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March 20, 2019 9:20 AM   Subscribe

“ In his 1859 preface to A Contribution to the Critique of Political Economy, Karl Marx implies that at earlier points in its development, capitalism is still “progressive” because it produces rapid increases in productivity. There aren’t enough material goods to support everyone at this stage, so socialism would only amount to the redistribution of scarcity. But at some point, Marx argues, production increases to such a scale that it becomes possible and necessary to socialize the existing mechanisms of production and redistribute the social product fairly. This would, for some, be enough to constitute socialism: a democratically run, centrally planned economy that ensures every person’s material needs are met. A Walmart for the people, with the same low prices and efficient logistics but without the poverty wages—and no billionaires at the top raking in the profits.” The People’s Republic Of Walmart? Could large megabusinesses be a starting point for a democratically planned economy?
posted by The Whelk (35 comments total) 28 users marked this as a favorite
Given the progressive, at times absurdist, failure of the Soviet planned economy to meet the basic needs of average Russians, and the fact that industrial capitalism is rapidly turning the planet into a graveyard, I think we need to consider options for societal organization that do not involve totalizing economics, or even a primarily economic focus.

I don't pretend to have a solution here, but the paths of the 20th century are looking increasingly like dead ones.
posted by ryanshepard at 9:41 AM on March 20 [14 favorites]

My big question is how we would induce (let's be real here, they're not going to do it of their own volition) a corporation to socialize.
posted by koucha at 9:56 AM on March 20 [1 favorite]

I've not read the book, so this shouldn't be taken as a criticism of the authors—it's potentially just the way the reviewer is framing their argument—but it seems odd to highlight Walmart as a "planned economy".

Walmart's supply chain is very sophisticated (and despite their reputation, they aren't the shittiest dicks in the room—if you have a choice between working in a Walmart DC or an Amazon DC, you'd want to pick Wallyworld every time; I've been in both and while it's certainly no picnic, Walmart felt like a workplace, while Amazon's felt like a place where burnt offerings were made to the gods of Taylorism), but it's not really planned. It's responsive, agile, pick whatever the adjective du jour is, but it responds to demand signals.

Sure, they can wag the dog occasionally: if they put a certain item front-and-center in the stores, for a price that's markedly lower than their competitors, you can bet that thing will sell and thus create demand. But their ability to do this is pretty limited, and it's virtually nil in the other direction: if Walmart decides not to stock something that people want, people don't just stop demanding that item, they'll go elsewhere for it if they want it.

Walmart isn't a "planned economy" as much as it's a "predicted economy". Their supply chain people have models (which they probably hold pretty closely, but TBH supply chain models aren't, mathematically, all that complex or anything; it's really all about the quality of your input data) with which they try to predict future sales, and fill the pipeline appropriately.

But most of the effort in modern supply chain systems isn't about trying to plan or predict demand, it's almost an item of faith that demand will have some randomness to it, and the best you can do is be responsive. Minimize inventory, minimize time between manufacture and consumption, maximize freight velocity, etc. Demand is an exogenous signal that comes from the marketplace. The folks in Marketing may think they have some control over it, but my experience is that most SCM people have a fairly dim view of Marketing's control over demand. It's a weak feedback loop in what's otherwise a one-way signaling system.

I feel like the intelligence of even a big supply chain organization like Walmart is being overestimated; or rather, the very specific type of intelligence that's captured in that chain is being generalized too far. It's like looking at a Venus fly trap and imagining that it must be a very clever predator, when in fact there's not much there there. What looks like intelligence and overarching planning is very likely a sort of emergent behavior of the system, of lots of people making miniscule adjustments here and there in response to various signals communicated from elsewhere in the chain. It's a very market-oriented way of doing things, and I don't know how well it aligns to the idea of central planning as I've ever heard it described.

That said, it certainly works pretty well at doing the task it's meant to do—delivering shit that people want to people who are willing to pay for it, at a price they're willing to pay—and if we can harness the power of market-like / emergent-behavior systems to do more useful things than move plastic shit from China with breathtaking efficiency, we certainly should. Or, hell, even if we could nudge those systems into being less rampantly destructive than they are, we obviously should. But I think trying to build a planned economy out of them makes about as much sense as bringing a Venus fly-trap indoors and trying to teach it to fetch you a newspaper.
posted by Kadin2048 at 10:09 AM on March 20 [41 favorites]

Sounds like a fascinating book (and I'm glad Peter Frase reviewed it).

