Consider a recurring pattern in international affairs. A major power backs an armed faction abroad. When that faction takes power, its human rights record becomes a pretext for military contracts and arms sales. The crisis generates jobs in the defense industry while destroying livelihoods elsewhere. This is job creation through destruction.
A simple alternative would be to create jobs by vote.
The usual answer is that economies are too complex for popular direction. Markets, the argument goes, process information that no central authority can aggregate. The history of centrally planned economies gives this objection real force. But the choice is not limited to laissez-faire capitalism or Soviet-style central planning. There is a third possibility: an economy that is planned accountably, with the plan set by popular vote rather than by a party bureau. Production can be organized locally rather than directed from the center.
This series describes that third possibility. It draws on a body of empirical research spanning decades and dozens of countries, showing that the amount of labor required to produce a commodity predicts its market price with remarkable accuracy (see “Labor Values Predict Market Prices,” Part 1, for the full evidence). If economic regularities are this measurable, then democratic planning of production is not a utopian fantasy. It is an engineering problem. Recent work in econophysics and information theory demonstrates that the computation required for economic planning is not only tractable but involves less information transmission than the market system it replaces. This essay lays out the problem with capitalism; the empirical and theoretical foundations on which the alternative rests were presented in Part 1. Part 3 presents the proposal. Part 4 addresses objections. Part 5 concludes.
The profit motive produces interlocking dynamics that make capitalism structurally unstable. Businesses are most profitable when they suppress wages relative to productivity, but when wages are systematically suppressed, workers cannot afford to buy back what they produce. The resulting imbalance between productive capacity and purchasing power pushes prices downward.
When prices fall, a process economists call deflation, businesses cannot extract enough surplus to justify production. Investors hold their money rather than deploying it, and the resulting contraction leads to scarcity. When the money supply increases instead, businesses gather more of it, giving them the appearance of profitability without the pressure to perform socially beneficial work, and inequality rises. Inflation erodes the purchasing power of most workers even as it gives surviving firms the appearance of profitability. Neither deflation nor inflation resolves the underlying imbalance; each simply shifts the damage.
A capitalist economy has no stable state. When it doesn’t grow, it shrinks. Section 5 of Part 3 explains the mechanics of both in detail and shows how this proposal eliminates the trap.
Capitalist growth is fueled by incorporating new markets: new populations willing to work more cheaply, new territories whose resources can be extracted, new consumer sectors opened up by technology. Rosa Luxemburg argued in The Accumulation of Capital (1913) that capitalism requires access to non-capitalist markets to realize surplus value, and that this necessity drives imperialist conquest as advanced capitalist states absorb pre-capitalist regions. The globe is now substantially out of large non-capitalist population centers to incorporate. For continued growth, one must assume that technology will generate demand that people are both willing and able to pay for (that AI-driven job displacement will not be serious) and that environmental constraints will not materially affect market-linked assets. Both assumptions are precarious.
There is also a subtler distortion. What counts as “demand” under capitalism is not demand expressed by human beings but demand expressed by purchasing power. A spender matters to the market in proportion to the capital they can mobilize, and this has nothing to do with social benefit. Production skews toward the interests of the wealthy. This leads to an artificial scarcity of basic necessities, because it is less profitable to produce goods for people who command less purchasing power. This is not an incidental flaw that better regulation could correct. It is a structural feature of any system in which the means of production are deployed for profit rather than for use. The proposal is to redirect production toward what the population actually needs. The question is whether there exists a scientific basis for this redirection. Part 1 presented the case that there does.
The theoretical framework for this proposal is mechanical materialism, the philosophical system described in Part 1 of this series. Because labor values predict market prices with high accuracy across countries and decades (see “Labor Values Predict Market Prices,” Part 1), democratic planning of production has a measurable basis. Because the two-class structure of capitalism is a statistical regularity governed by conservation laws rather than a contingent historical accident (see “The Class Structure as Statistical Regularity,” Part 1), it will not yield to piecemeal reform. Changing it requires altering the underlying relations of production. Because contemporary money creation redistributes existing claims on real output rather than generating new value (see “Money Creation as Redistribution,” Part 1), the financial system reinforces the class divide rather than bridging it. And because the rate of profit tends to fall over the long run (see “The Falling Rate of Profit,” Part 1), capitalism periodically destroys productive capacity while human needs go unmet. Part 3 presents a proposal for what to do about it.
Snapshots of the Labyrinth 