Fully automated theory

Issue: 167

Padraic Finn

A review of Leigh Phillips and Michal Rozworski, The People’s Republic of Walmart: How The World’s Biggest Corporations are Laying the Foundations for Socialism, Verso (2019), £9.99, and Aaron Bastani, Fully Automated Luxury Communism, Verso (2019), £16.99.

In The People’s Republic of Walmart, Leigh Phillips and Michal Rozworski argue that Walmart, Amazon and China’s Ali Baba are “vast planned economies”, and are now so dominant they usurp the so-called “free market”. Growing computing power means planning on a scale impossible in the Soviet Union is now feasible, opening up the possibility of solving the “economic problem” by allocating resources using information technology rather than the price mechanism.

In a 2005 work, Marxist literary critic Frederic Jameson took a swipe at the limited ambition of utopian thinkers in the age of globalisation by jokingly suggesting that the retail giant Walmart is actually a secret socialist plot to undermine capitalism. In an extract from his 2009 book Valences of the Dialectic, later republished with the title “Walmart as Utopia”, Jameson further explored this idea and argued that Walmart is “the purest expression of that dynamic of capitalism which devours itself…which abolishes the market by means of the market itself.”

Taking Jameson at his word, Phillips and Rozworski argue that Walmart’s vast network of global suppliers don’t act so much as independent businesses competing in a conventional “market”, but as tightly integrated components of a single firm. Indeed, Walmart is more than just a firm—it is a centrally organised command economy with more economic power than many nation states. Its global network of warehouses and retail stores is akin to a gigantic planned economy. If Walmart were a country, it would be the size of Sweden or Switzerland. With an annual revenue of $485 billion, Walmart is bigger than the Soviet Union—that other great planned economy—was at the zenith of its economic power in the 1970s.

For the authors, this planning colossus is “one of history’s greatest logistical and operational triumphs” (p31) and a testament to the huge productive powers unleashed by capitalism. But as it has grown, it has also suppressed market relationships in ever-increasing expanses of the logistics and retail sectors. Walmart is “a boa constrictor slowly but inexorably strangling market capitalism” (p19), and thus opening the possibility of transformation to a global socialist economy.

The book goes on to revisit the market versus planning debates, which took place from the 1920s onwards between Marxists and the neoclassical and Austrian schools of economics, represented by Ludwig von Mises, Friedrich Hayek and Milton Friedman. These economic theorists and apologists for capitalism argued that the market was the most effective way of organising the production and distribution of goods and services. They claimed that planners could not possibly garner all the information necessary to match the individual needs of billions of human beings with the productive capacity of the economy. Attempts at such centralised planning led inevitably to authoritarianism and repression. On the other hand, the market and the price system brings together the information that is normally isolated in the heads of different individuals, providing knowledge that is “instrumental in making production and distribution decisions.”

Phillips and Rozworski challenge this logic, which has become so dominant in the neoliberal period that we continue to live through today. They cite the work of British-born economist Ronald Coase, who pointed to the contradiction that the market model tends to create “islands of conscious power”—large-scale firms within which the price mechanism and the market are suppressed in favour of central planning. Gigantic, globe-spanning firms such as Walmart make decisions about allocation through centralised decision-making, not solely on the basis of price information.

As well as pointing to capitalism’s creation of vast monopoly firms that suppress the free market, the authors also suggest that these tendencies will be accelerated by the growth of computing power. The advent of global digital communications and problem solving by algorithms enables a scale, feedback and detail of planning unseen in the pass. Tantalisingly, they argue that states can use this sort of technology to overcome the market, along with its wastefulness, its ecological destruction and its generation of huge social inequalities.

This idea that technology is throwing up new possibilities for the transformation of society is central to the book. Phillips and Rozworski claim the Bolsheviks (and Karl Marx) had a limited vision of what a transition to socialism would actually be like. They argue that they had few concrete plans for the new society, beyond it involving the “overthrow of the bosses and the free association of producers.”

