3176. Do Red and Green Mix?

By Herman Daly, Great Transition Initiative, December 2018

Herman Daly

Those of us old enough to remember the Cold War know that it was basically a contest between Socialism and Capitalism to see who could grow faster, and thereby accumulate more wealth and military power. The audience was the uncommitted countries of the world who would supposedly adopt the economic system of the winner of the growth race. What happened? Basically, Socialism collapsed, and Capitalism won by default. The losers (Russia, China, Eastern Europe) got back in the growth race by adopting State Capitalism, and China has become the growth champion. The present system of world growthism, in the broadly capitalist mode, is triumphant. But growthism itself has turned out to be a false god because growth in our finite and entropic world now increases ecological and social costs faster than production benefits, making us poorer, not richer (except for the top few percent). Recognition of this reversal is obscured by the fact that our national accounts (GDP) do not subtract the costs of growth, but effectively add them by counting the expenditures incurred to defend ourselves from the unsubtracted costs of growth. Even more egregiously, GDP counts the consumption of natural capital as income. Growthism is consuming the life support capacity of the ecosystem for the benefit of a small minority of the present generation, while shifting the real but uncounted costs on to the poor, future generations, and other species.1

Ecosocialists, ably represented by the distinguished scholar Michael Löwy, seem to recognize this disaster, so environmentalists and ecological economists are inclined to be glad of their help in opposing rampant growthist capitalism. We certainly need help. But how much help in developing a workable green economy are red ecosocialists likely to be? Maybe not much, for reasons suggested below.

Marx himself was overwhelmingly a perceptive critic of capitalism, and hardly at all an architect of socialism, which remained for him a vague prophetic vision. Marxist socialist states have an impressive historical record of economic failure, political oppression, and abuse of human rights and religious freedom. The net flow of refugees was decidedly away from, not toward, socialist countries. How does Löwy deal with this well-documented and very negative historical experience? First by frankly recognizing it, and then by asking us to simply ignore the “actually existing socialisms of the twentieth century” and focus on Marxist theory instead. This reminds me of the growth economists who ask us to focus on the elegance of neoclassical optimization theory and downplay the massive external costs and monopoly concentration of wealth and power of actual corporate capitalism. Theory is always neater than reality—for both capitalism and socialism. While Scandinavian socialism is an example from which we can benefit, Marxist socialist economies no longer exist (except for North Korea). Our given starting point for reform is rampant growthist capitalism. If socialism had won the disastrous growth race, then we would be starting our reforms from socialist initial conditions, and Marxist theory would have been more relevant. But that did not happen, however much Marxists may regret the fact.

If one believes that Marxist theory is nevertheless true, then it would be worth starting over on that basis. But it contains basic errors that would likely lead to a repeated failure. Marxists have been very slow to recognize the reality of limits to growth, in spite of Marx's now oft-quoted prescient paragraph about “metabolic rift”—a paragraph certainly worth building on. Furthermore, there are some basic reasons for Marxists' unwillingness to identify growth as the core problem. Marx dismissed any appeal to morality or sharing as “utopian socialism.” The "new socialist man" would emerge from his bourgeois greed only on the basis of overwhelming material abundance, emerging under historically determined scientific socialism, “guided” by the dictatorship of the proletariat. Overwhelming abundance requires growth to the point that scarcity is objectively overcome, and therefore the moral demands for sharing scarce goods, emphasized by the “utopian” socialists, become unnecessary in “scientific” socialism.

Löwy has a section on growth, in which he opines that “[t]he issue is not excessive consumption in the abstract, but the prevalent type of consumption” dominated by fashion and advertising. I agree with his criticism of advertising, but the basic problem is the actual, not abstract, level of per capita resource consumption, mainly of the wealthy, not just the frivolous things they consume. And of course the number of consumers. There is no discussion of limiting resource consumption, much less limiting population growth—the latter a topic which Marxists, as well as the capitalist cheap-labor lobby, go far out of their way to avoid. With the exception of post-Maoist China, Marxist regimes have generally thought that more people are better than fewer, a view that environmentalists would actually agree with, as long as the people are not all alive at the same time! Marx’s hatred for Malthus and his dismissal of overpopulation are well known, and continue to mute Marxist attention to limits to growth.

