Thanks for posting that SA, it's an interesting book. As for the transition, they put this in the new introduction, quoted below.
In that intro they also discuss the political conjuncture in which they felt the book was a worthwhile exercise - the Thatcher/Gorbachev period when the possibility of socialism and varieties of 'market socialism' were live political issues and very much part of present politics rather than simply recipes for future cookshops or whatever.
http://ricardo.ecn.wfu.edu/~cottrell/socialism_book/preface-a4.pdf
Economic transition to socialism
One of the most obvious gaps in Towards a New Socialism is the lack of any systematic discussion of the process of transition from capitalist to socialist economy, that is, the transition from an economy regulated by the exchange of commodities for money and the extraction of surplus as surplus value, to one regulated in natura by the plan and with a plan-governed extraction of the surplus product. In this section we attempt to remedy that deficiency.
Broadly speaking we see the transition as occurring through the intermediary forms of cooperatives and state-owned capitalist enterprises, in a three-stage process.
A first stage of transition involves moving from a system of shareholder capitalism to a combination of state capitalism and worker-owned enterprises. A second phase involves a transition to a fully planned economy.
What has to be ensured here is the continuity of material production while the property relations change. Since it is commonplace for enterprises to change ownership in a capitalist economy, the mere change in ownership need not directly threaten the continuity of production. There is a substantial history of orderly transitions of enterprises from private to state ownership and back. All that is required for a smooth transition at the level of commodity production is for the staff of the enterprises to remain at work, and for a clear line of state-guaranteed credit be provided to pay commercial bills falling due for the supply of raw materials. A recent example of this was the effective re-nationalization of the railway network in the UK, where almost overnight and without any special legislation the government had the private company running the railways declared insolvent, and its assets passed to a new ‘not for profit’ company. In the process, the shareholders found, like the shareholders in any liquidated company, that they were entitled to only a fraction of what they thought they had owned. This was a special case, however, since the enterprise being taken over was almost insolvent and dependent on government orders.
Turning to the formation of workers’ cooperatives, it would be relatively easy to legislate that the board of limited companies was to be elected either entirely by employees or, say, 75% by employees. In such circumstances the enterprises remain liquid, retain their assets, but change their board of management.
In the formation of both ‘not for profit companies’ and employee-managed companies, the losers are the original shareholders. In the case of the enactment of a law allowing the formation of worker-managed companies the issue is fudged somewhat: the rights of shareholders are restricted without being completely abolished. But it is clear that a board elected by the employees would be likely to pay lower dividends than one elected by shareholders. The inevitable consequence would be a drastic fall in the price of the shares of the companies.
Where the state directly takes companies into its ownership the question of compensation for shareholders inevitably arises. It was the practice of Labour governments in the UK to fund the nationalization of companies by issuing government bonds to former shareholders. The net cost to the exchequer both on the revenue and capital account can be negligible. On the capital account the increase in state liabilities is offset by the shares acquired, while on the revenue side the obligation to pay interest on the bonds can be offset against the expected profits of the new state-owned firms. One can envisage an analogous provision in legislation creating worker-owned enterprises, whereby equity shares are converted to debentures.
Measures like this would enable the transition from rentier-owned capitalism to state- and employee-owned capitalism to be relatively smooth, but would have the disadvantage in the medium term of burdening both the worker-owned and state-owned firms with annual interest payments to the rentier class. It is clear that substantial differences in income and wealth would persist in such a scenario. During the period in which these transitional forms dominate the economy, some alternative would be needed for the limited real role that the stock market continues to play as a source of new investment funds. The obvious recourse here would be an expansion of the role of the banks, perhaps particularly the state bank, as a source of investment funding.
After this phase of transition the economy would still be capitalist, but the ownership role of individual capitalists would be greatly reduced. The most serious economic disruption would have been to the financial sector, where the profitability of stockbroking and investment banking firms would drastically decline. But this decline would be manageable, being no worse than the structural changes to many heavy industries that occurred during the last twenty years.
A second phase of transition involves the development of the capacity for detailed planning — setting up of the administrative system, establishment of the democratic control mechanisms and construction of the computer networks and software that would be required to carry out the sort of planning we discuss in the book. Initially these plans would be indicative, becoming mandatory as the system bedded down.
A third phase involves the actual abolition of monetary exchange and the movement to payment in labour tokens. At this point the class interests of the residual rentier class and the mass of the employed population come into sharp conflict. The installation of a system of payment by labour tokens is incompatible with paying interest, since the money in which the interest payments were made will cease to be legal tender. By this point, the essentially parasitic nature of the rentier class will be generally evident, since they would have lost any remaining productive function. The major complication that arises here is the extent to which the pensions system of a country depends upon financial assets—stocks and shares. If many people are dependent upon pension schemes whose assets might suddenly become worthless, then the political opposition to a movement to labour tokens would be serious. However, pension schemes based on the stock market are encountering serious liquidity problems anyway. It should be possible to make a transition to a non-stock market based public pension scheme attractive provided that prospective pensioners can transfer pro rata. If this were done prior to the transition to labour tokens, then the prospective losers would be limited to the capitalist class properly speaking.
The political appeal of the final abolition of money among the bulk of the population would be based on two prospects. First, it would simultaneously abolish all debts. Since a very large part of the population are net debtors—whether on credit cards or on house mortgages—this would create a strong constituency of gainers to outvote the minority who would lose under the scheme. Second, the transition to an egalitarian payment system would produce a significant improvement in income for the majority of the population.