Just before the October Revolution, Lenin wrote that capitalism had already laid down “an excellent mechanism of coordination” and that key nodes of capitalist control like banks, large firms and the postal system could simply be taken over ready-made by lopping off their “capitalist” appendages. Lenin considered the banking sector to be the key: “a single state bank, the biggest of the big, with branches in every rural district, in every factory will constitute as much as nine tenths of the socialist apparatus.” However, as Phillips and Rozworski argue, planning in the Soviet Union was not driven in practice by a conscious and deliberate programme that grasped towards socialism. Instead, it was a desperate attempt to hold the new socialist state together under the pressures of civil war, starvation and invasion by foreign powers. The chaotic breakdown of the money economy, the growth of barter between previously nationalised firms and the rise of the black market even forced the Bolsheviks to reintroduce elements of the market in 1921. Under this “New Economic Policy” (NEP), the market was temporarily tolerated, with the aim of developing private agricultural production and light industry. Money accounting was restored and factories were expected to operate as autonomous competitive units.

A centralised plan of production was reintroduced in 1928 with Stalin’s “Five Year Plan”. Under the direction of the State Planning Committee (GOSPLAN), heavy industries such as steel and coal were promoted at the expense of the agricultural and the light industrial sectors that had grown under the NEP. The objective was to catch up with the most economically advanced and industrially advanced nations. Significantly, all banking, lending and investment decisions were directed through the state bank. Although agriculture was forcibly “re-collectivised”, grain production still stagnated and there was widespread famine in the early 1930s. Obstructing “the plan” became a criminal offence, and complete suppression of all dissent through show trials, purges and the gulag followed in the wake of Stalin’s drive for rapid industrialisation.

The Second World War reinforced highly centralised planning. It was not until the liberalisation of the so-called “Khrushchev thaw” after the death of Stalin in 1953 that writing off of debts, reductions in quotas and more investment in agriculture led to a period of rapid economic growth. Under the government of Nikita Khrushchev, the Soviet Union experienced extraordinary economic expansion. This was also the period in which the USSR led the world in a number of technological areas, launching the first satellite and the first human being into space. Nevertheless, the Soviet economy was sclerotic in the longer term, and was ultimately destroyed by both its own internal contradictions and the external pressures placed on its by military competition with the United States. So why did Soviet planning fail? As Phillips and Rozworski put the question, “why would planning on the scale of the economy of the Soviet Union succeed in the form of a Walmart but fail in the hands of Stalin?” (p182)

The failure of the Soviet economic model certainly had huge ramifications, including the discrediting of the notion of planned economies and the ascendency of neoliberal economic thought. However, according to Phillips and Rozworski, the explanation for the failure of the Soviet economic model does not lie in the fact that it was planned and centralised, but rather in its lack of democracy. In this way, they seek to rescue “planning” from its Stalinist associations. Phillips and Rozworski reject the arguments of economists such as Alec Nove who claimed that Soviet authoritarianism was the inevitable result of the attempt to coordinate an economy without the market and the price signal. Instead, they argue that “far from planning leading to poor information and thus to shortages, which in turn lead to authoritarianism, it is authoritarianism that undermines the quality of information in the system.” Effective planning needs democracy. Hence, it was the relative liberalisation post-Stalin period that produced innovations in technology, planning and mathematics. Ironically, some of these developments would feed into technical systems that are now used by big capitalist firms, such as the algorithms that now power so many industries and “run the world”.

Drawing on an even more optimistic vision of the possibilities of digital technology, Aaron Bastani’s Fully Automated Luxury Communism declares that we are in the midst of a so-called “third disruption”. This is supposedly an historical event on the same level of importance as the neolithic and industrial revolutions. Bastani offers a vision of “extreme supply”. Technologies enabling the production and storage of solar power, mining of asteroids for valuable ores and the decoding of the genomes of every life form on earth will lead to a future of virtually cost-free production, the elimination of disease and an era of plenty. Following US management theorist Peter Drucker, Bastani asserts that “value increasingly arises from the instructions for using raw materials as opposed to the materials themselves.” Pointing to music streaming services such as Spotify as an example, he argues that technology increasingly means that, once the cost has been incurred, “the instructions can be used over and over again at no additional cost.” Because “information wants to be free”, it continuously outruns the efforts of the capitalists to capture, restrict and profit from it. Orthodox economics defines efficiency at the point where price equals marginal cost, that is, the cost of producing one extra unit. If this no longer holds true, then the price mechanism breaks down, scarcity ceases to exist and the profit system collapses.

