Unpredictability, economic unpredictability in particular, means that it’s never a good idea to leave things without a good plan. A truly free market is chaotic and leaves too much room for the possibility of failure, especially for the wealthy and well-endowed. A good plan, however, limits the possibility of failure and tries to make things work for the best possible outcomes. But in the absence of democratic control over planning, who sees the rewards of those best possible outcomes?
In Leigh Phillips and Michal Rozworski’s new book, The People’s Republic of Walmart: How the World’s Biggest Corporations are Laying the Foundation for Socialism, the authors demonstrate through several detailed examples how, in a capitalist political economy, planning stacks the odds in favour of the wealthy over the workers. Walmart, and other darlings of corporate capitalism such as Amazon, depend on strong economic planning to micromanage logistical supply chains, worker supervision, and ultimately allocate resources. The free market ideal of price signals for a more libertarian-style of management, best illustrated by the recent failure of Sears, hardly work to produce optimal economic outcomes for anyone. Realistically, the “successes” of capitalism have strayed far from the laissez-faire ideal and have practically taken up economic planning.
Walmart expands on ‘Thing 19’ of Cambridge economist Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism. In this short chapter, Chang also makes the similar argument that capitalism depends on economic planning. Both books refer to Herbert Simon’s 1991 article, “Organizations and Markets”, which takes on the perspective of a hypothetical Martian observing the Earth economy. A Martian could plainly see that Earthlings don’t live in a free market economy. If Martians represented firms with the colour green and markets by the colour red, Simon argued, they would see ‘large green areas interconnected by red lines’ rather than a ‘network of red lines connecting green spots’ that would be expected under capitalist systems.
Behemoth corporations with private monopolies/oligopolies in liberal market economies and market coordination between these large firms flavour the varieties of capitalism. Planning makes markets work, but a market dominated by private sector planning without democratic control over planning via the state limits the theoretical distributive power that the ‘invisible hand’ is supposed to provide and gives way to extreme wealth accumulation.
Planning was once assumed unfeasible in earlier economic thought because of the sheer amount of information needed to manage change and reactions, and so some economists (leftists and conservatives alike), thought of price signals as the best tool for making market adjustments. They couldn’t imagine the advent of computing power and vast telecommunications network that distribute data around the world at the speed of light.
Today, recorded data is continually produced by workers whose labour is increasingly automated, and by consumers themselves drawn by cheap prices, illustrating accurate and up-to-the minute statistics on supply and demand. Through algorithmic processes, managers and owners of big companies coordinate market actions through forecasting and planning, dominating competition with their monopolies over information. Phillips and Rozworski point out that where economic planning was ignored, there were pronounced market failures.
Where Walmart does a better job than 23 Things is in not neglecting the historic economic power of the Soviet Union. The USSR is everyone’s go-to example of why planning never works, despite all other evidence demonstrating the contrary. Chang also uses the Soviet example to argue why markets are still the best way to organize the economy, but Phillips and Rozworski don’t ignore the simple fact that for decades the USSR was the second largest economy in the world, measured by the favoured capitalist indicator of GDP. Going through the initial development of the Soviet Union’s planned economy, the authors put into historical context the causes of early market failures such as famines. The need for industrial catch up with western Europe, civil war, world war, urban and rural friction between elites, workers, and peasants, as well as centralizing Stalinism are just some of the episodic causes that can be blamed for the failures of Soviet planning. Yet if you put these crises in the context of a developing capitalist economy, you would see similar results.
Stalinization, however, may have been the greatest hindrance to economic planning, especially in peacetime. Fears of being purged (and actual purges) obscured information and data on the economy that Soviet planners were trying to collect and analyze. Often, economic planners were too afraid to provide evidence-based analysis towards their economic vision because they fell outside of Stalin’s expectations. Stalinist tendencies after his death also coincided with obscurities in data and information that hindered planning.
Information is key for effective economic planning and The People’s Republic of Walmart provides evidence that, when there is democratic control over the means of producing data, it can be a powerful tool for planners which can lead to better outcomes for workers. Phillips and Rozworski use the example of Cybersyn, sometimes described as Chilean President Salvador Allende’s “Socialist Internet”; a very early effort to build a distribution network of information for democratic economic management pre-dating the modern Internet.
It was through this early computer network that nationalized firms could coordinate production and workers’ actions, without the need for middle managers or too many bureaucrats. It was successful in developing greater economic democracy over resource development in Chile and foreshadowed the models of information and planning management that Walmart and Amazon would follow. Tragically, the full potential of worker control over data and network ownership could not be realized due to the 1973 CIA-backed coup that installed Pinochet and destroyed this system.
The People’s Republic of Walmart does more than prove that economic planning has worked, it also see the possibility of what can be achieved through it. Phillips and Rozworski call for economic planning to fight climate change for “Green New Deal” style policies. Planning is also essential for maintaining and expanding healthcare systems like the NHS, and for democratic control over information to reign in the private data monopolies that tech giants such as Facebook and Google exploit. Although the book lacks references, and some language in initial chapters may be inaccessible to those who don’t subscribe to dank Marxist meme accounts on Twitter, The People’s Republic of Walmart makes a strong case for seizing control of data and information by workers for greater economic democracy.
Clement Nocos is an Ottawa-based policy analyst and writer.