

that Marx was a proponent of “market socialism”. They are, as we’ve seen, not very

convincing in this exegetical exercise, nor are they convincing in their subsequent intuitive

claims about markets in socialism. For example, here is what Lawler claims:

The market that remains […] is a market that is increasingly subject to human

consciousness. It is a market that is consciously used for human welfare. (Lawler,

1998: 38)

It is quite uncontroversial to say that this Lawler’s “market that is consciously used for human

welfare” is clearly not a market in the sense that we talk about markets today. This is so

because there are only two general possibilities when it comes to organizing social

production. If a competitive market is the central coordinator of social production and

people’s economic activity, it necessarily follows from this that the law of value exists, that

individual labor becomes social only indirectly, and that social production is organized ex

post, not ex ante. In this case, the impersonal competitive market or, more precisely, the law

of value is what rules social production. If, and this is the second possibility, we strip the

competitive market of its ruling position,1 the law of value and indirect sociality of labor are

abolished. In this case social production has to be coordinated personally, consciously – it has

to be planned in some way. If we’re talking about socialism (not, say, feudalism) this plan has

to be truly democratic and probably decentralized.

In sum, if we modify the ruling role of markets in such a drastic way that the immediate

producers (not the spontaneous and impersonal competitive forces) are actually planning

social production, and that the law of value as an alien, objective social law is abolished

because of such planning, then we are hardly warranted to speak of “the market” existing in

any meaningful way or that such society is “market socialism”.

1 Of course, if we strip the competitive market of its ruling position only on a formal, juridical level, the law of

value and indirect sociality of labor will persist. Domination of the competitive market has to be abolished

actually, on the level of production.

Now, there are also non- or anti-Marxian theorists, such as Alec Nove (1991), who agree

Marx was not a “market socialist”, yet claim that his vision of non-market socialism in which

social production is organized ex ante is not feasible. Claims like these are important and

popular so they have to be critically examined and – if it turns out they’re unconvincing –

rejected. However, such a task is beyond the scope of this essay.

Literature

Lawler, James. 1998. Marx as Market Socialist. In: Market Socialism: The Debate Among

Socialists, B. Ollman, ed. London: Routledge, 23-54.

MECW22: Marx, Karl. 1986. Karl Marx Frederick Engels: Collected Works 1870–71,

Volume 22. New York City: International Publishers.

MECW28: Marx, Karl. 1987. Karl Marx Frederick Engels: Collected Works 1857-61,

Volume 28. New York City: International Publishers.

MECW35: Marx, Karl. 1996. Marx [Volume I of Capital], Volume 35. New York City:

International Publishers.

Nove, Alec. 1991. The Economics of Feasible Socialism. London: HarperCollins.