A structured approach for progressive political ambitions – Part 3

This is Part 3 of the short series of briefing notes that arose out of discussions I recently had in London about how a progressive political party might want to break out of the shackles that the Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I focused on aspects of the institutional structure that should be considered to support that shift in focus, including a planning network and a return to a public employment service. In Part 3, I examine the long debate about economic planning and demonstrate that most of the criticisms of it from free market advocates are no longer applicable in an age of rapid, networked communication systems.

Earlier posts:

1. A structured approach for progressive political ambitions – Part 1 (March 2, 2026).

2. A structured approach for progressive political ambitions – Part 2 (March 9, 2026).

I want to make it clear that these briefing notes are not intended to sketch a blueprint for a ‘new socialism’ – a ‘from scratch’ architecture.

While I am not a political scientist, like everyone I have a sense of what is possible within reasonable time horizons.

I am also keenly aware of the inertia in existing institutional structures and so my thoughts here are about moving to a better system, that would iterate on the existing system.

In other words, while I would love to smash the existing Capitalist system and there are well thought through designs of a ‘new socialist’ society, which would would be operational, what I am doing here is iteration rather than smashing.

One reason for that approach relates to path dependence.

How would we get to a ‘new socialist’ society?

While the end point is now well articulated by several authors, it is not clear that the resistance on the path to the end point would allow us to get there.

That discussion is a topic that will I write about another time as my research on it at the moment is progressing.

But I do think that by introducing substantial retrenchments to the current neoliberal reality will help lay out the path to a non-capitalist future.

In other words, people need to see how the abandonment of some of the key neoliberal elements dramatically improves their well-being and that would instill a new sense of trust about government intervention and public institutions.

They need to relate the substantial and growing income and wealth inequality to the cause (logic of capitalism) and see that the solution is not ‘neoliberalism lite!’ but a fundamental shift in the ownership of capital and organisation of production.

They also need to understand that what the role of government is.

The so-called ‘mixed economy’, which is cast as the state mediating between the conflictual ambitions of capital and labour, is a myth.

As we explained in our 2017 book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) – under neoliberalism, the state has been reconfigured to become an agent for capital and through its legislative and regulative capacity has undermined the rights and well-being of workers to subordinate their interests to those that best benefit capital.

That is the role of an agent after all – to promote the interests of the client.

While I do consider the ‘social democratic’ era after WW2 was defined by the state actively engaging in full employment, redistribution and advancing the provision of public goods (education, health, transport, electrification, telecommunications, etc), that period was short-lived and the power of capital rebounded – and the neoliberal retrenchment began.

And the capacity of governments to maintain the welfare state interventions they introduced in that brief period of social democracy has been consistently undermined by the dominance of mainstream macroeconomic narratives about ‘taxpayer funds’ and ‘how to pay for it?’.

Over time, it has become increasingly difficult from a political standpoint for governments to sustain those initiatives and, instead, political parties on the right and the left have converged and privatised, outsourced, and retrenched essential services.

Now the basic elements of our well-being – housing, energy, health care, education – are profit centres for capital rather than being public goods provided by the state on our behalf.

Which is why I think progressive political forces must embark on a massive education campaign to reverse some of the mainstream economics indoctrination that has successfully penetrated society and the way we think and act.

I also preface the following by noting that what I am about to write is not some new idea.

The idea that a planned society (and embedded economy) can deliver excellent outcomes is not new.

And certainly the applications of – Cybernetics – and – Management cybernetics – have provided powerful intellectual support to the viability of a planned economy.

Market socialism

But first we need to consider the concept of – Market Socialism – which was developed to counter the idea that a mixed economy (combining state and capitalist sectors) would ultimately be a viable solution to advancing human well-being.

This idea has a long history and I first really encountered it as an undergraduate student studying comparative economic systems.

I particularly became interested in the – Socialist calculation debate – which was a discussion between the major players in the Austrian School (Ludwig von Mises and Friedrich Hayek) who were implacably opposed to even the thought of Socialism, and, various neoclassical and Marxian economists (including Oskar R. Lange, Abba P. Lerner, Fred M. Taylor, Henry Douglas Dickinson and Maurice Dobb) who promoted the feasibility of Socialism.

Even before these promoters of the feasibility of Socialism, a young German economist named – Cläre Tisch – had completed her PhD thesis in 1932 – Economic Calculation and Distribution in the Centrally Organized Socialist Commonwealth (original German version – which laid out the argument that a socialist planning system could deliver efficient outcomes.

She met with a bitter end at the hand of the Nazis after being transported to Minsk around 1941 or 1942.

At the time she was researching her PhD, there was a growing debate about the relative efficiency and viability of socialist planning versus capitalist market systems.

The famous Italiam economist – Vilfredo Pareto – contributed the idea of – Pareto efficiency – to neoclassical economic theory, which is the idea that well-being is maximised “when no one can be made better off without making someone else worse off”.

In his famous and very influential 1906 book – Manuale di Economia Politica (Italian version) – he wrote that (Page 347):

In conclusione, l’economia pura non ci dà criteri veramente decisivi per scegliere tra un ordinamento di proprietà o di concorrenza privata e un ordinamento socialista. Quei criteri si possono solo avere tenendo conto di altri caratteri dei fenomeni.

