Central Planning Ideal market capitalism says nothing about social classes. In principle, it might be a classless society -- that is, a society with only one class, without class divisions . The one class might be a class of yeoman market farmers. But, in practice, market capitalist societies have been divided between two classes with quite different conditions: employers and employees. The tension between the employer class and the class of employees led to socialism, an idea that arose in the first half of the 1800's. Socialists knew that the old aristocracies, from feudal times, had ceased to exist as a class. The revolutions and gradual changes of the two centuries before 1800 had eliminated the special role of the old aristocracy and transformed them (at best) into capitalist land-renters. The socialists looked forward to a future in which the class of capitalist employers would also be eliminated as a class, with the former employer class or their descendants having to work for a living as the vast majority already do. This would be a society with only one class, the working class; a society without class distinctions and thus a classless society. In the words of W. Arthur Lewis, a spokesman for the Fabian Socialist Society in the 1940's (and later a Nobel Memorial Prize winner in economics) socialism is "democracy and a classless society."
Perhaps we should treat "democracy and a classless society" as a definition of democratic socialism. Then socialism means just a society with only one class, the working class, regardless of the system of government. Certainly there were people who favored a dictatorial socialism, "dictatorship and a classless society." Nicolai Lenin, the founder of the Soviet Union, was one of them. Their idea was that the dictator would be the voice by which the working class would express its government of society. There were also libertarian socialists, that is, people who favored a classless society with the maximum of possible political liberty.[1] Some of the libertarian socialists were anarchists, who wanted a classless society with no government at all.
When it is put that way, perhaps the terms "democratic socialist," "libertarian socialist," and "anarchist socialist" may not seem so strange. Is there something about a classless society that requires the existence of a government? The only balanced answer is "maybe." All of these socialist ideas have been controversial from the beginning, and have been critical of one another. For example, the libertarian and democratic socialists often argued that a dictatorship could not co-exist with socialism, since the bureaucracy and political groups surrounding the dictator would eventually form a new exploiting class, and re-establish capitalism with themselves as the capitalists.[2] This is probably what Lewis had in mind when he included democracy in his definition of socialism.
The socialists felt that a capitalist society is unavoidably divided between the capitalist employer class and the working class of employees, so a classless society would have a non-capitalist economic system. But this does not tell us just what the non-capitalist economic system would be. There have always been several schools of thought on this, among socialists. Karl Marx and Friedrich Engels, the major theorists of socialism in the 1800's, were careful not to describe a "socialist economic system" (though they clearly had their own opinions of what it was likely to be). Instead, their position was that the economic system of a socialist society should be decided democratically by the workers themselves.
Another element in this mix was communism. Originally separate from socialism, the communism saw competition as the root of all evils. In the communist society, the economic rule would be "from each according to his ability, and to each according to his need." But that rule could not be applied in a capitalist society, because of the defective human character capitalism produces. Communists believed that human character is formed by the environment. A competitive environment would cause people to grow up greedy and aggressive. But, in turn, a population of greedy, aggressive people would create a highly competitive society, so that their children, too, would be greedy and aggressive. Thus, the communists saw the social evils of aggression and competition as the result of a vicious circle. To break the vicious circle, the communists felt that the small, intelligent minority who understood this truth should take power as a dictatorship, an "educational dictatorship," and ruthlessly suppress competition, and direct the allocation of resources "from each according to his ability, and to each according to his need." Thus, over a few generations, a new virtuous circle might be set in motion, in which sharing and action on behalf of the whole population would replace greed and aggression as the basis of society and human character.[3]
In "The Communist Manifesto," Marx and Engels tried to bring the socialists and communists into a common movement with a common program. To reconcile these quite different ideas, they proposed that socialism -- a classless society -- would be the first stage in a social evolution that would lead to communism as a later and higher stage, without an educational dictatorship. Marx and Engels argued that competition could not be eliminated so long as there is scarcity; but that the socialist society would rapidly increase productivity so that scarcity could be eliminated, and then "from each according to his ability, and to each according to his need" could be the rule. Does this make sense? We should not reject it too hastily. Increasing labor productivity has already transformed society in many ways: just a few generations ago, most human beings were farmers who consumed most of what they consumed, and market capitalism was impossible. Increasing productivity made market capitalism possible. Perhaps it will eventually make communism possible. The reader may judge these ideas, since "The Communist Manifesto" is still in print.[4]
Yet another challenge to capitalism came from nationalism. Capitalism arose at the same time as nationalism did, and capitalism could not have come into existence without the national state. But the national state challenged the capitalist system in two ways. On the one hand, some nations lagged behind others, remaining poor and agricultural as other nations industrialized. Some of the relatively poor nations borrowed part of the socialist idea, changing it and applying it not to a division between classes but to a division between nations. The real key division was not between classes but between nations, they said, and the poor nations, the "proletarian nations," had to rely on their national governments rather than on a capitalist economic system to assure their prosperity. This idea led to fascism in the first half of the twentieth century and played an important part in the ideologies of some less-developed countries in the second half of the twentieth century, though (it should be stressed) fascism and the less-developed country ideologies were very different in some important ways.
But, second, the national state was seen as a vehicle of economic planning. This idea held that the market economy was unplanned and thus, in some sense, wasteful and misdirected; by contrast, if the national state were to take over direction of the economy, production could be carried out on the basis of a coherent plan.
This idea of a centrally planned economy was a very powerful one. It has come to be associated with socialism and with the failure of the Soviet-type systems in the twentieth century, but that identification is hasty in a number of ways. It is true that many socialists, probably a large majority, advocated a centrally planned economic system. They thought central economic planning fit well as the economic system for the first stage of socialism. On the one hand, if the government would direct the economy, there would be just one class -- everyone would be government employees. On the other hand, a planned economy might (it seemed) be able to speed the growth of productivity, bringing nearer the transition to communism. But there might be other ways of accomplishing the same things -- we will discuss some of them later in this chapter -- so central planning was not necessary for socialism. Nor was socialism necessary for central planning. A centrally planned economy might keep and even reinforce the distinction between the working and employing classes, and, in fact, that was part of the Fascist idea.
In any case, the combination of socialism, communism, and central planning was an idea with great intellectual power in the first half of the twentieth century, and this idea had consequences. Accordingly, we will next explore the pure idea of a centrally planned economy, then look at the real attempts to put central planning into practice in the Soviet-type and Fascist economic systems, and then finish up by looking at some other approaches to constructing a classless socialist society.
Central Planning 