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Debate on Market Socialism

Debate on Market Socialism

Alec Nove

Beyond the Market? comments on Boris Frankel
The editors have asked me to comment on Frankel’s Beyond
the State?, since Frankel devotes several pages to a criticism of the sort of arguments which I advanced in my
Economics of Feasible Socialism and in some other works.

The key issue is evidently the relationship between socialism and the market mechanism. Frankel also criticises the
ideas of many other thinkers, and -challenges some aspects
of Marxist orthodoxy. Let me say at once that I found his
work refreshing, vigorous and honest.

He devotes much space to a CrItIcIsm of received ideas
about the state, and he is right to do so. Its role in modern
societies, in East and West alike, is very different indeed
from the ‘orthodox’ models, both of Marx and of the
‘ideal-type images of capitalism’ of ‘Chicago’ laissez-faire.

The traditional distinctions between the state and ‘civil
society’, between base and superstructure, are in urgent
need of drastic amendment. Frankel rightly focuses on
many confusions: should (for instance) a movement such as
Poland’s ‘Solidarity’ be demanding freedom of social institutions from the state, or control by society over the
state? What role should the state, and state planning, play
in models of socialism which stress the autonomy of selfmanaged productive units? Perhaps, as he claims, ‘stateless
socialism will probably only guarantee unfreedom and inequality.’ What, within any sort of class analysis, should be
the status of state employees, which in more developed
countries constitute a sizeable percentage of the total
workforce? Evidently, such categories as ‘exploitation’ and
‘surplus’ value do not relate to them. A large part of our
economy no longer fits into the Marxist division of it into
‘Departments I and II’. These and some other ‘sacred cows
of Marxian orthodoxy’ must be abandoned, argues the
author. It is not my intention to enter more deeply into
discussion of these matters, only to stress that Frankel is
fully justified in raising these issues, and does so in ways
which stimulate and inform.

as ‘productive’ any activity which generates surplus value,
but made a (to me) illogical exception of ‘circulation’. This
was a consequence of his insistence that the processes of
circulation do not add to value. This meant that, according
to the orthodox tradition, private employers in the ‘sphere
of circulation’ do not exploit their employees, that they
live on the surplus generated in the productive sphere.

Surely this ‘sacred cow’ is also in urgent need of quick and
painless liquidation? It is noteworthy that the Soviet theorist, Isaak Rubin, includes in his tightly-argued work on
Marxian value theory a remark to the effect that he does
not agree that labour in circulation does not create value;
yet Rubin is in other respects a close follower of Marxist
orthodoxy. Barazov, a follower and translator of Marx,
criticised his illogical and contradictory bandJing of ‘the
sphere of circulation’ already in 1899. Let us make a list
of a few familiar ‘circulatory’ employments: shop assistant,
travel bureaux, estate agents, consultancies, building contractors, advertising offices, etc. The importance of these
and similar activities in our society are well understood
and stressed by Frankel, but it leads him to the conclusion
that ‘most capitalist enterprises do not extract surplus
value, but circulate commodities and provide services’ (p.

116, his emphasis), and do so at a profit. This makes no
sense to me. If the owner of an estate agency or travel
bureau makes a profit, and does not ‘exploit’ his own
employees, then whence the profit? Are he and his employees living on a surplus created by productive workers?

Which productive workers would these be, and why? This is
an unsustainable distinction. Marx’s identification of productive labour with exploited labour led Bukharin to quip
that a prostitute working on her own is unproductive, and
one employed for profit in a whorehouse ~ productive. I am
not enamoured of the distinction, but let us be consistent:

anyone employed to provide goods or services for sale by
someone for that someone’s profit should be considered by
sens.ible and non-dogmatic Marxists to be generating a surplus appropriated by his or her employer, whatever be the
nature of that employer’s activity. We shall see that this
confusion will make its reappearance in Frankel’s view of a
socialist economy.

Who is ‘productive’?

This reader was, however, worried about his retention of
one element of the dogmatic tradition: the treatment of
‘unproductive’ (or non-surplus-generating) labour. The problem here is not one of the typical employee in the public
sector: obviously, a hospital nurse, probation officer, city
architect, street sweeper, tax inspector, do not generate
surplus value in any sense of the word, and their incomes
evidently arise out of taxation. Marx, as is known, treated

Plan versus Market
However, my main bone of contention is the plan versus
market dichotomy, which Frankel discusses with skill, making a real and honest attempt to come to grips with the
essential points in his argument. In this respect he differs
from some incurable dogmatists, for whom the word ‘market’ sets up a sort of ideological-emotional storm, with the

result that slogans replace thought. Yet he still, in my
view, comes down on the wrong side of the fence. Possibly
this is because he does not fully grasp the nature of the
economic problem in its quantitative, qualitative and technical aspects.

Let me divide my counter-argument into several parts,
and begin with the vital issue of scale. Frankel is envisaging a modern industrial society, in a large country. So we
have to contemplate (say) a hundred million economically
active persons, working in perhaps 100,000 enterprises and
institutions of many kinds, providing thousands of different
kinds of goods and services, which will run into many millions if fully disaggregated (e.g. brown boots of size 9, different makes of carburettors, inoculation serums, etc. etc.).

The provision of each good and service requires that a
number of material inputs be provided and assembled. The
tasks of coordination, of ensuring that means are made
available to reach specified ends, not to speak of determining what these ends should be, are of truly gigantic dimensions. It is not only as a joke that the Soviet academician
Fedorenko once remarked that a disaggregated, balanced,
coherent plan for next year, based on a full analysis and
checking of the needed information, might be ready in
30,000 years’ time, and this with the help of computers!

Soviet plans are frequently unbalanced, lacking coherence,
aggregated, because next year’s plan must be ready next
year. The democratisation of political system, while highly
desirable, would not make the task of plan-coordination any
easier. This task is hierarchical, not because the hierarchs
wish it to be so, but because the functional necessity of
marketless planning makes it so. Also, in the real capitalist
world, not all decisions are left to market forces: many are
administered, within hierarchically structured corporations.

democratic will to ‘translate’ itself into micro-economic
operational instructions? How are the extremely varied
needs of millions of individuals to find their effective expression? If these needs were to be identified, whose responsibility would it be to ensure that they were met, and
that the means to meet them were provided to the hundreds of thousands of enterprises of all kinds whose job it
is to manufacture, build, process, transport, inform, distr ibute?

In this context, the notions of ‘conscious, deliberately
planned (non-market) exchanges’ (p. 240), or ‘parallel pyramids (sic) of local, regional and national workers’ councils,
consumer councils and industry councils ••• along decentralised lines but linked vertically within federal structures’ (p.

241), or ‘central planning ••• based on producers acting as
social individuals ••• based on labour-time accounting’ (p.

245) all seem patently inadequate. Where is the decisionmaking power to lie? Who can enforce decisions, upon
whom? Is there not, underlying such phrases as those just
cited, the notion that under socialism people will see dearly what is needed (and the order of priority of the satisfaction of needs), will somehow discover the best way of
providing for these needs, and be quite dear about their
own role, as individuals, without any binding instructions?

For reasons expounded at length in my book, this is an unreal utopian fantasy, so long as there is relative scarcity
and therefore opportunity cost. I argued that this is not a
question of counterposing individual and social: we all, in
our most personally-unegoistic moments, tend to identify
with the needs we know, for which we feel responsibility.

We cannot, in normal circumstances, be aware of the vast
number of alternative uses to which resources for which we
ask might be put. Anyhow, the thousands of units responsible for actual production of and investment in energy,
say, or footwear, must be informed by someone what to do,
whom to supply, from whom to draw their supplies. Allocation by planners seems the only alternative to sale-andpurchase, i.e., to market relations of some kind.

Verbal exchange?


How is all this to be ‘decentralised’? Regional associations
can identify the needs of a region, but, unless one imagines
regional autarchy, it will still be necessary to incorporate
the satisfaction of these needs in the plans of enterprises
located in other regions, and they in their turn will require
inputs from sources of supply outside their region. There is
a potent centralising logic about the marketless economy.

The powerful critique of ‘really existing socialism’ by
Feher, Agnes HelIer and Markus is entitled Dictatorship
Over Needs. It is true that the political system in the USSR
is that of a dictatorship exercised by a single party, and
that the people’s votes do not determine economic priorities. But, firstly, no Marxist should be surprised if the political system reflects the hierarchical nature of its economic base, and, secondly, how precisely is the people’s

Ah, argues Frankel, to produce for exchange does not
amount to a market. But what sort of exchange has he in
mind? Let us see things from the angle of v ision of the
producing unit. Their products could be oil, shoes, sulphuric
acid, restaurant meals. Whom are they to exchange these
with, and how? Surely not by some primitive and clumsy
barter mechanism? Why was money invented all those thousands of years ago? In Marx’s utopian vision there is plenty
to satisfy any reasonable need, and the productive units
(unproductive units too) simply draw what they require
from the ample storehouses, with advance knowledge of the
requirements for their goods and services. This is at least a
logically coherent fantasy. Frankel’s is not. How on earth
is one to fit ‘conscious deliberately planned exchanges’ into
the reality of everyday life? You run a restaurant, one of
thousands. You need a hundred and more ingredients,
ranging from sausage-meat to mustard, not to mention
frying-pans and fuel. Since the customers have choice, you
should try to vary the menu with their preferences in mind.

You can buy these inputs, or alternatively a planning authority authorises each procurement decision, while simultaneously instructing your suppliers to supply you. So long
as there is opportunity-cost, i.e. so long as there exist
some mutually alternative uses for resources, it is always
possible that some person or institution will not be supplied, unless a decision is taken by someone who can ensure
that it is implemented. This ‘someone’ must have knowledge
of alternatives and of need. ‘Implementation’ could mean
either contractual obligations or an administered duty,
these being, if necessary, enforceable. One cannot have a
democratic vote (where? by whom? why?) to abrogate a
contract or a delivery obligation, even if it happens to be
inconvenient to some of those involved. Of course one
hopes that a sense of responsibility to one’s fellows will
cause people to observe the rules without any sanctions,

just as I try to deliver this Ms. to you in time even though
you cannot sue me if I fail to do so. But it would be wrong
and irresponsible to base one’s model of a socialist economy on the assumption that everyone wil1 always know
what it is right to do and will then do it. The more so
because the immense complexity of a modern economy prevents most people from knowing what is the most expedient
action. To take any decision one needs information, and to
act upon it one requires both motivation and means.

