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Put simply, a poor person has not been allocated the stuff (or the ability to buy it) that a rich person has. The needs of the rich and poor are met and unmet in wildly different ways: the potential to fully articulate their humanity is cut off at the root for some, while others are granted space to flourish. Inequality limits what a person, and indeed society, could otherwise do; it delimits our freedom. Past generations have fought to expand the realm of freedom—to ensure all adult humans have the same rights and to ensure that any new capabilities delivered through technological advance are to be made available to all. And if we are to continue this battle to correct the titanic, manifest unfairness of the way things are, we must therefore wage a struggle over which method for the allocation of things we want as a society.
The technique, a type of vendor-managed inventory, works to minimize what businesses call the “bullwhip effect,” the free market’s kissing cousin to Stalinism’s shortage problem. First identified in 1961, the bullwhip effect describes the phenomenon of increasingly wild swings in mismatched inventories against product demand the further one moves along the supply chain toward the producer, ultimately extending to the company’s extraction of raw materials. Therein, any slight change in customer demand reveals a discord between what the store has and what the customers want, meaning there is either too much stock or too little.
To illustrate the bullwhip effect, let’s consider the “too-little” case (although the phenomenon works identically in either scenario). The store readjusts its orders from the distributor to meet the increase in customer demand. But by this time, the distributor has already bought a certain amount of supply from the wholesaler, and so it has to readjust its own orders from the wholesaler—and so on, through to the manufacturer and the producer of the raw materials. Because customer demand is often fickle and its prediction involves some inaccuracy, businesses will carry an inventory buffer called “safety stock.” Moving up the chain, each node will observe greater fluctuations, and thus greater requirements for safety stock. One analysis performed in the 1990s assessed the scale of the problem to be considerable: a fluctuation at the customer end of just 5 percent (up or down) will be interpreted by other supply chain participants as a shift in demand of up to 40 percent.
like the butterfly effect but for supply chains i guess
But there’s a catch—a big one for those who defend the market as the optimal mechanism for allocation of resources: the bullwhip effect is, in principle, eliminated if all orders match demand perfectly for any period. And the greater the transparency of information throughout the supply chain, the closer this result comes to being achieved. Thus, planning, and above all trust, openness and cooperation along the supply chain—rather than competition—are fundamental to continuous replacement. This is not the “kumbaya” analysis of two socialist writers; even the most hard-hearted commerce researchers and company directors argue that a prerequisite of successful supply chain management is that all participants in the chain recognize that they all will gain more by cooperating as a trusting, information-sharing whole than they will as competitors.
[...] Too often we confuse the violence of despots with what makes despotism wrong. But much of this violence is a grotesque tool to enforce submission. It is this unfreedom—unchallengeable control of a human by another—that is the worst crime.
The manager’s exercise of central planning over his small province of tyranny is therefore not simply a better means to an end, as Coase thought, but a reflection of how the economy actually works. The adversarial relationship between bosses and workers that capitalism creates is no accident of markets merely introducing transaction costs that are best avoided through planning. Yet for mainstream economists, the confrontation between workers and managers only comes up in the context of “shirking.” The GPS device in the UPS driver’s truck, the call center badge that monitors washroom breaks or the white-collar worker’s app that tracks web browsing history are the sticks requiring one does as one is told; the bonuses are the carrots.
Shirking, however, is a very rational response for someone who has little or no say over their work, often has no deeper sense of collective responsibility and knows that the profit from what they do ends up in someone else’s pocket. Shirking is not an innate tendency toward laziness, but rather the way people are under capitalism. Any complex society will have people with different, sometimes-conflicting interests who need to cooperate toward common goals. Humans have embarked upon and accomplished projects in common, from the mundane to the spectacularly ambitious, long before the advent of capitalism and its subtly coercive labor market—indeed, often involving much more explicit coercion. Across history, however, people have also found ways to plan and act together without bosses to tell them what to do.