The growth of digital technology therefore brings the forces of production into conflict with the relations of production, opening up the prospect of the type of revolution that was envisioned by Marx. Breaking with classical political economy by attributing the source of value to technology rather than labour power, Bastani argues that as manufacturing becomes ever more automated, “capital becomes labour”—strangely, echoing the “human capital” ideas of the neoliberal economic orthodoxy. He claims Marx saw the working class as the key to a future society “only because its revolution was uniquely able to eliminate work and thereby end all class distinctions.” Bastani therefore welcomes the necessary passing of “radical or reformist” forms of organising “erroneously premised on the idea of work enduring forever” (p194). The proper role of the labour movement is to liberate the working class from work.

Bastani seems to give primacy to technological development over political struggle. Though he says that “the relationship between technology and politics is complicated”, his paraphrase of Marx is perhaps revealing: “technology makes history but not in conditions of its own making” (p237). Whilst proclaiming the orthodoxy of his Marxism by asserting that Marx “never believed the transition beyond capitalism would be an exclusively political process”, Bastani’s political project seems to be subordinate to his faith in the apparently limitless growth of science and technology.

Not surprisingly then, Bastani claims that the possibility of communism was actually closed off to both Marx and the Bolsheviks due to the underdevelopment of the technical means of production in their historical eras. Just like Phillips and Rozworski, he argues that what was not possible in the 19th and 20th centuries has now become possible in the 21st century with the development of digital technology.

But if, as Bastani argues, technology is in the process of abolishing the working class and capital has supplanted labour, who are the new agents of historical change? Phillips and Rozworski argue that if the left is to succeed in the digital epoch, it will have to be led by technical workers from the technology-driven logistics and advertising giants such as Walmart, Amazon and Facebook. By contrast, Bastani’s approach hovers between a focus on change through the existing state and through social movements spawned by the digital technology revolution, the anti-globalisation movement and climate activism. Unfortunately, both books work with a limited concept of class and a restricted understanding of the nature of states in a globalised system, and this cramps their political prescriptions.

Phillips and Rozworski’s goal is a “global, stateless, planned economy”. They focus on the globally dominant finance system, arguing that the highly centralised and concentrated US financial sector increasingly uses digital technology to manage its operations and even decide its investment decisions. However, they leave unexplored the global reach of the US banking system and how it might serve as a prototype for a properly socialist financial system.

Bastani’s narrower focus on the nation state (and, in particular, the British state) locates the problems of 21st century life in the fact that “agency ebbs to the market and an increasingly globalised economy undermines the ability of nations to act decisively.” He embraces “de-globalisation” as an opportunity to implement a series of measures at state and local level which can rectify the ravages of globalisation. This leads him to endorse policy ideas such as the so-called “Preston model”, in which local councils follow a localised investment strategy that promotes sustainable and cooperatively owned local industries over footloose global corporations.

Both Bastani and Phillips and Rozworski invest their hopes for fundamental change on a fusion of advanced technology, democratically controlled finance driving investment decisions and handing responsibility for planning to reformed central banks—much as the Bolsheviks did in the 1920s. But it is far from clear that central banks will be open to direction by elected governments. The US Federal Reserve printed vast quantities of dollars to bail out the banking system after the 2008 crash, and repeated this monetary magic in response to the coronavirus pandemic. But they simultaneously opposed nationalisation and state control over investment decisions because it smacked of socialism.

The same problem arises with technology. Innovations in digital technology have enabled a small number of transnational corporations that dominate global trade to augment their profitability by deepening their control over global supply chains. However, their power rests primarily on their size and scale. Walmart may be a massive planned economy, but its cost-cutting drive to profitability comes, not from its use of technology, but from a ruthless squeeze on the wages of workers both in the US and its outsourced suppliers in China and the Global South.

Even if we accept the argument that technological development is inexorably leading to the end of capitalism, there is still the question of political agency: what social force can push through this change, involving the repression of the “speculative economy”, against the entrenched interests of the capitalist class? Far from disappearing, the global working class has grown massively, even through the economic crises that have punctuated the neoliberal period of global capitalism. One of the effects of the Covid-19 pandemic is the rediscovery of millions of “key workers” as being central to the day to day sustenance of society. A politics pitched simply at the level of the nation state or a “new working class” of digital technology workers is surely inadequate to our historical moment.