Money and choice
Let us approach the same issue in a slightly different way.

You are now a local authority, or a group of citizens who
have formed a producers’ cooperative. You observe that
some good or service seems to be either in short supply or
deficient in some desired quality. You wish to act upon
that knowledge. To do so you must be able to obtain a
number of material goods. Any acceptable form of socialism
requires – in my mind – that citizens be free to decide to
supply their fellow-citizens with any non-noxious goods or
services, and this requires that they be able to obtain the
necessary means. How, other than by purchase? Why not
defer to ‘producers’ preferences’?

Citizens as individuals, or as groups, are consumers of
goods and services, as well as producers. ‘Producers’ preferences’ must, of course, relate to how one produces, not
what one produces. In the latter respect the user’s needs
and preferences are primary. How, should and can they be
expressed? The workforce will need some means of exercising choice. Is there any practicable or desirable alternative
to paying them in money? It makes no difference, of
course, if one calls it by some other name, such as a
‘token’, so long as it does provide choice, and permits the
expression of intensity of desire, which is measured by the
willingness to spend one’s income on specific goods or services. This seems elementary. The French radical thinker,
Castoriadis, who views markets with evident distaste, saw
no alternative to aJJowing citizens to spend their incomes
as they think fit; and he noted that in this area one cannot
have decision by majority vote, since minorities are also
entitled to claim their share of resources (e.g. for works by
Shostakovich, long skirts, pickled herring, or whatever).

Yet here is Frankel speaking of a ‘transition from wagelabour to payments in kind’ (p. 266). Socialist ration books?

Non-transferable tokens earmarked for specific items? If I
am anon-smoker, am I to go to a consumer supply office
and ask for permission to exchange these for extra coffee
or liquor tokens? This is a nightmare, which would surely
be unacceptable to any sensible worker. He or she will feel
instinctively that, when goods and services are ‘free’, one
takes what one is given.

Or let us consider a different but related point.

Suppose that citizens see a profitable opportunity to supply
some good or service, or to buy and resell something. They
would need, in Frankel’s world, to be prevented from doing
so by the constant vigilance of a ‘socialist’ police. True, he
does, on page 239, accept the temporary existence of ‘a
small private sector of (market-based) simple commodity
exchange’, based on the family, but insists that this should
cover ‘a very small proportion of total output’ (p. 239).

Presumably the thought of someone actually employing five
people he would regard as intolerable; he would call in the
police. They would be then very busy combating the daily
or hourly resurgence of the petty bourgeoisie. This is a
prospect that appals rather than appeals.

The necessity of markets
It is not enough to dislike the market. It is indeed necessary to be aware that its operation can have some undesirable consequences. It is just that all practicable alternatives are worse. I agree entirely with Frankel that ‘socialist anarcho-liberalism’, which ignores the vital role that


must be played by the state, is a gravely deficient concept.

Together with others whom he labels ‘market socialists’, I
envisage a model in which plan and market coexist. It is
not either ‘democratic central planning or market socialism’

(p. 228, my emphasis). These are not alternatives. In modern capitalism one has both market relations and administered hierarchical subordination, and the choice between
these methods (and such intermediate categories as subcontracting) depends on the nature of the sector and of the
decision. So under a realistically conceived socialism one
can and should envisage major investment decisions (e.g. in
the energy sector) to be taken at the centre, while central
planners should not be involved in decisions on the product
mix in the textile or farm-machinery industries, let alone in
the acquisition of sausages or saucepans by restaurants, or
the allocation of sulphuric acid to a chemicals factory.

Frankel keeps imagining that the ‘democratic central plan’

should take priority over the sectional interests expressed
by groups of producers or consumers, in pursuit of the
‘general interest’, and also of equality.

On equality more will have to be said. But we must
have clarity about what sort of conflict between partial
and general interest Frankel has in mind. That such conflicts occur and will occur is, of course, true. Congestion,
polution, regional-Iocational policies, other external economies and diseconomies of many kinds, are indeed important
issues, and I am well aware of them. However, to take into
account all external effects is a counsel of totally unrealistic perfection. In no economy can this be done without
intolerable cost and equally intolerable delay. It is necessary to identify likely areas of decision where externalities
will be significant. One then introduces regulations (e.g. on
pollution, location, etc.) within which market forces can

Thus one could ban industrial projects from
Mexico City, Paris, Budapest, Moscow, and create favourable conditions for investment in provincial areas, without
eliminating economic-monetary calculation. Similarly, one
can (one should) exempt medicine and education from market criteria, and stilI have market forces active in guiding
the providers of medical equipment, school .desks, laboratories. Frankel is concerned that this will be incompatible
with the degree of necessary central planning. I agree that
there can be tensions at the ‘join’ between market and
plan, but there need be no insoluble conflict, so long as it
is appreciated that the market will provide essential information to the planners about the needs of producers and
consumers, and that it will usually be the planners’ duty to
respond, unless there are specific reasons to the contrary.

Thus suppose that analysis of the market situation (conjuncture) leads to the conclusion that more sulphuric acid,
winter overcoats or the collected works of Shakespeare are
needed, and that this caBs for investment to expand the
capacity of the chemical, wool-textile and printing industries. In the name of what principle should the ‘democratic
central planners’ refuse to act accordingly? They could
indeed direct the investments to an area where there may
be some unemployed resources. Be it noted that in the absence of a capital market, major investment decisions
would ‘belong’ to the central planners. Yes, the information
provided by market analysis is often imperfect, but even
more imperfect are any known alternatives. Frankel refers
to ‘desynchronisation of Processes’ in our society, but he
agrees that mistakes and imbalances cannot be excluded
under socialist planning too. Perfect planning is as unattainable a goal as a perfect market. His critique of ‘market socialism’ seems to drive him towards a high degree of
centralisation. To repeat, I accept that the state would
have to play a vital role. In my book I cited Tinbergen on
this very point: ‘It is highly improbable that the proponents
of a laissez-faire theory of self-management are right. It
can be convincingly shown that in an optimum order some
tasks must be performed in a centralised way … ‘. With this
I agree strongly. But Tinbergen would doubtless deny that
this remark was intended to be an argument against the
extensive use of the market mechanism. Self-management
without any market can only be spurious. Self-management
with no planning and no state would come quickly to grief,

and indeed speedily lead to intolerable inequalities and

Winners, losers and rough justice
A market implies and requires a degree of competition.

There will be gainers and losers. There will be some inequality. But at least in theory it is possible to make corrections. Some inequalities are plainly due to what could be
described as natural causes: advantages in soil fertility,
location, accessibility, modernity of equipment, etc. It is
perfectly possible to eliminate these by some species of
rental payments or similar forms of transfer, and this has
been repeatedly proposed by Soviet reformer-economists.

This would leave differences due to skill, effort, ingenuity,
knowledge of market conditions (and, inevitably, also luck).

One cannot eliminate these without eliminating material
incentives. It is also true that successful self-managed and
cooperative enterprises, and any private enterprises or
craftsmen, might make a lot of money if they take advantage of shortages; but such shortages would be due to past
error and omission (notably by planners), and the high profits would be a temporary quasi-rent, which would stimulate others to provide more of the goods and services in
question, while providing signals to the planners. All such
excesses of inequality can be moderated by personal and
corporate taxes, but, true enough, inequalities cannot be
eliminated, any more than one can decree equilibrium in a
dynamic economy.

Competition is non-socialist? Please, then, imagine user
or consumer choice without competition between suppliers.

If a customer can say: ‘I am not satisfied with A, I prefer
to obtain my supplies from B’, then A and B are in a competitive situation, are they not? One cannot eliminate competition without eliminating choice.

Frankel rightly raises the question of employment and
unemployment. Unemployment is one of the problems which
-::he planners must indeed handle. Left totally to itself, the
market (especially in this age of computers and automation)
may lead to highly undesirable consequences. But here
again the intensive plan can include incentives for employment, as well as the undertaking of labour-intensive activities of many kinds, ranging from beautifying the landscape
to kindergartens. A problem indeed, but why an insoluble

producers’ (and with them all other working citizens), as
well as producti~e enterprises, will ‘bear the burden of
carrying the rest of the population’ (themselves too!), but I
strongly suspect that ordinary citizens will be much less
attracted to these extremes of levelling than are left-wing
intellectuals such as Frankel. A balance can be struck
between the need for redistribution and the need for incentives. In the process, the words ‘direct producers’ will
surely make less and less sense. Why is a worker in a factory making hair-clippers productive and a hairdresser is
not? Far better make the distinction between those who
provide goods and services for sale or exchange, and those
who work in institutions that must be maintained out of
some form of taxation.

So, to conclude, while a strong state and a central plan
would be needed in any socialism that I can conceive of, so
would autonomous producers whose link with their customers and suppliers would be contractual, thus of the market
type. OK, this will raise problems and some predictable
fr ictions and contradictions. But the al terna tives are either
worse or impracticable.

Finally, may I be allowed one personal complaint. While
in Frankel’s text my ideas are criticised in a scholarly and
reasonable way, in a footnote on page 314 I am reproached
for my ‘vulger critique of Habermas’. Really? My offence
was as follows. In a paper which discussed the issue of
realistic criteria, and which formed part of the Festschrift
for Richard Lowenthal, I cited his critique of Habermas’s
conception of ‘substantive democracy’, which he (Lowenthal)
regarded as ‘utopian-idealist’. I commented that ‘Habermas
would presumably disagree, and the argument would then
turn on the possibility of alternatives, i.e. in a sense on
counter-factual history’ (Political Economy and Soviet
Socialism, p. 219). Why is this a ‘vulgar critique’ on my
part? Lowenthal can speak for himself, but I had made no
critique at all, vulgar or otherwise.