[...] Instead of optimizing the satisfaction of our needs and desires, as well as workers’ working conditions and livelihoods, Amazon’s plans are geared toward maximizing profit for its shareholders—or future profit, since Amazon keeps plowing money from sales into research, IT and physical infrastructure to squeeze out competitors. Planning for profit is in fact an example of capitalism’s web of allocation inefficiencies. The planning technologies dreamed up by Amazon’s engineers are a way of meeting a skewed set of social needs—one that ends up enriching a few, misusing substantial free social labor, and degrading workers. A democratized economy for the benefit of all will also need institutions that learn about people’s interests and desires, optimize via IT systems, and plan complex distribution networks; but they will look different, perhaps alien to the systems we have today, and they will strive toward dissimilar goals.
These cycles of boom and bust are not, however, pure anarchy. Capitalism, too, has something akin to an economy-wide central planner: the financial system—the first car in the rollercoaster, managing spirits and rationing investment. Economist J. W. Mason, who has developed the idea of finance as planner in a series of articles in Jacobin magazine, writes: “Surplus is allocated by banks and other financial institutions, whose activities are coordinated by planners, not markets … Banks are, in Schumpeter’s phrase, the private equivalents of Gosplan. Their lending decisions determine what new projects will get a share of society’s resources.” Banks decide whether a firm will get a loan to build a new plant, a household a mortgage, or a student a loan for tuition and living expenses—and the terms on which each is repaid. Each loan is an abstract thing that masks something very concrete: work for workers, a roof over someone’s head or an education.
[...] The financial system’s best guesses of ultimately unknowable future profitability, then, govern how concrete resources are set aside. [...]
The financial managers of the global economy—the vast majority working at private rather than central or other public banks—occupy a class, not a control room. They share much in terms of wealth, positions of power, education, and lunches in Davos. But as individuals they have their own histories, ideological leanings and visions for how best to achieve stability for capital. Large-scale planning is mundane, technocratic and systemic, not conspiratorial. Networks of power and ideology replicate themselves without the need for open scheming. [...]
What kinds of transitional demands could such forces make to hasten future socialization? There are relatively small, but meaningful, steps such as creating a public payments system—to ensure that every time you tap your credit or debit card, it is not a private company getting a cut and setting the terms—or a public credit rating agency—to displace the likes of Moody’s or Standard & Poor’s, which play a key role in determining how investment is distributed among competing projects, most recently helping divert a sizeable chunk of it into junk mortgages that nearly crashed the world economy. Then there are bigger public sector projects, like a massive increase in public housing construction—which places land into common ownership, takes housing off the market and ends its role as an investment asset—and its corollary, expanded public pensions. As for those who hold financial power themselves, what better way to disempower them than directly, through proposals to tax away large concentrations of wealth or diminish the role of shareholders and the stock market over the corporate sector—ultimately empowering the workers that produce the goods and services, and the communities that use them. All of these reforms serve to make planning explicit and public, rather than hidden and private as it is today. To quote J. W. Mason once more,
A society that truly subjected itself to the logic of market exchange would tear itself to pieces, but the conscious planning that confines market outcomes within tolerable bounds has to be hidden from view because if the role of planning was acknowledged, it would undermine the idea of markets as natural and spontaneous and demonstrate the possibility of conscious planning toward other ends.
The question is not whether the economy will be planned as a whole, or not at all. Instead, it is whether the present money managers will continue as the capitalist planners of the twenty-first century, or whether we ordinary people will start to remake our economic institutions, introduce democracy into their hearts, and bring the planning that already exists out into the open.
[...] Science and technology could be tools used by workers to help democratically coordinate society, from the bottom up, leaping over the centralization/decentralization dichotomy. Instead of having engineers and operations researchers craft the models of factories, programmers would be under the direction of workers, embedding their deep knowledge of production processes into the software. Instead of the Soviet model of sending large quantities of data to a central command point, the network would distribute, vertically and horizontally, only that amount of information that was needed for decision making. For Beer, Medina writes, Cybersyn offered “a new form of decentralised, adaptive control that respected individual freedom without sacrificing the collective good.”