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I.4.5 What about “supply and demand”?

Anarchists do not ignore the facts of life, namely that at a given moment there is so much a certain good produced and so much of it is desired to be consumed or used. Neither do we deny that different individuals have different interests and tastes. However, this is not what is usually meant by “supply and demand.” Often in general economic debate, this formula is given a certain mythical quality which ignores its underlying realities as well as some unwholesome implications of the theory (for example, as discussed in section C.1.5 the market can very efficiently create famines by exporting food to areas where there is demand for it). At the very least, the “the law of supply and demand” is not the “most efficient” means of distribution in an unequal society as decisions are skewed in favour of the rich.

As far as “supply and demand” in terms of allocating scare resources is concerned, anarchists are well aware of the need to create and distribute necessary goods to those who require them. The question is, in an anarchist society, how do you know that valuable labour and materials are not being wasted? How do people judge which tools are most appropriate? How do they decide among different materials if they all meet the technical specifications? How important are some goods than others? How important is cellophane compared to vacuum-cleaner bags and so which one should be produced?

It is answers like this that the supporters of the market claim that their system answers. For individualist and mutualist anarchists, their non-capitalist market would indicate such information by differences between market price and cost price and individuals and co-operatives would react accordingly. For communist and collectivist anarchists, who reject even non-capitalist markets, the answer is less simple. As discussed in section I.1.3, these anarchists argue that although the market does answer such questions it does so in irrational and dehumanising ways (while this is particularly the case under capitalism, it cannot be assumed this will disappear in a post-capitalist market). The question is: can collectivist and communist anarchism answer such questions? Yes, they reply.

So collectivist and communist anarchists reject the market. This rejection often implies, to some, central planning. As the market socialist David Schweickart puts it, ”[i]f profit considerations do not dictate resource usage and production techniques, then central direction must do so. If profit is not the goal of a productive organisation, then physical output (use values) must be.” [Against Capitalism, p. 86] However, Schweickart is wrong. Horizontal links need not be market based and co-operation between individuals and groups need not be hierarchical. What is implied in this comment is that there is just two ways to relate to others — either by prostitution (purely by cash) or by hierarchy (the way of the state, the army or capitalist workplace). But people relate to each other in other ways, such as friendship, love, solidarity, mutual aid and so on. Thus you can help or associate with others without having to be ordered to do so or by being paid cash to do so — we do so all the time. You can work together because by so doing you benefit yourself and the other person. This is the real communist way, that of mutual aid and free agreement.

So Schweickart is ignoring the vast majority of relations in any society. For example, love/attraction is a horizontal link between two autonomous individuals and profit considerations do not enter into the relationship. Thus anarchists argue that Schweickart’s argument is flawed as it fails to recognise that resource usage and production techniques can be organised in terms of human need and free agreement between economic actors, without profits or central command. This system does not mean that we all have to love each other (an impossible wish). Rather, it means that we recognise that by voluntarily co-operating as equals we ensure that we remain free individuals and that we can gain the advantages of sharing resources and work (for example, a reduced working day and week, self-managed work in safe and hygienic working conditions and a free selection of the product of a whole society). In other words, a self-interest which exceeds the narrow and impoverished egotism of capitalist society.

Thus free agreement and horizontal links are not limited to market transactions — they develop for numerous reasons and anarchists recognise this. As George Barrett argued:

“Let us imagine now that the great revolt of the workers has taken place, that their direct action has made them masters of the situation. It is not easy to see that some man in a street that grew hungry would soon draw a list of the loaves that were needed, and take it to the bakery where the strikers were in possession? Is there any difficulty in supposing that the necessary amount would then be baked according to this list? By this time the bakers would know what carts and delivery vans were needed to send the bread out to the people, and if they let the carters and vanmen know of this, would these not do their utmost to supply the vehicles … If … [the bakers needed] more benches [to make bread] … the carpenters would supply them [and so on] … So the endless continuity goes on — a well-balanced interdependence of parts guaranteed, because need is the motive force behind it all .. . In the same way that each free individual has associated with his brothers [and sisters] to produce bread, machinery, and all that is necessary for life, driven by no other force than his desire for the full enjoyment of life, so each institution is free and self-contained, and co-operates and enters into agreements with other because by so doing it extends its own possibilities. There is no centralised State exploiting or dictating, but the complete structure is supported because each part is dependent on the whole … It will be a society responsive to the wants of the people; it will supply their everyday needs as quickly as it will respond to their highest aspirations. Its changing forms will be the passing expressions of humanity.” [The Anarchist Revolution, pp. 17–19]

To make productive decisions we need to know what others need and information in order to evaluate the alternative options available to us to satisfy that need. Therefore, it is a question of distributing information between producers and consumers, information which the market often hides (or actively blocks) or distorts due to inequalities in resources (i.e. need does not count in the market, “effective demand” does and this skews the market in favour of the wealthy). This information network has partly been discussed in the last section where a method of comparison between different materials, techniques and resources based upon use value was discussed. In addition, the need to indicate the current fluctuations in stocks, production and consumption has also to be factored in when making decisions.