Direct realism
One other problem that looms large in Frankel’s account
seems to me to be largely unreal, a consequence of the
error analysed earlier concerning the distinction between
productive and unproductive labour. Most people in a
socialist society cannot be ‘direct producers’, he writes.

Indeed, most people in advanced capitalist societies are not
‘direct producers’ either, in the narrow sense adopted by

How should one finance ‘non-surplus-valueproducing workers’? He implies that they must all be
‘carried’ by productive enterprises, i.e. be maintained out
of the surpluses they generate, in a market-socialist model.

But surely one must distinguish between paid and unpaid
services. A great many so-called unproductive services are
and will be paid for by the individuals and institutions using them. This would apply to hairdressers, dry-cleaners,
consultants, travel agents, shops, quantity surveyors, building contractors, authors, singers, telephonists. Of course,
some important sectors do and will provide free services:

staffs in medicine, education, public parks, social security,
state and local administrators, judges, traffic police, and so
on. But will they necessarily be much more numerous than
they are today in Western Europe? The question of what
services (or goods) are to be supplied free is a matter
which would require democratic decision. One can imagine
an extreme egalitarian model in which nearly all needs are
provided without any payment, and the citizens would
receive some sort of pocket-money to spend on personalised luxuries, or in the very limited market sector which
Frankel is prepared to tolerate. Then indeed the ‘direct



The Historical Obsolescence of
Market Socialism
a reply to
Alec Nove
Saris Frankel

I am very pleased that Alec Nove has responded to the
criticisms I have made of market socialism and what he
calls ‘feasible socialism’. It is only through a frank and
honest exchange of views on the respective merits and
weaknesses of central planning or market socialism that the
cause of socialism can be advanced. Both Nove and I share
a profound dislike for the way that Soviet central planning
works. Yet I regard Nove’s ‘feasible socialism’ as a response to developments in Eastern Europe, rather than an
adequate alternative to existing capitalist societies. I will
therefore attempt to show why ‘feasible socialism’ is not
only too conservative, but historically obsolete.

Beyond the State? Summary
In the third part of Beyond the State?, I criticise various
alternative economic programmes as well as long-term
images of socialism. Basically, I support some of the specific initiatives proposed within alternative programmes, but I
do not believe that these attempts to combat unemployment
and cuts in social welfare etc. are compatible with a
smooth transition to socialism within a capitalist society.

They are necessary antidotes to capitalist restructuring,
but must be freed of the naive belief (held by Bennites,
Eurocommunists and Eurosocialists) that these alternative
economic policies will resolve massive social problems in
the mutual interests of both non-monopoly capitalists and
the working class. In pursuing anti-capitalist short-term
policies we must become aware of both the impending instability of these alternative economic programmes, and
also their explicit connection to notions of market socialism which I believe are historically obsolete – given the
nature of contemporary social, ecological and other crises.

In this respect, Nove’s ‘feasible socialism’ shares common
problems with alternative economic programmes even
though there are significant differences between the former and the latter. In subsequent chapters I go on to analyse the major weaknesses of stateless socialism (in its
anarchist or self-management forms), market socialism and
decentralised planning without market mechanisms. I explicitly argue against those who believe in a non-hierarchical, non-wage-Iabour economy. I also argue against people
such as Nove and Brus because of my doubts concerning the
possibility of maintaining the dominance of central planning
while market mechanisms govern a large sector of the
overall economy. While I see the necessity of market mechanisms in a small sector of the society, I believe that the
Brus and Nove models lead to the dominance of market
mechanisms or the reduction of central planning to the ineffective versions of indicative planning which have already failed in Western Europe (especially France). Finally,
I admit to being attracted to decentralised planning, but
explicitly reject the adequacy of Albert and Hahnel’s
‘parallel pyramids of local, regional and national worker’s


councils, consumer councils and industry councils ••• ‘, because of the need to also have strong central mechanisms
for redistribution and foreign relations. Nove creates the
misleading impression that Albert and Hahnel’s ‘parallel
pyramids’ is my position. In the interests of socialist pluralism, maximum equality and freedom, feminist and environmental values, I opt for democratic central planning based
on new socialist state structures at local and national
levels. I also advocate increasing payment-in-kind (while
still maintaining wages as the primary index), decentralisation to the extent possible with overaIJ central planning,
and an explicit commitment to semi-autarkic goals – given
the danger of supra-national political economic structures
to local and national independent democratic decisionmaking and ecological well-being.

In analysing the various conceptions of market socialism, central planning, etc., I changed my. mind several
times, first opting for one and then the other, agonising
over issues of equality, bureaucracy, national or international solutions and so forth. In my opinion, there is no
more sobering experience than to digest the limited literature on market versus plan and confront the painful reality
that all the books and slogans on freedom, morality, rights,
etc. have to be readjusted to the necessities of a political
economy under the conditions of scarcity. Because so few
socialists have bothered to discuss the critical issues which
Nove raises, our only practical examples are those perverted formations in Eastern Europe. But the problems
which we face in the West are in many respects qualitatively different from those currently troubling Communist
countries. Nove has not adequately distinguished the major
political and material differences between Eastern Europe
and OECD countries. In fact, Nove’s work is conspicuous
for its almost total neglect of the specific political situation in capitalist societies and the implications of the
latter for the construction of a socialist economy. In concluding that democratic central planning was preferable to
the other options, I was aware that central planning
brought with it major dangers and problems, e.g. the temptation of the central planners to usurp total power unto
themselves. But just as Nove argues that, despite the undesirable consequences of the market, ‘all practicable
alternatives are worse’, I argue that, despite the negative
problems associated with democratic central planning, all
practical alternatives are worse.

It is also important to state that Nove and I agree that
a major role will have to be played by new socialist state
institutions, that some form of hierarchical decision-making
process is unavoidable, that ‘plans’ and ‘markets’ are not
mutually exclusive ahistorical models, but exist in specific
historical combinations (e.g. in contemporary capitalist and
Communist societies), and that it is foolish to believe that
any plan or market can work in a perfect, trouble-free
manner. The differences between us have more to do with

political forms, socialist end-goals and evaluations of the
contemporary political economy of capitalist societies. All
these differences are implicitly and explicitly built into our
different approaches to central planning and market mechanisms. I will now take the opportunity of making these
differences more explicit.

Productive and unproductive workers
At the theoretical level, Nove criticises me for retaining
the distinction between productive and unproductive workers. He quotes my assessment that ‘most capitalist enterprises do not extract surplus value, but circulate commodi ties andprovide services ••• ‘, yet leaves off the vital
part of the sentence – ‘their rate of profit is not directly
determined by the diminishing pool of surplus-value, but by
the rate of wages and rate of taxes, and costs of means of
operation as expressed in real money or price terms’ (p.

116). Nove says that this makes no sense to him. ‘If the
owner of an estate agency or travel bureau makes a profit,
and does not “exploit” his own employees, then whence the
profit? Are he and his employees living on a surplus
created by productive workers? Which productive workers
could these be, and why? This is an unsustainable distinction ••• anyone employed by someone for that someone’s
profit should be considered by sensible and non-dogmatic
Marxists to be generating a surplus appropriated by his or
her employer, whatever be the nature of that employer’s

Why is the distinction between productive and unproductive workers so important? From Nove’s point of
view, my ‘unsustainable distinction’ reappears in my analysis of a socialist economy and leads to a narrow conception of ‘direct producers’ and all other workers. Nove
agrees that· in a socialist society there will be many services (e.g. education, social security, medicine, state
administration, etc.) which will be provided free of charge.

But why, he asks,
is a worker in a factory making hair-clippers productive and a hairdresser is not? Far better make
the distinction between those who provide goods and
services for sale or exchange and those who work in
institutions that must be· maintained out of some
form of taxation.

At last we come to the vital issues! What are the major
differences between capitalist societies, existing Communist regimes, and socialist alternatives in regard to the size
and nature of state sectors, forms of taxation,’ level of
population in paid employment, orientation of economy (i.e.

a semi-autarky or heavy integration with other economies)
and so forth? It appears to me that Nove not only lacks an
adequate explanation of the persistent crises in capitalist
societies, but is unjustifiably optimistic about ‘feasible
socialism’ resolving existing major problems.

In distinguishing between a minority of surplus-valueextracting enterprises and a majority of non-surplus-valueextracting private businesses (not to mention state sector

institutions), I was concerned to move beyond the old
mono-causal explanations of crises offered by orthodox
Marxists, neo-Ricardians and others. I argue that Electoral,
Production, Credit and Food Production Processe~ are subject to different forms of crises as well as ~avm? rep~r­
cussions on one another. It is precisely the hlstorIcal dIfferences between capitalist countries in relation to forms
of production, size and nature of state institutions, etc.,
which make some nations depend more than others on commodity production rather than speculative investment capital on tourism rather than international loans. If Nove
doe~ not understand why many private enterprises do not
directly depend on the extraction of surplus value, it is
because he does not appear to understand the concept of
exploitation as used by Marx. If we used Nove’s distinction
between ‘those who provide goods and services for sale and
exchange, and those who work in inst~tutio~s that must be
maintained out of some form of taxatlon’, It would be extremely difficult to answer satisfactorily such questions ~s
the following: Why is it that so many workers employed m
retailing, services, tourism, etc. are laid off when workers
in commodity production are sacked, or suffer reduced
wages, higher taxes or other reductions in disposab~e income? If tourists ceased to come from other countries or
parts of the same nation (where there is adequate employment, and therefore productive labour), who would consume
the local tourist attractions? If all workers produced a
surplus simply because they worked for a pr iya te fir~,. th~n
we would have long ago had an extraordmary CrISlS m
overproduction or, conversely, we would never have had all
the periodic crises within capitalist societies!