Which translates, dear readers into the rather important concession that:

In conclusion, pure economics does not provide us with truly decisive criteria for choosing between a system of private property or competition and a socialist system. Such criteria can only be obtained by taking into account other characteristics of phenomena.

This ran counter to the idea that neoclassical economics that focused on optimality via market exchanges could not be used to arbitrate between those who believed capitalism was superior and those who preferred a socialist system.

And today that still holds – mainstream economics cannot be used to disavow us from desiring a socialist system – all claims that a socialist system would be inferior because private property and market exchange are necessary to maximise well-being cannot be resolved through appeal to economic theory.

It also holds that there is nothing that mainstream economic theory can tell us about the desirability of the size of government.

In the popular commentary, it is assumed that economists believe a ‘smaller’ government footprint is best and somehow that ‘belief’ is given authority through appeal to economic theory.

Along the lines of ‘it must be true because an economist has the authority to draw such conclusions’.

However, that inference is false.

Economic theory has nothing to say about which size of government is better or worse.

Anyway, the debate about the ‘efficiency’ of a socialist system essentially began in 1908, when Italian neoclassical economist – Enrico Barone – published an elaborate (for its time) mathematical model for a socialist economy.

I won’t go into Barone’s views about nationalism, militarism etc – he was both and didn’t believe in democracy – he saw the state as being vehicle where the industrial elites could advance their interests.

He supported Mussolini.

The journal article – IL MINISTRO DELLA PRODUZIONE NELLO STATO COLLETTIVISTA (Italian original – you need a library access to read it) – was published in the Giornale degli Economisti in September 1908.

In his ‘Ministry of Production’ work he posed two questions at the outset (translated from Italian):

1. Will it be useful for some capital to become collectively owned and for production to be socialised?

2. How, under a collectivist regime, should production be organized?

He noted that in focusing on the second question, the answer to the first was by and by – in other words, he said he was “not writing for or against collectivism”.

Rather, he wanted to outline the conditions where collectivism would work.

He also seek (at this stage) to advocated for market socialism or central planning as ways of organising a socialist state.

I won’t go into the technical aspects of Barone’s work – it is rather opaque even to those who can comprehend the mathematics, which is why Barone, himself, urges readers to explore Part IV if they are having troubles with the earlier sections of the paper.

He proposes a ‘Ministry of Production’ that has ultimate authority to allocate productive resources in such a way that overall well-being is maximised.

It doing that, he abstracts from the politics that would sit on top of that Ministry.

Barone showed that if certain conditions were present, a fully planned economy using a – Shadow price – system (effectively a monetary value for something that is not traded in a market place) – could achieve what he called “maximum collective welfare”.

This meant that all goods and services were being provided at the lowest possible resource cost, which is the same outcome that neoclassical economists claim an unfettered capitalist market place would deliver.’

In other words, a shift from capitalism to socialism would not necessarily sacrifice the so-called benefits of ‘free market’ exchange based on individual choice and private ownership.

His caveat, however, was that such outcomes would require a system of “experimentation on a large scale, with great demands on data collection” – that is, to ensure the state had access to information that was, in his view, generated routinely and implicitly by market exchanges (preferences of consumers interacting with the producer cost realities) where the prices adjusted to bring the supply and demand sides together in an ‘optimal’ fashion.

The point is that Barone suggested that ideology aside, his system of equations for a collectivist equilibrium were identical to those that established a individual, free competitive equilibrium (optimal state).

Which sparked the subsequent debate and conditioned the work that was to follow on the principles of Market Socialism.

In – On the Economic Theory of Socialism – which is a collection of two essays, the first by – Fred M. Taylor – ‘The Guidance of Production in a Socialist State’ – and, the second by – Oskar R Lange – ‘On the Economic Theory of Socialism’ – we see how the work was developed.

Both were known for developing the principles of – Market socialism – which recognises that within a system of – Social ownership – which is the basis of a Socialist state and a rejection of the Capitalist mode of production, the price signals emerging from the interaction between the demand for and supply of a good or service play an intrinsic role in the allocation of productive resources and production decisions.

Market socialism stands in contradistinction to a totally planned economic where resource allocation decisions, in it purest form, are decided by technicians rather than consumer preferences.

The – Lange Model – which is sometimes referred to as the ‘Lange-Lerner theorem’ after its proponents, Oskar Lange and Abba Lerner (who also contributed the notion of ‘functional finance’).

I will return to this work in Part 4 of the series.

Conclusion

So far we have been introduced to work that established under certain conditions, a socialist organisation of production could generate the same levels of well-being as a market-system based on private property relations and capitalist ownership of the means of production.

That alone was considered to be an important breakthrough – it separated the ideological disdain for socialism from the technical matters – which was a highly significant step.

That separation is still blurred by free market ideologues.

In Part 4, we will see how developments in modern cybernetics added to the credibility of the earlier work on collectivism.

That is enough for today!

(c) Copyright 2026 William Mitchell. All Rights Reserved.