To indicate the relative changes in scarcity of a given good it will be necessary to calculate what could be termed its “scarcity index.” This would inform potential users of this good whether its demand is outstripping its supply so that they may effectively adjust their decisions in light of the decisions of others. This index could be, for example, a percentage figure which indicates the relation of orders placed for a good to the amount actually produced. For example, a good which has a demand higher than its supply would have an index value of 101% or higher. This value would inform potential users to start looking for substitutes for it or to economise on its use. Such a scarcity figure would exist for each syndicate as well as (possibly) a generalised figure for the industry as a whole on a regional, “national”, etc. level.

In this way, a specific good could be seen to be in high demand and so only those producers who really required it would place orders for it (so ensuring effective use of resources). Needless to say, stock levels and other basic book-keeping techniques would be utilised in order to ensure a suitable buffer level of a specific good existed. This may result in some excess supply of goods being produced and used as stock to handle unexpected changes in the aggregate demand for a good. Such a buffer system would work on an individual workplace level and at a communal level. Syndicates would obviously have their inventories, stores of raw materials and finished goods “on the shelf” which can be used to meet unexpected increases in demand. Communal stores, hospitals and so on would have their stores of supplies in case of unexpected disruptions in supply.

This is a common practice even in capitalism, with differences between actual demand and expected demand being absorbed by unintended stock changes. Firms today also have spare capacity in order to meet such upsurges in demand. Such policies of maintaining stocks and spare capacity will continue to the case under anarchism. It is assumed that syndicates and their confederations will wish to adjust capacity if they are aware of the need to do so. Hence, price changes in response to changes in demand would not be necessary to provide the information that such adjustments are required. This is because a “change in demand first becomes apparent as a change in the quantity being sold at existing prices [or being consumed in a moneyless system] and is therefore reflected in changes in stocks or orders. Such changes are perfectly good indicators or signals that an imbalance between demand and current output has developed. If a change in demand for its products proved to be permanent, a production unit would find its stocks being run down and its order book lengthening, or its stocks increasing and orders falling … Price changes in response to changes in demand are therefore not necessary for the purpose of providing information about the need to adjust capacity.” [Pat Devine, Democracy and Economic Planning, p. 242]

So syndicates, communes and their confederations will create buffer stocks of goods to handle unforeseen changes in demand and supply. This sort of inventory has also been used by capitalist countries like the USA to prevent changes in market conditions for agricultural products and other strategic raw materials producing wild spot-price movements and inflation. Post-Keynesian economist Paul Davidson argued that the stability of commodity prices this produced “was an essential aspect of the unprecedented prosperous economic growth of the world’s economy” between 1945 and 1972. US President Nixon dismantled these buffer zone programmes, resulting in “violent commodity price fluctuations” which had serious negative economic effects. [Controversies in Post-Keynesian Economics, p. 114 and p. 115] Again, an anarchist society is likely to utilise this sort of buffer system to iron out short-term changes in supply and demand. By reducing short-term fluctuations of the supply of commodities, bad investment decisions would be reduced as syndicates would not be mislead, as is the case under capitalism, by market prices being too high or too low at the time when the decisions where being made (as discussed in section I.1.5 such disequilibrium prices convey misinformation which causes very substantial economic distortions).

This, combined with cost-benefit analysis described in section I.4.4, would allow information about changes within a moneyless economy to rapidly spread throughout the whole system and influence all decision makers without the great majority knowing anything about the original causes of these changes. This would allow a syndicate to ascertain which good used up least resources and therefore left the most over for other uses (i.e., relative costs or scarcity) as well as giving them information on what resources were used to create it (i.e., the absolute costs involved) The relevant information is communicated to all involved, without having to be ordered by an “all-knowing” central body as in a Leninist centrally planned economy. As argued in section I.1.2, anarchists have long realised that no centralised body could possibly be able to possess all the information dispersed throughout the economy to organise production and if such a body attempted to do so, the resulting bureaucracy would effectively reduce and impoverish the amount of information available to decision makers and so cause shortages and inefficiencies.

To get an idea how this system could work, let us take the example of a change in the copper industry. Let us assume that a source of copper unexpectedly fails or that the demand for copper increases. What would happen?

First, the initial difference would be a diminishing of stocks of copper which each syndicate maintains to take into account unexpected changes in requests. This would help buffer out short lived, changes in supply or requests. Second, naturally, there is an increase in demand for copper for those syndicates which are producing it. This immediately increases the scarcity index of those firms and their product. For example, the index may rise from 95% (indicating a slight over-production in respect to current demand) to 115% (indicating that the demand for copper has risen in respect to the current level of production). This change in the scarcity index (combined with difficulties in finding copper producing syndicates which will accept their orders) enters into the decision making algorithms of other syndicates. This, in turn, results in changes in their plans. For example, the syndicates can seek out other suppliers who have a lower scarcity index or substitutes for copper may be used as they have become a more efficient resource to use.