Despite all the problems with orthodox Marxlsm, I ~m
not prepared to abandon the distinction between productlve
and unproductive labour, especially as there is no alternative theory which adequately explains (a) the source of
profits; (b) why capitalists constantly attempt to extract
higher rates of absolute and relative surplus-value fr?m
certain types of labour; and (c) why these forms of mcreased exploitation are not implementable in non-surplusvalue-extracting businesses. A capitalist firm may try to
reduce the number of workers employed in sales, administration or security, or try to make these workers labour
more efficiently; but higher efficiency is not equivalent to
greater surplus-value production, just ~s higher profits can
be earned without any new value bemg produced. Nove
confuses the non-Marxian notion of exploitation with the
specific meaning which Marx gave to the extraction of
surplus-value. In Nove’s ethical use of the term, most workers employed in state institutions would also produce a
‘surplus’ simply because they are exploited, collec~ fees or
sell services, e.g. banking. However, Nove recognises t~at
most state workers in capitalist societies are unproductlve
(in both the Marxian and non-Marxian sense), yet he fails
to follow through the implications of market mechanisms
and state sector employment for capitalist and socialist
societies. If there are no differences between those workers who produce surplus-value and those who ~irculate,
guard, service or administer commodity produ.ctlOn,. then
any capitalist society should be able to survlve wlthout
commodity production simply because everyone could be
employed selling real estate or cutting hair!. Nove is really
quite inconsistent. On the one hand, he belIeves that everybody employed by a private firm produces surpl~s. val~e,
yet, on the other hand, he wishes to reject the dlstmctlon
between the production of value and non-value work as a
bit of Marxian dogmatism or metaphysics.

., .

Nove’s criticisms reveal a fundamental mabIllty to
explain the reasons why capitalist s~cieties. cannot .survive
simply by having people employed m servlces whlch are
paid for (e.g. janitors, dentists, prostitute~) •. As Marx ~ut
it ‘the fact that with the growth of capltalIst productlon
at’l services become transformed into wage-labour, and
those who perform them into wage-labourers, means t~at
they tend increasingly to be confused with the productlve
worker ••• ‘ . If not all people employed in the services
area produce surplus-value, it is. clear t~at. n~arly every
capitalist economy would not surVIve long If It lmported all


its goods, or if everyone was employed as a teacher, hairdresser, travel agent or soldier. In so far as Nove does not
appear to understand the dynamics of reproduction in capitalist societies, his conception of ‘feasible socialism’ must
equally be subjected to rigorous scrutiny.

For the sake of discussion, let me accept Nove’s rejection of the distinction between productive and unproductive
labour and see whether his preferred distinction between
‘those who provide goods and services for sale or exchange
and those who work in institutions that must be maintained
·out of some form of taxation’ overcomes major problems. In
a socialist society it is possible to imagine a whole range
of goods and services that wi11 be paid for by individual
consumers or socialist enterprises. Similarly, it is possible
to imagine that free services (e.g. social welfare) wi11 be
paid for via tax levies on individuals and enterprises, or in
the form of local or enterprise consumption funds. The
more that income maintenance and free services have to be
paid out of individual or local enterprise profitability, the
more social inequality wi11 eventuate, given the uneven
strength of enterprises within particular markets. But if
social welfare, education, public parks etc. are paid from
national taxation funds, this presupposes an overa11 plan or
conception of which goods and services are produced locally or nationa11y, which goods and services are imported,
what the demographic ratio is between people in paid employment and those in unpaid labour requiring income maintenance, which people are eligible for communal income
maintenance and which goods and services wi11 be provided
from communal resources such as tax levies. If Nove’s
‘feasible socialism’ is based on the widespread existence of
enterprises which operate according to the criteria of the
competitive market, then labour-saving devices, tax minimisation schemes, etc. wi11 govern these ‘socialist enterprises’, as profit maximisation and cost minimisation can
only be ignored if market mechanisms can themselves be
ignored, and most enterprises guaranteed survival by state
subsidisation. But if government subsidisation averts bankruptcy and unemployment, then the advantages of market
competition are eroded as workers fa11 back on national job
and income maintenance schemes. Nove’s ‘feasible socialism’ rests on the ability of the majority of ‘socialist enterprises’ to remain viable, generate sufficient revenue for
‘social wage’ goods and services, implement new technology
required by competing enterprises in other countries
(whether socialist or capitalist) and yet overcome the
massive legacy of unemployment and near-bankrupt welfare

Market Socialism a false alternative to Soviet Planning
Because it is politica11y unpopular to advocate central
planning (given the discrediting of Soviet planning), many
people on the Left have welcomed Nove’s ‘feasible socialism’ without appreciating the major weaknesses and limitations of market socialism. For example, Gavin Kitching
regards Nove’s arguments as unanswerable , while Perry
Anderson, despite his criticisms of Nove’s lack of political
strategy, raves about him (in contrast to the ‘vacuities of a
Crosland’), and declares that Nove has ‘awakened us to our
first real vision of what a socialist economy, under democratic control, might look like’ . In contrast, I would
argue that Nove’s ‘feasible socialism’ is almost as conservative as Crosland’s Fabian image of socialism which was put
forward in the 1950s. Of course, there are major differences between Crosland and Nove on a range of issues
related to socialism.

But what is more important is the historical location
and relevance of both Crosland and Nove. Today we can
laugh at Crosland’s naivete in asserting (in 1951) that
‘Britain had, in a11 essentials, ceased to be a capitalist
country’ . Crosland’s images of socialism were narrow
and conservative: this was just as true at the time in the
1950s, as it is today. It was simply less evident to large
numbers of people. The same is true of Nove’s ‘feasible
socialism’. For millions disillusioned with the ‘dictatorship

over needs’ in Eastern Europe, Nove’s ideas are hailed as
refreshing, luminous and fu11 of clarity. But to anyone
seriously concerned with socialist alternatives to current
capitalist social conditions, Nove’s proposals are already
stale and historica11y obsolete. I do not have the space to
go into a detailed critique of the conservative nature of
Nove’s ‘feasible socialism’, but I wi11 indicate those issues
and problems which Nove either neglects, underestimates or
doesn’t value as urgent priorities for socialists.

1. Paid and unpaid services

Most political economists who have discussed the problems
of planning and market socialism invariably overlook or
give second priority to social welfare and other such ‘noneconomic’ issues. Thus, Nove’s failure to discuss the enormous problem of unpaid services and unpaid labour is not
unusual. I deliberately raised the whole issue of the relationship between productive and unproductive labour, and
between ‘direct producers’ and other citizens, simply
because most discussion has focused on workers employed
in enterprises. But what of the millions of unemployed,
underemployed and welfare-dependent in existing capitalist
societies? Nove says that in a socialist society there wi11
be many free services such as education, social security,
etc. ‘But,’ he asks, ‘will they necessarily be much more
numerous than they are today in Western Europe?’ I should
bloody we11 hope so! Nove is either unaware of the enormous suffering experienced by millions on low welfare payments, in poorly paid jobs, etc., or he grossly underestimates the budgetary problems which would arise if any
market socialist economy set about providing major improvements in child care, health services, social welfare
and income support.

A policy which failed to improve dramatica11y the living conditions for millions on welfare, etc. in existing capitalist nations, not to mention the growing numbers of ageing or those made ‘socia11y redundant’ through market
forces, could hardly be regarded as any more radical than
Crosland’s ‘welfare state’ – which was also put ·forward as
the solution to poverty! Nove assumes that I am thinking of
a socialist society ‘in which nearly a11 needs are provided
without any payment’. He goes on to say that ‘ordinary citizens wi11 be much less attracted to these extremes of levelling than are left-wing inte11ectuals such as Frankel.’ But
I am not envisaging a paradise where the vast majority
enjoy the fruits of the labour of a sma11 minority of ‘direct
producers’. Rather, I am deeply concerned about the failure
of many socialists to consider the political-economic consequences of market socialism and the ability of such an economy (despite central direction) to meet the minimum needs
of social welfare – assuming there will be enormous problems in this area inherited by any socialist society. But
why can’t all these problems be solved in a market socialist
system? The answer has a great deal to do with the internal and external conditions of production which are likely
to be experienced by any socialist government in the foreseeable future. I will return to these conditions shortly.

2. The anti-feminism of market socialism
It is no accident that most male political economists have

neglected the central issue of social welfare in various
alternative economic programmes or conceptions of socialism. In raising the vital issue of paid and unpaid services, I
am aware that any party or movement claiming to be socialist in the 1980s wi11 become irrelevant to more than half
the popUlation if it fails to address the crucial issues of
unpaid labour, and widespread gender discrimination in the
quantity and quality of social welfare, education, health
and other services. The gender-blind nature of most market
socialist proposals is equally evident when it comes to the
issue of labour processes, occupational divisions, wage
rates and conditions. First of a11, we can safely assume
that in the next twenty or thirty years there wi11 be minimal changes in capitalist societies relating to the wide-







spread existence of wage inequalities, concentration of
women in limited types of occupations, restrictions on policy making and general social inequality. A socialist society
which comes into being against a general background of
sexism, racism and other social discrimination, would have
to make a major effort to overcome or drastically minimise
these inequalities in the first five or ten years of radical
restructuring. But if we look at Nove’s five-tiered ‘feasible
socialism’, it can be seen that most enterprises in the noncentrally-planned sectors would have autonomy in labour
processes operating according to market mechanisms, with
central controls remaining only over certain things such as
taxes and income policies. Now imagine that all existing
transnational corporations, medium and small businesses are
converted into ‘socialist enterprises’, cooperatives, etc. It
is possible that the government may institute an egalitarian
incomes policy for all workers. But this is most unlikely, as
it would undermine the so-called benefits of a free labour
market which Nove advocates. On the other hand, tax policies could be implemented to create the incentive to hire
more women or give them equality with males. But how
much interference could the labour market tolerate before
it ceased to have autonomy and local enterprise control?