Löwy, and Marxists in general, take a very dim view of markets and a very rosy view of central planning. There is plenty of need for both markets and planning, depending on the type of good in question. Goods are either physically rival or non-rival, and either legally excludable or non-excludable. My shirt is a rival good—if I am wearing it, you can’t wear it at the same time. It is also excludable because I have the right to keep you from wearing it, or to allow you to. Goods that are both rival and excludable are market goods that can be, and usually are, allocated by markets. Goods that are non-rival and non-excludable are pure public goods, like a just legal and ethical code or the Pythagorean Theorem, for which there can be no market. Goods that are rival but non-excludable, like fish caught on the high seas or water pumped from an aquifer, are subject to the tragedy of the open-access commons and require collective action to avoid overexploitation. Goods that are non-rival but excludable, like patented knowledge or information, are inefficiently allocated, and the revenue from their artificial price is unjustly distributed by markets. For the last three categories, markets work poorly or not at all, and consequently, collective planning is necessary. That should provide plenty of opportunity for ecosocialists’ contributions! For market goods, a large category including the basics of food, clothing, and shelter, market allocation usually works better than planning, if governments can limit or regulate monopoly. Since three of the four categories require government planning, it is doubly important to avoid overloading government capacity for needed collective planning by unnecessarily imposing it on the large first category as well.

However, Löwy, and Marxists generally, have an ideological antipathy to markets—to supply and demand, and prices, and especially to profit. They prefer central planning, or as Löwy calls it robust “democratic ecological planning.” If Löwy means economic planning in the light of ecological limits, then we would need much more discussion of limits. The historical failure of War Communism with its direct physical requisitioning of goods was corrected by Lenin's New Economic Policy, which reinstated considerable reliance on markets. That socialist lesson seems to be ignored. Likewise ignored are the theoretical criticisms of even socialist economists, such as those of Oskar Lange, who in his On the Economic Theory of Socialism demonstrates how markets can efficiently serve socialism as well as capitalism. Löwy dismisses criticism of central planning as “conservative fearmongering.” Instead, he tells us that “the core of ecosocialism is the concept of democratic ecological planning, wherein the population itself, not ‘the market’ or a Politburo, make the main decisions about the economy.”

Imagine the consequences of market goods (food, clothing, and shelter, plus a whole lot more) being “freely distributed, according to the will of the citizens.” The democratic will of the citizens is to be expressed by voting. How much steel shall we produce? Citizens vote. How much of that steel will go to the production of, say, wood screws, for example? The citizens vote again. Of the wood screws how many will be round head, how many flat head countersunk, slot head, or Phillips head? How many cadmium-plated; how many chrome-plated? And some screws are made of brass or aluminum, not steel. And how many of each length and diameter, etc.? And who shall receive how many of each type? The citizens robustly and democratically vote again and again as conditions change, although most have no idea of the myriad special uses of different types of screw, and may not even know which end of a screwdriver to hold.

Meanwhile those people who actually use screws and know their uses are not able to “vote” with their money in markets and thereby convey reliable information to producers about what mix of the nearly infinitely many types of screw is most needed, and would be most profitable to produce. Instead we have all citizens spending absurd amounts of their time “democratically” voting, mostly about things they don’t understand, while those with the most information about actual use-values of screws are “disenfranchised” by the absence of markets. Yet Löwy claims that in a planned ecosocialist economy, “use-value would be the only criteria for the production of goods and services.” Use-value as judged mostly by non-users—what could possibly go wrong?

With so much effort wasted on attempting to plan the allocation of market goods, there will be little capacity left to plan the use of true public goods, to avoid the tragedy of the commons and the larcenous market enclosure of non-rival goods. Of course, the humble wood screw is only one of millions of market goods that would be grossly misallocated by “democratic ecological planning.” If one thinks my example of the wood screw is too trivial, then ask the same questions about a more complex commodity of your choice. Löwy expects that “as the ecosocialist transition moves forward, more products and services critical for meeting fundamental human needs would be freely distributed, according to the will of the citizens.” Overwhelming material abundance and the “new socialist man” will apparently have arrived, along with the abolition of scarcity. But with little discussion of growth or its costs.

Without markets (supply and demand, prices, and yes, profit), there could be no self-employment. Everyone would be a salaried employee of the state, giving the state monopsony power in the labor market. No one could identify a needed good or service and make a living by providing it. Happily, Löwy at least would allow small shops and artisan enterprises to escape the planner.

Ecosocialism aspires to be egalitarian and ecologically sustainable. But nothing is said in this essay about proper limits to the range of inequality in the distribution of income and wealth. Should the richest citizen be four times as wealthy as the poorest, as Plato thought? Ten times? A thousand times? And what do ecosocialists think about macro limits to growth of resource throughput? Many of the ecosocialists’ objections to market allocation would disappear if the underlying degree of inequality of wealth and income distribution were more formally and tightly limited, and if the aggregate scale of throughput of energy and materials were restricted to some level of ecological sustainability. Instead of correcting excessive throughput scale, and excessive distributional inequality, which of course are reflected in market prices and allocation, ecosocialists just attack market allocation itself, as if underlying scale and distribution problems could be solved by breaking the mirror that reflects them. What are ecosocialists’ policies for directly limiting throughput scale and distributional inequality? Voting is indeed required at this point, but there must be some policy to vote on. And in the three categories where planning has long been recognized as necessary, what policies are recommended for providing and financing public goods, for avoiding overexploitation of the commons, and for protecting non-rival goods from illicit privatization?