It brings to mind the Chilean cyber idea (good to see it name checked) as well as the cybernetic possibilities under Khrushchev (cf Red Plenty for one account). It also connects well, in the US, to the current Democratic party's technocratic impulses. Or, further back, the odd, giant phone company which bestrode the US like a colossus, a kind of hybrid socialist enterprise, in Bruce Sterling's view.
posted by doctornemo at 10:13 AM on March 20 [1 favorite]

I just got this book for my birthday and I'm so excited to read it!
posted by mittens at 10:16 AM on March 20

We must start from where we are … thrown back on our individual will and energy, forced to exploit each other and ourselves in order to survive; and yet, in spite of it all, thrown together by the same forces that pull us apart … to develop identities and mutual bonds that can help us hold together as the fierce modern air blows hot and cold through us all.
Karl Mark 1848
posted by robbyrobs at 10:23 AM on March 20 [2 favorites]

I'll believe that a technocratic rearrangement of the status quo can solve all of our problems when we've figured out how to explain why you should care about other people.
posted by Reyturner at 10:31 AM on March 20 [5 favorites]

Costco pays fair wages and takes only a slight profit, and is also the second largest retailer in the world.
posted by seanmpuckett at 10:32 AM on March 20 [4 favorites]

"Planned" economies don't work, because no one is omniscient (you are always working with an incomplete data set), and reaction time is terrible. Computers have helped with both of these problems, but there is a long way to go. A government is far more complex than a business.
posted by domo at 11:07 AM on March 20

I think CostCo, WalMart, and Amazon can all be fine starting points to developing a planned economy. I like CostCo because it encourages purchasing in bulk rather than piecemealing necessities every week. I don't think current wages are the biggest concern as you can just move money from profits to employees. Also, with Walmart, you can go once a week and get literally everything you need that week. Costco can be a bit more limited in that regard, but obviously it can be expanded.
posted by avalonian at 11:17 AM on March 20 [1 favorite]

One of the greatest mysteries in the current metastable capitalist system, IMO, is that it doesn't favor not-for-profit enterprises more strongly.

I mean, you would think that over time a not-for-profit enterprise would outcompete a for-profit enterprise in the same industry, simply by being able to reinvest what the for-profit enterprise has to pay out in dividends. To the firm itself, shareholders are parasitic, and dividends are a deadweight loss. It's sort of a raw deal when you think about it: in return for the initial capitalization of an IPO, a firm is saddled with "owners" who are going to want to extract profits from it forever. In comparison, a not-for-profit could issue bonds to raise capital, know exactly how much it will need to pay those bondholders back, and once paid off—they're gone. (Hospital revenue bonds are one traditional example of bonds typically issued by nonprofits.)

If I were an alien and had just learned about capitalism and market economics, and was making an a priori prediction of what the US economy would look like, given that we've been going down this path for a while now, I'd probably think that it would involve a small number of really huge, nonprofit, zaibatsu-style vertically-integrated firms. Because that gets you economies of scale, full control of the supply chain with no frontiers, and no deadweight dividend or buyback loss. With maybe a flurry of small for-profit firms buzzing around the edges, doing inventive stuff and getting bought up at insane multiples ("fuck you money" multiples) by the big fish when they seem to have stumbled onto something that might potentially give one an edge over another.

I don't have a fully-formed theory for why this isn't what we actually have. I've read some interesting stuff that posits an effective maximum size to an enterprise as a function of the velocity of information delta across the corporate boundary; basically, that big companies get torn apart if they can't pass information internally fast enough to allow a reaction to changing external circumstances. I.e. if the "speed of information" inside the company is slower than the "speed of information" outside it, they get torn apart. But that would seem to be a temporary problem, not a permanent structural one.