After all, we are not talking about discrimination in a few
enterprises, but right across the whole society! Imagine
that you are working in an enterprise which has to function
according to market mechanisms; would you hire extra
women, pay equal wages to women, retrain women for jobs
currently dominated by males? Remember that all these
proposals would cost more, perhaps reduce or seriously disrupt production, threaten enterprise profitability, threaten
wage and bonus rates and so forth. In so far as workers in
each enterprise have to weigh up the cost of each extra
wage or production change against central government incentives or penalties, I believe that market socialism has
an inbuilt structural sexism and racism which only greater
control over the labour process could remedy. Any woman
who does not demand from Nove or other market socialists
a satisfactory account of how market mechanisms will
overcome institutionalised discrimination is surrendering to
vague moral slogans which ‘feasible socialism’ is unlikely to
be able to fulfil.

But could a democratic, centrally planned society be
less sexist than a market socialist society? Assuming that
the level of consciousness was the same in both Nove’s
scenario and mine, I would argue that a society which was
predominantly planned (and had only a small sector operating according to market mechanisms) would be much freer
of precisely those structural features which would determine conditions of work in enterprises operating according
to their own devices and standards. If enterprises were not
threatened by bankruptcy or a drop in profits, a society
committed to gender equality could pursue this objective in
a manner which was free of the conflicting interests of
market viability as opposed to central directives, or enterprise autonomy as opposed to national egalitarian values. It
would be utopian to believe that serious obstacles to full
gender equality would not exist under democratic central

But the whole relationship between paid and
unpaid services, labour process conditions, etc., would not
be circumscribed by market mechanisms having to be constantly policed and curbed by central administration (simply
because, as market socialists themselves admit, market
mechanisms will give rise to a range of social inequalities!).

Anybody familiar with social welfare institutions in OEeD
countries is also familiar with what is called the ‘feminisation of poverty’. A socialist society needs to be committed
to a significant increase in precisely those jobs, services
and practices which are usually incompatible with market
mechanisms or market criteria – regardless of whether the
markets are based on private owners or collective, ‘socialist’ owners.

3. ‘Feasible socialism’ in· an age of capitalist restructuring
Not only is Nove’s model conservative and neglectful of

unpaid services and women’s roles, but the whole thrust of
his conception of ‘feasible socialism’ seems to suggest that
his idea of socialist life is basically similar to that enjoyed
by middle class people in capitalist societies – except that
more people will enjoy this form of life, and the worst
aspects of capitalist societies will, he hopes, be overcome
or modified. His relatively uncritical reception of recent
Hungarian reforms fits in with the conservative nature of
‘feasible socialism’. It seems that Nove is more concerned
about how Hungary can reach Western levels of consumption than with the glaring absence of socialist values (not
that one could expect them to flour ish under one-party dictatorships). But how can socialist relations flourish within
societies committed to high levels of existing forms of consumption and high growth (in order to create employment in
enterprises basically working to criteria of profit and domestic and international competition)? The answer is that
they can’t. Either we have more of the same quantitative
values which have inspired orthodox Marxists, Fabians,
Eurosocialists and Eurocommunists, or we consider how
feasible is Nove’s model in relation to feminist, ecological
and anti-militarist values – to name but a few priorities.

Nove believes in small units, cooperatives and individual producers. He wants to maximise democratic control
while satisfying customer preference and choice. But what
are the historical conditions which would make this scenario possible? Nove would probably concede that a mixture
of central planning and market mechanisms could only be
implemented if a particular society had reasonable control
over most of its productive capacities and resources. But
he is also opposed to self-sufficiency scenarios. So this
means that he envisages ‘feasible socialism’ to be implemented in a world (for the foreseeable future) consisting of
both capitalist and socialist societies. (In this respect Nove
and I agree: images of world revolution, stateless socialism
and moneyless economies are irrelevant utopias.)
It is at this point that we come to the historical obsolescence of market socialism. I believe that we are living
through a period which is increasingly characterised by the
subordination of local and national industrtes· to supranational integration. This process is far from complete, as
most goods and services are still produced and consumed
within their national boundaries of origin, and about a third
of the workforce is also located in local and national state
institutions. But for socialists who believe in the need for
market mechanisms, it is difficult to envisage how ‘socialist
enterprises’ could ignore the competitive forces of transnational exchanges, technological innovation, labour shedding, price cartelisation and other current practices. For
example, look at the negative influences of capitalist production techniques and trade practices on regimes adopting
market mechanisms in Eastern Europe. More importantly,
how could central planning be effective in a socialist economy whose major enterprises were already structurally
locked into transnational component production? This major
obstacle would also face people wishing to construct a
democratic central plan. But the difference between ‘feasible socialism’ and democratic central planning has much to
do with short- and long-term goals. For example, if Ford or
other transnational giants simply become ‘socialist enterprises’, and through worker control are able to continue
most of their current practices, then one can be sure that
feminist, ecological and non-imperialist objectives will
never be attained.

I get little indication that Nove is opposed to further
international economic integration or to many of the technological innovations introduced by capitalist firms. His
five-tiered scenario is geographically and politically naive.

It is not clear how medium and small businesses can provide
millions of jobs to the unemployed if they have adopted
market competitive labour processes. How can one have a
viable manufacturing base, if deindustrialisation processes
have created major forms of dependency before socialist
policies are implemented? How can Nove urge a postindustrial socialism based on small units, while saying nothing about existing giant military-industrial complexes, the
close relationship between military research and civilian

production, military exports, etc? If Nove believes in cooperatives, how will thousands of new cooperatives (a) find
new markets to remain profitable; (b) employ large numbers
of existing unemployed, when the major thrust of cooperatives (governed by market mechanisms) is to restrict the
entry of new workers and to stringently reduce costs? Finally, do~s Nove envisage that most goods and services will
be produced for domestic consumption (and governed by
strict ecological standards), or is his ‘feasible socialism’

propelled by export-led recoveries, little variation in existing forms of Western consumption, and the continuation of
transnational business practices (alias ‘socialist enterprises’) in Third World countries?

Geographically, does Nove envisage ‘feasible socialism’

within the whole EEC rather than in just a single nation
state? If so, will market socialism result in planned deindustrialisation, e.g. steel, textiles, etc? On the other
hand, the inbuilt dynamic of constant growth which governs
market mechanisms makes the combination of national
self-sufficiency and market socialism unfeasible. We have
already witnessed one of the few disastrous attempts to
combine market mechanisms and national self-sufficiency namely the Nazi strategy of Grossraumwirtschaft (the economics of large areas) combined with the moral and political
philosophy of Lebemsraum. At least the Nazi economic
strategy was matched by an equally consistent though repugnant moral philosophy. Yet socialists continue to delude
themselves that vital moral values such as those of greater
equality and freedom, ecological sensitivity, feminism,
anti-imperialism, democratic control over productive forces,
are compatible with an economic order based on market
viability. It is in this sense that Nove’s ‘feasible socialism’

is historically obsolete. It is far too closely linked to many
of the existent practices of capitalist market societies
(even though Nove’s scenario calls for extensive public
ownership). Market socialism must of necessity give rise to
the expansion of markets beyond national boundaries;
‘socialist enterprises’ must earn sufficient income to pay
for all the services financed from taxes. The logic of market mechanisms is in many respects incompatible with
values of solidarity, eqaity and care.

In a world where capitalist market practices are unable
to create sufficient markets, jobs, welfare, etc., it is a
giant leap in faith to believe that ‘feasible socialism’ (with
strong central direction) can simply shed or transcend the
key characteristics of the current historical period.

Furthermore, Nove’s conception of strong central planning
is too vague. One gets the impression that many of the
enterprises which Nove believes should be centrally planned
(e.g. oil, banking, petrochemicals, rail) are already part of
the monopoly sector in capitalist societies. Would they continue to determine the development of social production,
thus effectively reducing the market sector to a secondary
role in market socialism? If the market sector produced too
many inequalities or failed to clear up the mess left by
capitalist classes, would social pressure for jobs, welfare,
socially useful goods, etc., result in democratic central
planning, thus reducing market mechanisms to a small sector of the economy?

4. The political utopian ism of ‘feasible socialism’

Because Nove is preoccupied with Eastern Europe, he
appears to be relatively unaware of the opposition in capitalist societies to even his conservative version of ‘feasible socialism’. I will simply make a number of brief points
to illustrate the lack of political reality in Nove’s pro·
posals. Which capitalist class is going to peacefully tolerate the overthrow of large sectors of private property?

What kind of political representation does Nove envisage in
a society divided between five different forms of ownership, control and participation? Why does Nove expect workers in centrally-planned institutions to tolerate directions
from the centre while other workers are free to decide
most of their own conditions? Will trade unions survive in
all those cooperatives and small businesses whose structural

features result in anti-union feelings? Nove says of Eastern
Europe that ‘no Marxist should be surprised if the political
system reflects the hierarchical nature of its economic
base ••• ‘ But this economic determinist analysis assumes that
it was central planning which created one-party dictatorship! It also naively assumes that market mechanisms mus t
equal pluralism. There is no automatic correlation between
market mechanisms and democracy as numerous dictatorial
regimes in the West amply illustrate. With all the central
directives and interventions necessary to avoid social inequalities and negative features of market mechanisms,
what makes Nove think that workers living under ‘feasible
socialism’ will be able to exercise self-management or be
free of the ‘visible hand’ he so dislikes?

Nove’s whole conception of ‘feasible socialism’ is
single-mindedly oriented to economic mechanisms which
avoid repeating the experiences of Soviet command planning. Yet there is no visible conception of alternative political structures in his work. There are no explicit priorities which the socialist movement should implement.

Rather, ‘feasible socialism’ is a ‘pluralist economism’ which
relies heavily on some mysterious quality inherent in market mechanisms combined with planning. But socialists must
have, above all, clear goals and values. It is one thing to
earn the label ‘feasible’ by paying due regard to realities;
it is quite another to interpret it as implying the necessity
of surrender to ‘really existing capitalism’. Yet this is the
consequence if one fails to appreciate how disastrous are
the forms of restructuring presently implemented by capitalist classes. Far too many socialists have accepted the
logic of this restructur ing and bowed to the inhumane fetishes of growth for growth’s sake, and national competitiveness through technical modernisation.

