Politics
Out of context: Reply #3217
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A Move towards Market Socialism
Daily Article by D.W. MacKenzie | Posted on 10/16/2008"They want people to play market as children play war, railroad, or school. They do not comprehend how such childish play differs from the real thing it tries to imitate." – Ludwig von Mises
The recent financial crisis has renewed interest in old issues. The Bush administration has announced plans to buy $85 billion in preferred stock in what are (for the time being) private financial institutions, like Bank of America, J.P. Morgan, Wells Fargo, and Morgan Stanley. The total commitment by the Treasury is set at $250 billion. While this move by the Treasury Department into the financial industry is unique in American history, it has precedents elsewhere, and has been debated many times.
Karl Marx proposed "centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly." Years later, so-called "market socialists" like Oscar Lange, Abba Lerner, and H.D. Dickinson proposed state control over credit and financial capital. While these market socialists accepted trade and the use of money with consumer goods, markets for capital goods would be simulated and markets for financial capital would be wholly replaced by central planning. Capital investment would therefore be determined by state officials, rather than by competition for funds in financial markets. Lange was particularly clear about how the state would determine the overall rate and pattern of capital investment. State officials would set the overall rate of capital accumulation, instead of interest rates. State officials would also determine the pattern of investment, instead of profit-seeking capitalists and entrepreneurs.
Ludwig von Mises and Friedrich Hayek defended capitalism from its Marxian and market-socialist enemies. Mises attributed special significance to financial markets and private financial institutions. After all, it is financial markets that determine the rate and pattern of future capital investment in capitalism.[1] Since socialism is defined by communal control of capital, this system requires state control of investment and finance. Socialism therefore means replacing private dividends with social dividends and interest rates with edicts. All private speculation and credit must be prohibited if capital is truly to become communal property. Capitalism works because it eliminates inept managers of production automatically through bankruptcy, while extending greater industrial control to competent capitalists.