In this way, requests for copper products fall and soon only reflect those requests that really need copper (i.e., do not have realistic substitutes available for it). This would result in the demand falling with respect to the current supply (as indicated by requests from other syndicates and to maintain buffer stock levels). Thus a general message has been sent across the economy that copper has become (relatively) scare and syndicate plans have changed in light of this information. No central planner made these decisions nor was money required to facilitate them. We have a decentralised, non-market system based on the free exchange of products between self-governing associations.

Looking at the wider picture, the question of how to response to this change in supply/requests for copper presents itself. The copper syndicate federation and cross-industry syndicate federations have regular meetings and the question of the changes in the copper situation present themselves and they must consider how to response to these changes. Part of this is to determine whether this change is likely to be short term or long term. A short term change (say caused by a mine accident, for example) would not need new investments to be planned. However, long term changes (say the new requests are due to a new product being created by another syndicate or an existing mine becoming exhausted) may need co-ordinated investment (we can expect syndicates to make their own plans in light of changes, for example, by investing in new machinery to produce copper more efficiently or to increase production). If the expected changes of these plans approximately equal the predicted long term changes, then the federation need not act. However, if they do then investment in new copper mines or large scale new investment across the industry may be required. The federation would propose such plans.

Needless to say, the future can be guessed, it cannot be accurately predicted. Thus there may be over-investment in certain industries as expected changes do not materialise. However, unlike capitalism, this would not result in an economic crisis (with over-investment within capitalism, workplaces close due to lack of profits, regardless of social need). All that would happen is that some of the goods produced would not be used, some labour and resources would be wasted and the syndicates would rationalise production, close down relatively inefficient plant and concentrate production in the more efficient ones. The sweeping economic crises of capitalism would be a thing of the past.

In summary, each syndicate receives its own orders and supplies and sends its own produce out to specific consumers. Similarly, communal distribution centres would order required goods from syndicates it determines. In this way consumers can change to syndicates which respond to their needs and so production units are aware of what it is socially useful for them to produce as well as the social cost of the resources they need to produce it. In this way a network of horizontal relations spread across society, with co-ordination achieved by equality of association and not the hierarchy of the corporate structure.

While anarchists are aware of the “isolation paradox” (see section B.6) this does not mean that they think the commune should make decisions for people on what they were to consume. That would be a prison. No, all anarchists agree that is up to the individual to determine their own needs and for the collectives they join to determine social requirements like parks, infrastructure improvements and so on. However, social anarchists think that it would be beneficial to discuss the framework around which these decisions would be made. This would mean, for example, that communes would agree to produce eco-friendly products, reduce waste and generally make decisions enriched by social interaction. Individuals would still decide which sort goods they desire, based on what the collectives produce but these goods would be based on a socially agreed agenda. In this way waste, pollution and other “externalities” of atomised consumption could be reduced. For example, while it is rational for individuals to drive a car to work, collectively this results in massive irrationality (for example, traffic jams, pollution, illness, unpleasant social infrastructures). A sane society would discuss the problems associated with car use and would agree to produce a fully integrated public transport network which would reduce pollution, stress, illness, and so on.

Therefore, while anarchists recognise individual tastes and desires, they are also aware of the social impact of them and so try to create a social environment where individuals can enrich their personal decisions with the input of other people’s ideas.

On a related subject, it is obvious that different syndicates would produce slightly different goods, so ensuring that people have a choice. It is doubtful that the current waste implied in multiple products from different companies (sometimes the same multi-national corporation!) all doing the same job would be continued in an anarchist society. However, production will be “variations on a theme” in order to ensure consumer choice and to allow the producers to know what features consumers prefer. It would be impossible to sit down beforehand and make a list of what features a good should have — that assumes perfect knowledge and that technology is fairly constant. Both these assumptions are of limited use in real life. Therefore, co-operatives would produce goods with different features and production would change to meet the demand these differences suggest (for example, factory A produces a new CD player, and consumption patterns indicate that this is popular and so the rest of the factories convert). This is in addition to R&D experiments and test populations. In this way consumer choice would be maintained, and enhanced as people would be able to influence the decisions of the syndicates as producers (in some cases) and through syndicate/commune dialogue.

Finally, it would be churlish, but essential, to note that capitalism only equates supply and demand in the fantasy world of neo-classical economics. Any real capitalist economy, as we discussed in section I.1.5 is marked by uncertainty and a tendency to over-produce in the response to the higher profits caused by previously under-producing goods, with resulting periods of crisis in which falling effective demand sees a corresponding fall in supply. Not to the mention the awkward fact that real needs (demand) are not met simply because people are too poor to pay for the goods (i.e., no effective demand). As such, to suggest that only non-market systems have a problem ensuring demand and supply meet is mistaken.

To conclude, anarchists do not ignore “supply and demand.” Instead, they recognise the limitations of the capitalist version of this truism and point out that capitalism is based on effective demand which has no necessary basis with efficient use of resources. Instead of the market, social anarchists advocate a system based on horizontal links between producers which effectively communicates information across society about the relative changes in supply and demand which reflect actual needs of society and not bank balances. The investment response to changes in supply and demand will be discussed in section I.4.8 while section I.4.13 will discuss the allocation of work tasks.

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