A place for markets?

Much of Nove’s defence of market mechanisms is based on
the so-called superior information process of the latter
compared to central planning. He criticises me by giving
the example of the restaurant and also the oanger of ration
cards if payment-in-kind replaces wages. Several brief
points should be made in reply. (1) I do not advocate a
society totally regulated by a central plan; restaurants as
well as many aspects of food production will remain subject
to a combination of market mechanisms and planning simply because the food area is historically too sensitive to
be totally subjected to non-market mechanisms. The lack of
socialist consciousness in rural areas must be realistically
reckoned with, if popular support for the new society is
not to be undermined by serious food shortages. Restaurants, various services and crafts can easily be run by a few
individuals or families; this small sector of the economy
will continue to exist. Nove makes a reference to the need
for ‘socialist police’ in Frankel’s world. However, under
‘feasible socialism’, much to Nove’s surprise, it is much
more likely that the police will be called upon to fulfil
similar roles to those currently performed in capitalist
societies – namely, policing demonstrations by the unemployed, feminists, ecologists and others whose needs can
not be met by the major presence of market mechanisms.

(2) As I do not believe that wage labour can be abolished
in the foreseeable future, Nove is being unfair when he
equates increasing the proportion of payment-in-kind with
ration books. Is it too much for Nove to imagine that the
provision of housing, electricity, various communal services
~(e.g. transport) could be substituted for monetary payments
such as rent, charges and fees? Even in capitalist societies,
most of us already enjoy our standard of living through
various public goods and services which are part of the
‘social wage’ rather than the money wage. A centrally
planned society could significantly increase the ratio of
‘social wage’ to money wage. (3) Nove sets up two false
equations: market mechanisms = free choice, while central
planning = rationing and queues. The first equation is based
on an idealised, if not ideological, version of the invisible
hand; the second solely on the undemocratic central plan-



ning in ‘really existing socialism’. For example, in capitalist
societies, many pubs and restaurants have restricted choice
because they obtain their mustard or meat from fast food
chains or large food corporations. Rather than receiving
specific ration coupons for bread or sugar, food stamp
recipients in the USA can exercise a limited choice in
supermarkets, thus showing that even capitalist societies
can create alternatives to monetary payments. As for queuing and administrative delays, Nove himself found that the
number of workers in clerical jobs and distribution was
higher in the UK than in the USSR . Lack of goods in
shops is not due solely to lack of workers in distribution.

But democratic planning could certainly allocate more workers to ease distribution problems. (4) One should not confuse central planning with Soviet central planning. In Eastern Europe central planning and market mechanisms are
both overdetermined by political control mechanisms. A
socialist society based on pluralist political and social
structures does not need to maximise social control mechanisms by trying to plan everything – from haircuts to the
number of teeth extracted. Central planning must be combined with decentralising planning goals of self-sufficiency
in basic material resources and services. Political pluralism
would maximise local administrative control over social and
communal services, while central planning would maximise
redistributive needs in regions and localities unable to meet
criteria of self-sufficiency. However, as Nove is opposed to
self-sufficiency, he is left with national market mechanisms
rather than combinations of local and national planning
structures. Moreover, as Nove lacks an explicit set of
socialist goals or objectives, ‘feasible socialism’ aims to
deliver a combination of existing modes of consumption
with modified ‘socialist’ enterprise mechanisms. It is thus
firmly locked into the existing trajectory of both capitalist
and Communist (e.g. Hungarian) paths of development.

The necessity of autarky
In conclusion, let me offer a (currently unfashionable) view
on democratic planning. If socialists are in agreement that
a new society must have a strong central plan (even Nove
believes this), then we must ask ourselves what are our
main planning objectives? If we wish to maximise social
equality and democracy, establish new gender and race
relations, prevent ecological disasters and nuclear war,
gain control over local and national resources (for political
independence), then ‘feasible socialism’ is not only inadequate, but positively destructive of these very important
socialist priorities.

For too long socialists have believed that a socialist
world could replace the capitalist ‘world market’ – which
indeed is often fancied to be its foundation. But global
material production and interdependence must provide the
basis for a nightmare, if one stiIJ envisages a world central
plan, or a world of soviets, or a world of market socialist
nations all competing with one another. No country can be
self-sufficient. But the goal of maximum self-sufficiency
and limited trade with other nations is one of the few
alternatives to the bankruptcy of the Soviet model, Eurocommunism, etc. In contrast to ‘feasible socialism’, which
locks us into existing forms of market integration while
most likely doing little for aJl the unemployed and social
welfare populations, a semi-autarkic socialist strategy
forces socialists to confront the task of constructing alternative socialist state institutions at local and national
levels. Socialists have to make the choice between promoting supranational integration at the technical, trade, political and military levels (variations of EEC, COMECON,
NATO, etc. while hoping these are compatible with local
democracy), and semi-autarkic goals.

Nove is oriented to large societies (he speaks of economies with 100 miJlion active workers). But only the two
superpowers are this big. Most capitalist societies have
considerably fe~er economicaJly active persons, and it is
therefore necessary to think of their capacity and ability
to develop socialist objectives which enhance domestic sov-

ereignty. If socialists try to maXimise social equality by
attempting to create dynamic export-oriented industries
(i.e., earning revenue to pay for ‘social wage’ services),
then we wiJl simply have a future which is qualitatively
indistinguishable from Mitterand’s France. It is not competition which is inherently bad. Rather, socialists must
confront the truth that the world does have limited resources, that there is no likely administrative structure which
could make either central planning or market socialism
across the whole of Europe (let alone the whole world)
anything but a bureaucratic nightmare, and that the socalled superiority of market mechanisms becomes regressive
when enterprises efficient on its criteria perpetuate unemployment, sexism, environmental destruction, class inequalities and existing levels and forms of consumerism. A
post-industrial socialism must begin at the national level. It
must base itself on socialist values, rather than aim solely
at administrative and informational efficiency and perpetual economic growth. The Hungarian model wiIJ eventuaJly stagnate through increasing dependence on the West;
but even as it booms there is a perceptible decay in even
the pretence of maintaining socialist values. On the other
hand, national semi-autarky can only be constructed by a
major attack on existing social, economic and political
priorities. It is not a model for national chauvinism, as an
internationalist and co-operative consciousness can and
should be promoted. But if socialism is to become a reality
in a world characterised by capitalist global restructuring,
by the bankruptcy of existing models of socialism, by the
naive’ alternatives of many Greens such as Bahro , by
the deep-seated conservatism of many labour movements
and so forth, then socialists will have to reconsider
radically many long-held images of socialism.

While I can envisage a world of co-operating nation
states, I know of no socialist model with even a minimum
programme based on social welfare, redistribution, feminist
and environmental values, and which is at aJl compatible
with market socialist plans, supra-national central planning
or stateless forms of self-management. Only a centrallyplanned semi-autarky is compatible with real social and
political control over local and national resources. Such a
society has the best chance of making a viable break with
the existing forms of irrationality in both the West and the
East. The mere attempt to conceptualise a semi-autarky
forces socialists to go beyond vague slogans. As nearly all
contemporary Eurosocialist and other alternative programmes are structurally locked into organisational objectives predetermined by capitalist classes within the EEC and
elsewhere, it is imperative that real alternatives emerge
rather than the temporarily attractive, but conservative
and obsolete, versions of ‘feasible socialism’. After all,
Nove’s ‘feasible socialism’ is just as politically remote as
my democratic semi-autarky. But, as they say in the market, why settle for second-best when you can have a model
that is oriented towards the future rather than the past?

(Acknowledgement. I would like to thank Alan Roberts for
his valuable comments.)



K. Marx, ‘Results of the Immediate Process of Production’ in Capital
Vol. One, trans. B. Fowkes, Penguin Books, Harmondsworth, 1976, p.


G. Kitching, Rethinking Socialism, London, Methuen, 1983, p. 42.

P. Anderson, In the Tracks of Historical Materialism, London, Verso,
1983, p. 100.

Quoted by V. George and P. Wilding, Ideology and Social Welfare,
London, Routledge and Kegan Paul, 1976, p. 69.

See A. Nove, Was Stalin Really Nece~s~, London, 1964, Ch. 15.

In a forthcoming book (The Post-Industrial Utopians, Polity Press,
1985) I have made a detailed evaluation of the strengths and weaknessesof people such as Bahro, Gorz, Toffler and other ‘postmarxian’ and ‘post-industrial’ theorists.

Additional note re Nove and Habermas. Alec Nave is correct in stating
that he merely quoted L6wenthal on p. 219. But on p. 238 he once again
refers to L6wenthal and Habermas’s ‘political utopianism’, thus giving the
impression that he also subscribes to L6wenthal’s vulgar critique of
Habermas. If I have misunderstood Nave, then I offer my apology and
withdraw the offending comments.


Response to Boris Frankel’s
Alec Nove

May I echo Frankel in at least one respect? A frank and
honest exchange of views is a good thing, and should help
to clear our minds. I will concentrate, in my reply, on a
possible future ‘feasible socialism’, leaving aside the complex problems of what he calls ‘antidotes to capitalist restructuring’, or ‘the specific political situation in capitalist
countries’, and immediate policy alternatives for left-wing
parties today. This is not to deny their evident importance.

Frankel believes that what can be called for short
‘market socialism’ is a historically obsolete concept, and
that as I derive it primarily from the study of the need to
reform Soviet-type economies. It is true that a study of the
operation of such economies provides the background and
motive for my search for alternatives, but in what sense is
the ‘market socialism’ idea ‘obsolete’? The last person to
make a similar criticism of my work on this subject was an
intelligent and articulate stockbroker; for him what was
obsolete was the notion of socialism. Modern capitalism had
all the answers, in his view.

The Missing Model
My basic problem in answering Frankel is that he has hardly begun to sketch in his alternative model. I am sorry to
have attributed wrongly to him the phrase about ‘parallel
pyramids’ of councils, etc., but just what has he in mind?

