The market came with the dawn of civilization and it is not an invention of capitalism. If it leads to improving the well-being of the people there is no contradiction with socialism. -Mikhail Gorbachev
Was Gorbachev contradicting the basic assumptions of socialism? I don't see a fundamental contradiction.
Consider this: Everyone in the economy gets paid the same monthly salary - regardless of whether you're a child, an engineer, retired, or whatever (yes, people in more difficult jobs may get more "respect" than other jobs, but that's just social conditioning and not related to their salaries). They then spend that money in a market to buy what they want / need. Market pricing still determines prices.
Here's the rub: instead of higher profits going to the producers, the extra money going into those industries just means there is more demand for those products and services. So the money is used to pay new producers in those industries, thus increasing supply - and everyone still has the same monthly salary.
As long as everyone has an equal salary, that is similar to economic democracy. Everyone has an equal amount of "votes" as to what to produce next. The concept of a salary is no longer a "reward" for work (there are plenty of psychological studies that show "rewarding" work results in people liking the work less, and focusing on only the reward as their goal), but as just a method used so that everyone can help determine what goods and services are valuable.
Continued at August 9, 2008