Maybe it'll end up being correct over the long term, but in the meantime it's enough to make one suspicious that there's a certain amount of thumb-on-the-scales going on, presumably by the people currently profiting from passive rent-income ownership of the existing system. Hmmm.
posted by Kadin2048 at 11:18 AM on March 20 [28 favorites]

What, like The Co-op?
posted by scruss at 11:39 AM on March 20 [3 favorites]

My favorite socialist podcast Srsly Wrong just did an episode about this book where they talked with the authors and summarized the main ideas from it in a very funny and digestible way. It's also interesting because the show's hosts are normally skeptical about centralized economic planning, so you can really hear them grapple with these ideas.

Srsly Wrong ep. 178: The People's Republic of Wal-Mart

Walmart is the world’s largest corporation, a mantle it has achieved by (internally) eschewing market-based allocation, and developing itself into a sophisticated and well-functioning globally-planned economy.

This week, guests Leigh and Michal join the Wrong Boys to talk about their new book, and how analyzing the biggest, multinational, consumer-facing corporations puts to rest the myth that economic planning doesn’t work.

posted by One Second Before Awakening at 11:43 AM on March 20 [4 favorites]

A further sobering statistic tells us that almost 50% of the Fortune 500 from 1999 had disappeared from the list just ten years later.

The thing that separates governments from companies when companies screw up, they are destroyed. When they get too big that the pain of them being destroyed is too great, we bail them out. The counterpart to the People's Republic of Wal-mart is the Socialist Republic of Lehman Brothers. Walmart is less than 50 years old. Maybe give them a century to see if it works out?
posted by zabuni at 11:52 AM on March 20

What, like The Co-op?

Sort of; they seem to pay out dividends to co-op members, so I think they are more a model for direction and governance than ownership. (You'd expect a company that pays out zero dividends and reinvests everything to be even more competitive.) But it's certainly related. REI in the US works similarly; the profits are paid out to members in proportion to the amount of business done with them in a given year. There's still money going out the door that could, in theory, be put to work making the business more competitive. And the ownership model creates a vulnerability to demutualization, which befell a lot of customer-owned firms in the US (mostly insurance companies) when owners started to eyeball the short-term payout.

Interesting that they are the UK's fifth-biggest food retailer and also "the UK’s number 1 funeral services provider". I guess I'm glad that they have a strong sense of business ethics, or else there's some, uh, ominous opportunities for business development ("Streaky Bacon, now 95% off—forever!").
posted by Kadin2048 at 11:55 AM on March 20 [1 favorite]

Edward Bellamy predicted as much, with his book Looking Backward.
posted by ocschwar at 12:46 PM on March 20 [1 favorite]

Maybe Walmart is a poor example of this idea. If Walmart's profits were distributed equally to its employees, they would each get an extra $6,300 a year (2015 numbers)

Other companies have a much, much higher profit to employee ratio.
posted by rocket88 at 12:49 PM on March 20

Other companies have a much, much higher profit to employee ratio.

According to the linked article, that $6,300 is the average for "every retailer, restaurant, supermarket and retail pharmacy company in the Fortune," not the actual amount for Walmart. Capital and intellectual-property intensive firms naturally have higher profits per employee than labor intensive firms.
posted by Mr.Know-it-some at 1:23 PM on March 20 [2 favorites]

It's not that hard to work out. In 4Q2018, i.e. the quarter ending in January 2019, Walmart had $3.69 billion USD in net income. (This led to an diluted EPS of $1.27 per share.) They have 2.2 million "associates" worldwide, so if they had instead distributed that income equally to their employees, each would have received something like $1,677.

However, 4Q was a good quarter for them; 3Q19 would have led to $777.27 per employee, and 2Q actually had a negative EPS, so... hope the hypothetical employees weren't planning on going on a vacation with their dividend that summer.

I could imagine employees working under this system being pretty vulnerable to shysters offering to buy up their dividend payments for a one-time, upfront payment or a guaranteed amount every month. The payday lender people would probably be all over that.
posted by Kadin2048 at 2:17 PM on March 20 [1 favorite]

I thought the article made a pretty good case that Walmart is a planned economy. I could think of a few objections, but by the end of the piece I tend to agree. The question being asked isn't Are planned economies good/bad? It's, What are the requirements for a planned economy to exist and self-perpetuate?