‘Decentralisation to the extent possible with overall central planning’ means little unless and until much more is
said about what the central planners should be planning,
and how plans are to be implemented, on the basis of what
information. I agree, of course, that any freedom to take
decentralised decisions, whether by local committees or by
economic enterprises of any sort, could result in actions
which could be inconsistent with a central plan. This can
happen partly because of limitation of knowledge (one
knows one’s own locality or business best), and partly due
to differences of interest, complicated by the great difficulty of identifying the common interest. But how can this
be avoided? The attempt in the Soviet Union to overcome
this problem by an all-embracing hierarchy fails to resolve
it, because of what I have called ‘centralised pluralism’:

the centre is itself divided functionally, and there is
inter-departmental and inter-regional administrative competition for resources. To say that the USSR lacks genuinely
democratic institutions is both true and, in this context,
irrelevant: freedom for citizens to organisem interest
groups would in no way simplify the elaboration of a central plan!

Frankel is ‘attracted to decentralised planning’, and
agrees that ‘plans’ and ‘markets’ are not mutuaJJy exclusive. Good. The question is then: how can productive units,

or local communities, decide in a decentralised way what
they should be producing, and obtain means of production,
other than through some form of market mechanism? Conversely, what should the central planners be planning, in
respect of current output and its disposal to its various
users? In my model the centre directly plans the current
output of only a few ‘centralisable’ sectors, such as energy, and, naturaJJy, does so taking demand (expressed via
the market and in other ways) into account. The centre
would be greatly concerned with major investment decisions, with income distribution, welfare, etc. I wish that
Frankel would teJJ us more about what other productive
functions the central planners should be performing, also
how and why. I wiJJ come to welfare problems in a moment.

The ‘unproductive’ question
But first, let me dispose of the issue of productive versus
unproductive labour. FrankeJ’s point was that, under ‘market socialism’, the very large unproductive sectors would
have to be sustained by the productive workers, and that
this would be both difficult and unpopular. As he now also
argues that capitalist crisis is somehow connected with the
growth in the proportion of those engaged in unproductive
labour, let me try to sort out what I believe to be a
genuine confusion.

Frankel should recaJJ that Marx usualJy treated labour
in the service sectors as productive if employed for profit,
e.g. the clown in the circus, or hairdressers working for a
firm, making a not-very-Iogical exception only for that part
of circulation that consists of buying and selling. Consequently, I think it is inconsistent to treat businesses which
make profits as ‘non-surplus-value extracting’. Some Marxists, it is true, regard only the ‘direct producers’ of material goods as truly productive, omitting even the office
staffs of unmistakeably productive enterprises such as steel
and chemical firms, as weJJ as all providers of non-material
services. But surely this is analytically and politically foolish. Of course, tourism and haircutting would suffer if
‘many workers in commodity production were sacked’. (So
would workers in ‘commodity production’ who were making
hair-clippers and building hotels if tourism and haircutting
were depressed, but let that pass). It is equally true that
those engaged in transport of goods would have fewer
goods to transport if there were fewer goods. So what?

The relative numbers engaged in manufacturing and agriculture (‘direct producers’) have been falling in every developed country. The numbers in so-called tertiary occupations have risen sharply. So has the share of total profits
originating in the tertiary sector. With the exception of
Great Britain in the last few years, this has been accompanied by an increase in output of both manufactures and

agriculture. What has changed is employment. Suppose that
robots replace manual labour in factories on an everincreasing scale. Is it Frankel’s belief that the sharp resultant reduction in the relative number of ‘direct producers’

would mean that the remaining manufacturers (the robots
too?) now have to carry the burden of generating the
entire surplus needed to sustain the entire tertiary sector?

Surely this is nonsense! (Unemployment is a different issue.)
In the context of our discussion, the essential distinction is surely between what people pay for and what is
provided free. Free goods and services (also pensions, etc.)
must be provided out of a surplus that must be generated
somewhere. A steelworker who buys a week at the seaside
pays the tourist enterprise, and it makes neither sociological or economic sense to suggest that the tourist enterprise and all its employees subsist out of the surplus value
generated by the steel or any other materially-productive
industry. Ownership is also irrelevant in this context. A
Spanish or Bulgarian hotel (or telephone, or postal service,
or electricity supply) may be state-provided, but their products or services are bought, they usually yield a profit.

The French regie des tabacs, the Tsarist vodka monopoly,
provided much revenue for the state budget, and surely this
surplus was in no sense generated from within the private

So the key question is: what should be provided free,
by whom, and how should the costs be covered? I agree
that if ‘welfare’ (sick pay, old age pensions, health and
education provision, etc.) were the responsibility of ‘local
or enterprise funds’, this would generate an intolerable
degree of inequality in such provision. I make no such suggestion. They are, in the main, financed out of national
taxation. They would continue so to be.

Welfare and gender
I argued that the list of items provided free (i.e. health,
education, etc.) may be not much longer than we now have
in Western Europe. Frankel explodes: ‘I should bloody well
hope so’, but on closer examination this turns out to mean
that expenditures on the items on my list would be much
higher, which is a slightly different point, with which I
agree. This would cause a budgetary problem, true, but this
would be so whatever kind of socialism one has in mind,
unless national output rises sufficiently to make this redistribution less onerous, or unless there is ‘abundance’.

Market socialism is said to imply ‘gender discrimination’. This seems to be linked with the question of ‘unpaid
services’ (does he mean payment for housework: by whom?).

The market, argues Frankel, generates sex inequality: to
redress the balance ‘would cost more, perhaps reduce or
seriously disrupt production, threaten enterprise profitability’, etc. etc. Dear me! In his imagined socialist society,
are women really going to be so much more costly and less
efficient than men? I agree that there is a tendency for
typically female occupations to be paid at lower rates, and
the fact that this is so to virtually the same extent in the
USSR as in the West suggests that ‘the market’ is not solely to blame. This is a complex question, and Frankel does
agree that ‘democratic central planning’ is consistent with
‘serious obstacles for full gender equality’. Much depends
on human attitudes (the same applies to racism). My own
belief is that ‘market socialism’ will create more problems
through inequality between productive units than between
men and women, and that the centre will have a tough time
trying to redress such imbalances: being composed of human
beings with interests and feelings, the state may be unable
to do this effectively. But this would apply to ‘Frankel’s
state too.

Unemployment, autarky
I agree that unemployment could present a big problem. It
should be possible to draw up ‘rules of the game’ (via taxes
and subsidies) which can discourage excessive laboursaving, but the centre and local authorities may still have
a major task in providing work for those without it. There

is also no dispute at all about the importance of ecology.

Or about the hope that we shall not continue to be obsessed with growth – though the greater the consciousness
of unsatisfied needs, the greater the pressure to satisfy
them. Larger welfare payments do not only present a
public-finance problem: the recipients will wish to spend
them on goods and services.

I shafl say nothing about ‘military-industrial complexes’,
important as they are in the world today, because they
have no place in a ‘feasible socialist’ model. Much more
relevant is the issue of autarky. Frankel favours limiting
international trade, and in doing so follows (perhaps unconsciously) in the footsteps of Kautsky, who also believed
that each socialist country should achieve maximum selfsufficiency, keeping trade to a necessary minimum (e.g.

Germany will not grow bananas). This is a variant of ‘small
is beautiful’ applied to planning, but ignores the resultant
loss. Why should an imaginary socialist EEC ‘result in planned deindustrialisation’?

Why should a largely selfsufficient Britain (and the Netherlands, Norway, Sweden •••
Luxembourg too?) do better separately than together? Why
consciously aim for impoverishment by failing to take advantage of the international division of labour where economies of scale, or natural conditions, can yield substantial
returns? Adverse effects on consumer choice (from food to
skirts and cameras) and on industrial costs would be severe.

How then is Frankel proposing to finance his vastly improved welfare payments? Also, what sort of internationalism is this? What effects would it have on potential customers and suppliers, not least in the third world? He is
evidently mesmerised by the existence today of multinational corporations. He deplores industrial specialisation,
though why should this be? Right now some components for
Volvo cars are made in Britain and assembled in Sweden,
while others are made in Hungary and supplied to the Lada
factory on the Volga. In the name of what principle, socialist or other, should such arrangements be disrupted, if they
are cost-saving and efficient? Is it not desirable to save
costs, unless there is some weighty reason to the contrary?

Unnecessary improverishment is not a virtue. . Yes, there
could indeed be ‘expansion of markets beyond national
boundaries’. Why not? In Frankel’s world I can foresee that
the most lucrative trade will be one of smuggling •••
Politics and police
Lastly, politics. Yes, my model has some political question-marks, but Frankel’s rhetorical questions still puzzle
me. Why should the coexistence of different forms of
ownership and control make it especially difficult to devise
political representation? Why should workers who choose to
work in centrally-planned institutions (whether these are
power stations, railways or a welfare office) not ‘tolerate
directions from the centre’? Most of us ‘tolerate directions’ from someone. I did not say that central planning
‘created’ one-party dictatorsh1j)in the USSR; the one-party
dictatorship created central planning, but the two go together and reinforce each other. I did not ‘naively assume
that the market mechanism equals pluralism’. Quite obviously there are and have been vicious despot isms with a
market mechanism, so it cannot be a sufficient condition,
and I frequently say so (e.g. in Feasible Socialism, page 7,
and again on page 195). Brus has several times made the
same point.

Finally, the ‘socialist police’. It is not quite clear to
me why it would be necessary to repress ‘unemployed, feminists and ecologists’ in a democratic society of the kind I
was envisaging, but of course political pluralism may indeed
give rise to political conflict. Freedom to organise to pursue sectional interests (including via trade unions) might
lead to strife, but this does not really depend on whether
the market plays a big role in everyday economic life. My
point was that police would be needed to prevent it from
playing such a role, in realistically envisageable conditions.

But these are not really the essential points. What is
lacking is Frankel’s real alternative. I would be happy to
comment on his model, when he has one.


