Socialism, markets and democracy

7 Pages·1990·0.544 MB·English

by  Amartya Sen

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Journal Title: The Indianeconomicjournal: thequarterlyjournal ofthe IndianEconomic
Association.
Volume: 37 Issue: 4
MonthlYear: April1990
Article Author:
Article Title: Sen,Amartya: SOCIALISM, MARKETSAND DEMOCRACY
Pages: 1
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THE INDIAN ECONOMIC JOURNAL
No.4
VOLUME 37 APRIL - JUNE 1990
SOCIALISM, MARKETS AND DEMOCRACYI
, By
Amartya Sen2
Socialist ideas have taken agood deal ofbeating lately. The new praise ofcapitalism
isbased bothon the successes of market-reliant economies and the problems of socialist
C(,'IUlluics. The retreat from the traditional socialist systems has gathered considerable
momentum already in the Soviet Union, eastern Europe and China. The changes have
.•tOme abOut largely through inlernal criticism and scrutiny inthese countries and have not
been imposed from outside. Indeed. what must be particularly disturbing from the
sOcialist perspective is the fact that the reverses in the battle of ideas are at least as great
as1.boSein the realm of institutional practice.
• . And yet the basic issues insocialist beliefs have rarely beenre-examined explicitly
inlhe contemporary disputes. Socialist ideas have been mauled more by the experience
ofuncomforlable and embarrassing facts than by reasoned analyses of diverseexperi-
cAces
and their relevance to fundamental soc~alist ideas. The problem is made more
ctitrlCUll by the confounding of ends and means In the political literature, including the
.SOCialistliterature, making ithard to distinguish fundamental socialist ideas from the
instrUmental claims contingently associated with those ideas. This paper is aimed at
sorting
out a few of the basic distinctions.
Market vis-a-vis Democracy
In the reforms that are being introduced inthe USSR, east Europe and China, two
distinct issues have oflen been considered together, viz, (l)the use of markets, and (2) a
1. Presidential Addressattheannualmeetingofthe IndianEconomic Association inTrivandrum,
on December 30, 1989.
2. Amartya Sen isLamont University Professor atHarvard University andHonorary Professor
.8tDelhi University.
1
.2 THE INDIAN ECONOMIC JOURNAL
democratic political base. In fact, the two are often seen asconstituting an indivisible
programme. But democracy and the useof markets raise verydifferent types of consi-
derations andcannot buthaverather different status insocialevaluation. Indeed, thereis
even a basic contradiction in seeing both as fundamental requtrements. If there,is
democracy, thenitisuptothepeople todetermine whetherornot(andtowhatextent) to
usemarkets.Itwouldbecontradictory toleavethechoiceofinstitutions tothepeople,and
atthesametime,topre-close thatchoice byinsisting thatthemarketformoforganization
be, in fact, chosen. If democracy is to be an irresistible force, then the market system
cannot bean immovable object.
That conflict need notbeentirely theoretical.even though itisquite possible that
inmanycircumstances ademocratic deeision procedure willindeed leadtothechoiceof
market forms(at leastagreater uscof markets than hasbeenthecase in,say, theUSSR
and east Europe). There are circumstances in which the absence of conflict cannot be
presupposed. A good example is China since the economic reforms of 1979. There is
considerable evidence that the wholesale introduction of the markel-based "responsi-
bility system" in China has, on the one hand, provided good economic incentives for
agricultural production, andontheother,deeply undercut theorganizational support and
financial securityofrural healthservices. Justwhenagricultural output hasboomed and
GNP growth stimulated in the years following the reforms in 1979, mortality rates in
China have alsogone up andlifeexpectancy atbirth hasdeclined between 1979and the
mid 1980s.ThisisbroughtoutbothbyChineseofficial statistics, andalsobyestimations
.byindependent scholars, suchasJudith Banister, AtharHussain andNicholas Stem, and
others. Indeed, it appears that the Chinese mortality rates since the market-oriented
reforms havebeenconsistently higherevery year thanthey werejust before thereforms
in 1979.While thereare several causal factors involved inthisdevelopment (including
thecompulsory popUlationcontrol policy inChina), thedecimation ofChina's commu-
nalhealthservices intheruralareasiscertainly acausal factorofgreat importance. That
decimation basbeendirectly linkedwiththebigpushtowardsmarket-based allocation in
the Chinese rural economy. leading inter alia to a dramatic reduction of public health
servicesandcommunal medicalinsurancefortheruralpopulation. (JeanDrezeandIhave
discussedthisquestion insomedetailinourforthcoming book,HungerandPub lieAction,
tobepublished byOxford University Press.)