And like mathematicians the answer is to cite Walmart as a pathological instance of a large nontrivial planned economy. That's fair. One possibility is to ask, how can we take Walmart and make FALGS out of it? Why or why not? Etc.
posted by polymodus at 2:28 PM on March 20

I would love to see some citations to back up the points about Marx. It's been years since I read any Marx, but my reading definitely didn't involve a centralized planned economy and certainly not by the state. Marx famously said that under socialism the state would become irrelelvant. This is the withering away of the state, which now that I google it, the phrase seems to have come from Engels, not Marx, but the idea is definitely consistent with what Marx wrote.

A quick search of the Contribution of the Critique of Political Economy linked to didn't show any ctrl-f hits for planned, or central* and the mentions of the word "state" don't seem to suggest they would own the means of production or plan the economy.
posted by If only I had a penguin... at 3:48 PM on March 20 [3 favorites]

Regarding coops and non-profit vs for-profit. A non-profit is not competitive against a profit making entity unless there is some kind of regulatory carve out/support mechanism. The reason is that a for-profit concern is always going to access to more money as it is offering a gain on that money, a non-profit by design cannot. This ability allows the for-profit to undercut the non-profit until the non-profit is out of business. Coops, (REI being a good example, there is zero meaningful input from REI Coop members on the governance of REI,) almost uniformly devolve into being run for the benefit of their directors. A lot of non-profits are basically fiefdoms for their CEO, with tame boards and often a disconnect between the stated mission and the day to day decision making.

My opinion anyway.
posted by Pembquist at 6:59 PM on March 20 [1 favorite]

No, a planned economy would have to take an entirely different form than Walmart, which takes price inputs and demand levels more or less as givens. Walmart is geared around one thing: squeezing its suppliers (and laborers) for the lowest possible prices it can get and then passing those savings straight on to the consumer to gobble market share and drive volume. The absolutely necessity of low prices and high volumes drive the entire Walmart supply chain. Without competition driving the managers to do that the entire system would not work.

I mean, you would think that over time a not-for-profit enterprise would outcompete a for-profit enterprise in the same industry, simply by being able to reinvest what the for-profit enterprise has to pay out in dividends.

I would not think that. The reason corporate structures are what they are and not co-ops or other forms of non-profits has to do with finance, specifically financing costs. Corporations perform IPOs or issue equity to private partners because selling ownership rights is a cheaper source of money than issuing bonds at that point in time (or perhaps the only form of financing available depending on how risky the business is). The right mix of bonds and stock issuance keeps costs lower than a co-op is going to be able to get issuing only bonds, plus you can add different structures to the bonds to make costs even lower for a public company than a co-op can get, like convertible bonds. You can use the cheap financing to steamroll any competition that is unwilling to give up the governance rights.

You'd expect a company that pays out zero dividends and reinvests everything to be even more competitive

This is true only when the company has more profitable things to invest in that it is specialized to engage with, otherwise you're just burning money because of opportunity costs. This is easiest to see this is to imagine retailing a specific item, say you're a salt trader. At a certain point, you're selling all the salt you're going to sell, if you buy another ship and fill it with salt it's just going to sit in a warehouse, so now you're paying money to warehouse plus whatever the costs of the ship and crew are that brought the spice over. If you continue to run this extra ship, you'll lose more and more money on warehouse space and salaries. Double down and buy another ship and now you are exponentially losing money. The firm could have taken that money and invested it in the bond or stock market and made more money, this is the opportunity cost of buying another salt ship. If you're not specialized in investing that might be too risky for you, so generally if firms think the money would be better spent in the market, the firm returns the money to its owners to invest. This is the basic corporate finance model most companies use for decision making.
posted by HarshCoffee at 7:22 PM on March 20 [4 favorites]

No, a planned economy would have to take an entirely different form than Walmart, which takes price inputs and demand levels more or less as givens.

But first of all this describes an economy. It is simply the concept of a micro-economy or a micro-culture. I think this is the correct way to read the Marxian literature and the authors' book would have to develop this sense of the concept. The withering concept explained in Wikipedia also basically says this and contains a very good argument why it should be thought of as planned as well.