Nove and Frankel on
Unproductive Labour
Chris Arthur


Both Alec Nove and Boris Frankel spend a good deal of
time on attacking or defending Marx’s distinction between
productive and unproductive labour. This is surprising, considering that the debate is supposed to be about socialism.

This highly technical distinction drawn in Capital is irrelevant as far as I can see. Capital, remember, is about capitalism, not about socialism. Frankel insists loudly that such
an analysis is relevant but when he discusses socialism his
main interest is in the distinctions waged/unwaged, free
charged. These are important topics to look at in the transition to socialism but the debate on productive labour in
capitalism seems beside the point. Some other distinction
might usefully be drawn, as Nove does, but it should not be
confused with this one.

Nevertheless, it is an important question in its own
right and I would like to make some comments on it.

(a) Marx defines productive labour as that labour which
exchanges against variable capital in order to produce surplus value. All productive labourers are exploited therefore. No self-employed producer of goods or services is a
productive labourer. Nove drags in a ‘quip’: a prostitute
who works on her own is unproductive but one exploited in
a whorehouse is productive. This is no ‘joke’ but an intended consequence of Marx’s theory. (He gives the case of a
similar profession in Capital Vol.l – Penguin edition p.

644). Although the service is the same, the relations of
production are different – hence a different economic category applies. Nove may not be ‘enamoured of the distinction’, but it is essential to Marx’s project. However, this
‘joke’ is a red herring. Nove’s intended argument at this
point is designed to establish that all exploited workers,
including those in the sphere of circulation, ~re productive
labourers. I expand on this below: in (d.

(b) Nove and Frankel confuse the distinction productive/unproductive with that between goods and services.

This last is quite different and completely irrelevant. The
whorehouse prostitute above is productive even though she
offers services rather than goods. See Marx’s Theories of
Surplus Value for his discussion of Smith’s ‘two definitions’.

(d Marx’s conc~pts form a hierarchy from more to less
inclusive. At its simplest we have three levels: (a) production of goods (including services) requires useful labour; (2)
production of commodities requires value-creating labour;
(3) production of capital requires creation of surplus-value.

Now, productive labour applies only to level three.

Even here we have to notice that not all wage workers
employed by profit-making capital are engaged in productive labour because Marx excludes those employed by capital in circulation in so far as we are dealing with purely
circulatory employments – such as realisation and transfer
of values, and not transportation.

I sympathise with Nove when he questions this exclu-



sion. Marx’s view has the very strange consequence that
the shop assistant in Marks and Spencer does not create
value, and therefore not surplus value, for the employer.

Revenues of both sides are ultimately to be derived from
surplus value generated in ‘the productive sector’. But
Marx had good reason to exclude circulatory employments
and the matter needs careful consideration.

I will first give a counter-argument to Marx and then
readdress his posi tion.

Marx’s argument for excluding advertising agents, shop
assistants, bank clerks, etc. is that their sector does not
produce value but realises it. A fortiori, their labour does
not produce surplus value and hence is not productive in
the sense defined above. But should not this distinction be
taken more dialectically? Value is not reall¥ produced until
it is realised because value necessarily appears only as
exchange value. Hence, given this is a value producing economy, the labour of realisation is an absolutely necessary
moment of the circuit of capital.

It should be noted that Marx cannot rely on the claim
that productive labours are in some sense necessary to any
economy while the labour of realizing value is necessary
only in a capitalist economy. We have already stressed the
point that productive labours are defined in terms of their
social form, namely labours exchanged against capital (variable capital to be precise). Domestic labour, for example,
does not count (even as value creating) although necessary
in all economies. Marx does not provide an asocial naturalistic definition which could serve as a criterion to evaluate
various modes of production.

(d) It might seem that Marx failed to follow through
the consequences of his own anti-naturalistic definition.

Let us have a closer look. We must remember that his
enemy was the money fetish. People really believed that
wealth is created only by moving money around. Marx is
very fierce about this. Moving money around cannot
account for the origin of the surplus accumulated. This
must arise somewhere else before it can be (mis)appropriated by Mr. Moneybags. So circulation realises but does not
create surplus-value. But it seems possible to introduce a
distinction between distributing values – e.g. Marks and
Spencer (or redistributing them, e.g. estate agents. NB: in
this last case the powerful effects of misplaced materialism: the guy does not build houses, but we forget that the
transfer of me into your house and you into mine is a useful effect, so why should this service not be valued in exchange?), and parasitic circulatory activity such as property and commodity speculation, loan-sharking etc. Both
look like M-C-M’ but one is to do with realisation of what
is produced whereas the other is mere windfall profit. The
labour of realisation is a labour (ask the shop assistant)
nonetheless, and one whose efficiency has a direct effect

on the profitability of the enterprise. It may be said that
Stock Exchange speculators work hard. So they do – but
their time has no necessary relation to profits. Particular
difficulty for my suggested distinction arises when the
same enterprise does both, e.g. a bank. Here I would still
distinguish banking services, e.g. cheque collection, money
issue, from their lending activity. The former could be run
as a rational business. It is the latter that results in both
sudden huge profits and equally sudden collapses. It follows
from the above that shop assistants and bank clerks count
as exploited. The service (of realisation) they provide to
the producers is a labour-time which itself generates value,
realised at the same time as the original value (this sounds
confusing but is exactly analogous to factory labour adding
and transferring value) on behalf of the employer: and yet
they get just the standard wage, provided from variable
capital by, e.g. Marks & Spencer •
. (e) Frankel makes the extraordinary claim that we do
not see in this sphere constant attempts to extract higher
rates of absolute and relative surplus value. This is just
what we have seen. For a long time there have been constant struggles over the length of the working day (‘bank’

holidays – shop-hours legislation) and more recently decisive transformations in socially necessary labour-times
(supermarket check-out systems, automatic bank tellers).

Frankel also accuses Nove of inconsistency: ‘on the one
hand he believes that everybody employed by a private firm
produces surplus value, yet on the other hand, he wishes to
reject the distinction between the production of value, and
non-value work.’ It is quite consistent and indeed necessary
to do both together. Obviously, if Marks & Spencer are to
produce surplus value we must first extend the concept of
value-production to the labour of shop assistants. There
still remains non-value work in public service – but Nove
accepts this.

Frankel also argues, in effect, that the labour of realising values depends on the prior production of those
values. Hence there could not be a capitalism with estate
agents but no builders, shops but no factories, banks but no
businesses, and so forth. This seems a striking argument
until one remembers that no one is claiming otherwise.

There could not be consumer goods industries without socalled capital good production. Would Frankel therefore say
the former are unproductive? More importantly, one can
simply reverse the argument. Production is not possible
without circulation, albeit that the advertising industry
could be cut down drastically (why does British Telecom, a
monopoly supplier of an essential service, advertise at
all?). The point is that all economies must be balanced,
with appropriate investment in all essential sectors. In a
capitalist economy, the circulation of values ~ an essential
sector – not just in the sense that the police are essential
but to the internal moments of the self-valorisation of

(0 Let us now look at the argument from Marx’s point
of view. The best review of Marx’s discussion of ‘productRadical Philosophy Mea Culpa section
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Philosophy Group’.

ive labour’ is by 1.1. Rubin: Essays on Marx’s Theory of
Value – last chapter. He explains that Marx distinguishes
between capital in the phase of production (including transportation) and capital in the phase of circulation in its
purely formal sense (transfer of ownership), and that he
applied~erm ‘productive labour’ only to the former
phase of the reproduction process. (Incidentally, Nove says
Rubin disagrees with Marx. Please could we have the reference? The truth is that on this question Rubin stoutly
aefends the cogency of Marx’s distinction against Bazarov
and Bogdanov.)
What still requires justification is the concentration on
the moment of production, especially when this means other
employees of capital get excluded from the status of productive labourers. Nove says that they are surely exploited.

To get at Marx’s reason, we have to observe that just as
Marx was not much interested in a price theory, neither is
he, in a sense, interested in exploitation. Capitalism has
always been exploitative, and it is not necessary to write
Capital to demonstrate this. The point is that if the class
contradiction is to become explosive it has to result from
the intensification of the contradiction which develops over
time between the relations and forces of production, itself
depending on developing contradictions in the capital relation itself which block capital’s capacity to continue to
‘deliver the goods’. Marx is interested above all in the destiny of capitalist accumulation. All his theoretical constructions are organised around this. From this point of
view a narrow definition of productive labour may be justified on the ground that capital, employed in formal circulation, even if apparently analogous to the actual production
in their employment of wage labour, are dependent on the
dynamic of capitals employed in the productive sphere.

That is to say, although the labour of realisation is not just
objectively necessary to the mode of production but is an
internal moment of the circuit of capital and can be the
site of specialised capitals with their own variable capital
expenditure – even given all this- it is still different in
that it is concerned with realising already produced values.

The question about the ultimate destiny of capitalism
could therefore be reduced to what happens in the production of those values. Although it can be more or less
efficient, the realisation sector ultimately must take
second place to the dynamic of production. For example, in
an ideal logical model it is perfectly possibJe to set formal
circulation time at zero and capitalism still exists. But to
set production time at zero would disintegrate the value
relation. (From another point of view what we have here is
a methodological problem arising out of a discrepancy
between individual and total capital.)
Given Marx’s interests, namely in the ultimate destiny
of capitalism, he could justify his exceedingly narrow definition. By the same token it is irrelevant to a society not
governed by the dynamic of capital accumulation. After all,
in socialism the definition of wealth itself is very

Radical Philosophy always welcomes contributions.

We hope in the near future to publish articles and
discussions which bear on questions of social theory,
on aesthetics and on the relationship between feminism and philosophy. We would like to encourage
anyone with an interest working in these areas to
submit material, including shorter pieces of comment
and discussion as well as longer articles. And we
welcome, of course, all contributions relevant to the
general concerns of Radical Philosophy.

Some of the cartoons this issue are once again
from the Turkish newspaper Cumhuriyet Turkey’s sole remaining liberal daily.


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