How was itpossible todoaway withsuch acrucial comributor to health security
in China without the affeclCd public vetoing such a change? How come the rural
population didnot insist that thedomain of themarket economy notbeextended so far
astocompromise suchavitalfeatureofSocialsecurityonwbjchithadcome torely'!The
fact isthattheChinese people could nothave blocked such amove by thegovernment. f
The decision came largely fromabove. Just as in ]958-61, during theChinese famines ".
(inwhich itisnowestimated onthebasisofofficial statistics thatbetween 23to30million
people had died) the population\at large did not have the option of changing Chinese
official policy thatdirectly exacerbated thefamine, similarly during themarket-oriented
reforms of1979thepopulation atlargehadlittlesayonwhatsocialsecurityarrangements
. /
VOLUME 37NO.4 3
not
should be maintained. Inthis sense, itisthe very absence of democracy that made the .
t:8dkalmarketi~ation of the ~uralChin~ economy easy to enforce.
h'- .
The need todistinguish clearly between the issues ofmarketization and democra-
tization isnotonly important intheory, but can also becrucial inpractice. Itis,ofcourse,
possible that greater democratization will often lead togreater support forexpanding the
role of the market (as isclearly happening in Hungary or Poland or East Germany), but
dierelationship iscircumstantial and contingent.
Further, the choice of market asan institution ismain}yan instrumental one, white
die value of democracy is much more foundational than that The use or non-use of
mark,cLShas to be justified by the respective consequences, whereas the absence of
deroOcracY is an indictment in itself. Whatever may bethe status of the market mecha-
nism, itcannot beat par with that of democracy.
The market isoften seen as a vOling system. This in a sense it is, but with a very
unequal distribution of franchise. Indeed, the socialist argument for the abolition of
private property has much to do with precisely this undemocratic aspect of tbe market
distribution of franchise. Thus, there is a deep-seated conflict between unconditlonal
support for the market mechanism and basic socialist ideas. This is not the case in the
. ."lationship between democratic ideals and socialist goals.
Democracy a,nd Socialist Ends
The fact remains, however, that many socialist countries have had quite a terrible
record of undemocratic practice. Although the word democracy has always remained in
favour (even in the'writings of Joseph Stalin), the institutional structure and political
.practice were often anything but democratic. While there arc also excellent records of
socialist support of democratic institutions in many countries (e.g., in Scandinavia, and
also in India, including by the major communist parties), the history of the relationship
,between socialism and democracy isquite acheckered one. The ambiguity and opacity
ofSuch phrases as"the dictatorship of the proletariat" and "democratic centralism" have
contributed greatly tocombining antidemocratic practice with democratic rhetoric. It is
not surprising that in nearly all the countries governed by communist parties, popular
demands for democracy have gathered momentum (wbetheror not they have been mel by
bulletS, as in Beijing or Bucharest), But even within the Marxian intellectual traditien
there have been strong voices (Marx's own, Rose Luxemburg's, Antonio Gramsci 's and
Olhers) in favour of asserting basic institutional forms of democracy,
Some of the themes that have come to the forefront at this lime through protest
movemenL", were discussed and defended eXp'l_icitlyintheclassic Marxis; lucrature. Just
lOgive. one example, .~o~c Luxemburg bad the following to say on the monopoly of
~···~!iticalp<)worof the party: ,
.
,
4 TilE INDIAN ECONOMIC JOURNAL
"Freedom only for the supporters of the government, only for the members of one
party-however, numerous they may be- isno freedom atall. Freedom isalways
anexclusively forone who thinks differently. Not because ofany fanatical concept
of 'justice' but because all that isinstructive, wholesome and purifying inpolitical
freedom depends on this essential characteristics, and its effectiveness vanishes
when 'freedom' becomes a special privilege."
(The Russian Revolution, Chapter VI)
This is not the occasion to try to unravel all aspects of the relationship between
socialism and democracy, which has many facets. But it is important here not only to
distinguish the issue ofdemocracy from that of markctization, but also to emphasize the
cole of democracy in socialism as a central issue in the reassessment of socialism. To
recognize thisisnot thesame asdisputing Marx's belief thatformal political equality will
not automatically lead toanegalitarian distribution ofactual political power inasociety
with great economic inequality. Marx was right to be sceptical. But questioning the
SUfficiency of political equality does not amount to disputing its necessity. Support for
substantive democracy docs mili141LaCgainst inequalities ofwealth (and against the class
division between the owners Hoddispossessed), but it docs not militate infavour of
inequalities of political privilege.