A common pattern I see is the importation of mainstream conceptions of terms whereas in the area of political economics authors are more philosophical and thus unconventional, or radical, when it comes to the usage of such vocabulary.
posted by polymodus at 8:02 PM on March 20

Second, lemonade is of an entirely different form than a lemon. Where article uses the term refine I think that's exactly what they meant. It's the distinction i.e. the existing system and any future solution depending on yet in contrast to it in critical ways. That was a key part of Marxist theorizing.
posted by polymodus at 8:09 PM on March 20

To the firm itself, shareholders are parasitic, and dividends are a deadweight loss.

This statement confuses me. While this may be strictly true of Walmart(and I’m not sure it is, as I thought the family was still the largest shareholder) and other Fortune 500 companies, it’s certainly not of most companies. The largest shareholders are “the firm”, in the sense that they hold the board seats or at least elect the directors who are the ultimate level of accountability in “the firm”. In a lot of startups they are also the management and workers of the corporation (my experience is biased towards tech, so not fully versed in other sectors).

With regard to Walmart, as someone pointed out earlier, Walmart is only rigorously planned around two things, squeezing vendors and employees on price and driving volume(sales). There were important design decisions (their DC and store locations) that gave them structural advantages over large competitors, but it was the side effect of extracting wealth from towns and cities, depressing local economies, and creating feedback loops that reinforced creation of Walmart customers that cemented their box store dominance. I think the book “The Walmart Effect” goes into this. So I just don’t see “central” or “planned” as describing Walmart in any way.
posted by herda05 at 8:17 PM on March 20

I'm going to reserve judgement until I get my hands on their actual book, but if I was just going by the article, I'd agree with the folks in this thread that they're really reaching with describing Walmart as a planned economy. Planning in the colloquial sense of thinking ahead and using various means to try to predict where the market is going next, and trying to make sure you have what you need in terms of personnel and resources to handle things, is something every capitalist organization does, and that really seems to be all that the article is describing. They're just saying "wow, Walmart does it on a really large scale".

Which doesn't mean that anyone trying to build socialized economic units wouldn't benefit from understanding the nuts and bolts of how, for example, Walmart handles its supply chains. But that's a much different and much smaller claim.
posted by AdamCSnider at 9:30 PM on March 20

With regard to Walmart, as someone pointed out earlier, Walmart is only rigorously planned around two things, squeezing vendors and employees on price and driving volume(sales).

Again this is an incorrect reading of the author's arguments. To understand what they're saying their assertions have to be put in context of Marx's conditions for what "planned" and analogously, "states" mean. Marx wrote a lot on the problem on social coordination and how a proletariat-organized means of production necessarily entails a different form.

If you're using planning in a colloquial or "standard" (unexamined) sense, that is decontextualizing these arguments. The references are there; they're as close as the link to Wikipedia on the withering concept, and more. Part of discussing these materials means knowing this background. It's a prerequisite. It's certainly easy to shoot down the arguments by applying a different framework and ignoring the community's way of discussing the scholarship.
posted by polymodus at 10:33 PM on March 20

Planning in the colloquial sense of thinking ahead and using various means to try to predict where the market is going next, and trying to make sure you have what you need in terms of personnel and resources to handle things, is something every capitalist organization does, and that really seems to be all that the article is describing.

So for example in the Marxian context, a planned economy happens conditioned on the existence of production that meets the basic material needs of every individual in its economy. Marx had a rationale for positing this. This immediately rules out many other candidate examples, say Apple Inc. That's in the first paragraph of the article.
posted by polymodus at 10:50 PM on March 20 [1 favorite]

Walmart isn't a "planned economy" as much as it's a "predicted economy".

That definitely seems like a distinction without a difference
posted by eustatic at 7:00 AM on March 21

an oldie, but goodie!*
The Corporation as a Command Economy :P
posted by kliuless at 11:47 PM on March 25 [1 favorite]

more here :P
posted by kliuless at 9:41 PM on March 28

Actually I really thin everyone interested in this should read the above link. It goes into a lot of what I’ve been thinking about in terms of economic planning and the history of it and possible future

Tl;Dr. Democracy is not an abstract virtue it has to be the core mechanism of the process of it doesn’t work.
posted by The Whelk at 2:21 PM on April 6

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