Markets asInstruments
Toemphasize thepriority oftheissue ofdemocracy and thesubsidiary nature ofthe
use of the market should not be seen .IS "slighting" the market issue. Murkctscan he
powerful institutions with far-reaching consequences, and therole of the market mecha-
nism .in socialist SYSLCmSmust be seen as an important instrumental question. The
incen(lve advantages ofthemarket mechanism, inaddition toit')informational economy.
are sometimescontrasted with thedisincentives ofsocialist economic organization. Thm
contrast, taken inthis simple form, isdeeply misleading, since asocialist economy isfree -
to usc or not usc the market mechanism consistently with public ownership.
The question of incentives was extensively discussed by Marx himself in his
Critique ojth« Gotha Programme (leading tohis famous dcfenceofwage payments inline
with productivitics, inearly socialist organization). Infact, the formal exploration of the
incentive structure and the efficiency of the market mechanism owes agreat deal 10the
pioneering writings of socialist economists, including among others Oscar Lange and
Abba Lerner inthe 1930s(the definitive exploration of this question by Kenneth Arrow
and Gerard Dchrcu came later). The usc of markets isacentral instrumental question in
socialism and hasbeen seen assuch. Itcalls for undogmatic consequential analysis of the
results of using markets.
As it happens, the formal economic literature on the market mechanism has also
brought out the limitations of that instrument when itcomes to the allocation of"public
VOLUME 37 Jl;O.4 5
,i9Qds"alld of commodities yielding large "externalities" (both Paul Samuelson and
Kenneth Arrow have investigated these issues).The medical reverses inpost-reform rural
:Qin"
with the reduction of public medical insurance, discussed earlier, are not entirely
'out of line with standard economic theory, as analysed by Arrow and .olhers.. '
Given the limitations of market-based allocation of health services, education and
SillCialsecurity, itisnotsurprising that the market-reliant economics, even when very rich,
f~uently have lower achievement interms of standard indicators of quality of life than
Joorereconomies making better useofpublic delivery ofhealthcare, education and social
iasuraDce. Contrasting the experiences of China, Sri Lanka, Costa Rica with those of
BraZil, Oman, South Africa interms ofsuch indicators aslife expectancy clearly bring out
"cbe advantages of public delivery and social security measures (successfully USl'D in
f~r countries) .ovcr greater reliance on the market system (as in the laucr countries,
with lower "quality of life" despite higher GNP per head). Even the much-praised
achievements of the market based success stories of South Korea, Hong Kong and
Singapore can be shown to have been based on using the fruits of economic growth
(stimulated by the market, along with public planning) for public delivery of vital
necessities (going well beyond the market).
Insocialist economies as wellascapitalist countries, the reach and limitations ofthe
.mJlLrKt:;t.mechanismhave tobe undogmatically investigated through consequential unaly-
While the role of the market mechanism will certainly bevery much greater in the
USSR and east European countries than has been the case earlier, the question of what
~ce tochoose has tobekept firmly inview not toend upmaking theopposite mistake
.from that made inthepast.What isneeded above all isademystification and profession-
a1ization of the question of the use of markets,
To conclude, in the reassessment of socialism that is currently in progress (and
,u.rhii'~hwill undoubtedly gather furthennomentum), itisimponantto distinguish founda-
issues fromcontingent, instrumental ones. To treat theuse ofthemarkct mechanism
'i,,+jlc.',ii,/"i'
the foundational question of social istdemocracy isaserious mistake. M~lfkNs
iDStilUtions have many advantages and quite prominent disadvantages. and the
choice of markets in some spheres but not in others is a good subject for
~.lflilffi(~ntal analysis enlightened by professional investigation. It is U.''; naive to sec
'ilWdetsas ageneral threattosocialism as itistosec itas asure-fire recipe for efficiency.
In contrast, the issue of democracy is central. This includes not merely the well- .
importance of abolishing the class-dichotomy between the owners and the
}_"".. _i·7I'tt
.di1n.xJ'SS(~SSled, but also the relatively neglected question of political equality and shared
fre:ed'oms. The underemphasis ofthese issues inthe socialist lucrarurc has been aliabiIiIY
,'iI1"lDIII\UiJl;l. Indeed, as Ihave tried toargue earlier inthis paper, itisprecisely the ne.gk~l
6 TIlE INDIAN ECONOMIC JOURNAL
of democracy in China that has made itpossible for its government to over-extend the
market mechanism in the ruraleconomy after the reforms of 1979, leading to a serious
deterioration of commtfnafme~~iCCS, ultimately affecting the general health and .
longevity of the population (\li,Nl~vislhclligh levels already reached),
The climinalion~or~lilicul inC(lu~IiiY·in--Social~' systems is an important chal-
Ienge, Michael ~ICckj had once remarked. "Here in Poland we have successfully
abolished cupiuilism; an we have to donow istoabolish feudalism-.J·;-~lt piece orlcvay
points lO'_Vaids afoundational question lhat socialistreassessment must sel10usly ,~~drcss.
'-,
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