Saturday, November 24, 2012

The Socialist Choice

It is frequently claimed, not just by apologists for capitalism but so-called avowedly socialists, that it is impossible to have an economy which excludes such things as wages, prices and money, and that any society’s economy is necessarily going to include those concepts, particularly wages and prices. Sorry to say but it is well documented by anthropologists, that there has been many societies which has not involved a monetary economy – in fact some exist even today in isolated parts of the world. Dollars and cents, salary checks, and price tags on goods are not an intrinsic part of the human essence as such statements imply

According to capitalist economic theory, prices are the means for determining the rational allocation of resources in a money economy. But, in fact, prices are not intended for the purpose of organising production. The function of pricing is to fix costs with a view to making profit. In practice, costing and pricing are ultimately about calculating the exploitation of labour, enabling the capitalist class to live and accumulate capital from the wealth that the working class produces but does not consume. The problem of rationally allocating productive resources in an economy is common to all human societies at least as long as these resources remain relatively limited compared to needs. However, there is no need to assume that this allocation could be effected rationally only through the exchange of resources taking the value -”price”- form. Labour power, your ability to work, is a commodity that is sold on the open market like anything else, the `price’ you get for it is your wage. If you have special natural skills or a training to perform a particular kind of labour which is in high demand then like everything else you can command a higher price for it, as well as good working conditions

A monetary economy gives rise to the illusion that the “cost” of producing something is merely financial. Money is the universal unit of measurement, the “general equivalent” that allows everything to be compared with everything else under all circumstances—but only in terms of their labour-time cost or the total time needed on average to produce them from start to finish.
Such non-monetary calculation of course already happens, on the technical level, under capitalism. Once the choice of productive method has been made (according to expected profitability as revealed by monetary calculation) then the real calculations in kind of what is needed to produce a specific good commence so much raw materials, so much energy, so much labour…
In socialism it is not the case that the choice of productive method will become a technical choice that can be left to engineers, as is sometimes misunderstood by critics, but that this choice too will be made in real terms, in terms of the real advantages and disadvantages of alternative methods and in terms of, on the one hand, the utility of some good or some project in a particular circumstance at a particular time and, on the other hand, of the real “costs” in the same circumstances and at the same time of the required materials, energy and productive effort.

Production- for- use would operate in direct response to need. These would arise in local communities expressed as required quantities such as grammes, kilos, tonne, litres , metres, cubic metres, etc, of various materials and quantities of goods. These would then be communicated as required elements of productive activity , as a technical sequence, to different scales of social production, according to necessity.
Each particular part of production would be responding to the material requirements communicated to it through the connected ideas of social production. It would be self -regulating , because each element of production would be self-adjusting to the communication of these material requirements . Each part of of production would know its position. If requirements are low in relation to a build-up of stock , then this would an automatic indication to a production unit that its production should be reduced . If The register of needs and the communication of every necessary element of those needs to the structure of production would be clear and readily known . The supply of some needs will take place within the local community and in these cases production would not extent beyond this , as for example with local food production for local consumption.

Other needs could be communicated as required things to the regional organisation of production. Local food production would require glass, but not every local community could have its own glass works. The requirements for glass could be communicated to a regional glass works. These would be definite quantities of required glass . The glass works has its own suppliers of materials , and the amounts they require for the production of 1 tonne of glass are known in definite quantities. The required quantities of these materials could be passed by the glass works to the regional suppliers of the materials for glass manufacture . This would be a sequence of communication of local needs to the regional organisation of production, and thus contained within a region .
Local food production would also require tractors, and here the communication of required quantities of things could extend further to the world organisation of production . Regional manufacture could produce and assemble he component parts of tractors for distribution to local communities .These would be required in a definite number and , on the basis of this definite number of final products, the definite number of component parts for tractors would also be known . The regional production unit producing tractor would communicate these definite quantities to their own suppliers, and eventually this would extend to worl production units extracting and processing the necessary materials.

This would be the self-regulating system of production for need , operating on the basis of the communication of need as definite quantities of things throughout the structure of production . Each production unit would convert the requirements communicated to it into its own material requirements and pass these on to its suppliers . This would be the sequence by which every element of labour required for the production of a final product would be known.
This system of self-regulating production for use is achieved through communications . Socialism would make full use of the means communications which have developed These include not only transport such as roads, railways, shipping etc. They also include the existing system of electronic communications which provide for instant world-wide contact as well as facilities for storing and processing millions of pieces of information. Modern information technology could be used by socialism to integrate any required combination of different parts of its world structure of production.

Simpler is Better

Socialists desire to abolish economics. No exchange, no economy.

Socialism, being based on the common ownership of the means of production by all members of society, is not an exchange economy. Production would no longer be carried on for sale with a view to profit as under capitalism. In fact, production would not be carried on for sale at all. Production for sale would be a nonsense since common ownership of the means of production means that what is produced is commonly owned by society as soon as it is produced. The question of selling just cannot arise because, as an act of exchange, this could only take place between separate owners. Yet separate owners of parts of the social product are precisely what would not, and could not exist in a society where the means of production were owned in common.

However, socialism is more than just not an exchange economy; it is not an economy at all, not even a planned economy. Economics, or political economy as it was originally called, grew up as the study of the forces which came into operation when capitalism, as a system of generalised commodity production, began to become the predominant mode of producing and distributing wealth. The production of wealth under capitalism, instead of being a direct interaction between human beings and nature, in which humans change nature to provide themselves with the useful things they need to live, becomes a process of production of wealth in the form of exchange value. Under this system, production is governed by forces which operate independently of human will and which impose themselves as external, coercive laws when men and women make decisions about the production and distribution of wealth. In other words, the social process of the production and the distribution of wealth becomes under capitalism an economy governed by economic laws and studied by a special discipline, economics.

Socialism is not an economy, because, in re-establishing conscious human control over production, it would restore to the social process of wealth production its original character of simply being a direct interaction between human beings and nature. Wealth in socialism would be produced directly as such, i. e. as useful articles needed for human survival and enjoyment; resources and labour would be allocated for this purpose by conscious decisions, not through the operation of economic laws acting with the same coercive force as laws of nature. Although their effect is similar, the economic laws which come into operation in an exchange economy such as capitalism are not natural laws, since they arise out of a specific set of social relationships existing between human beings. By changing these social relationships through bringing production under conscious human control, socialism would abolish these laws and so also the economy as the field of human activity governed by their operation. Hence socialism would make economics redundant.

What we are saying, in effect, is that the term exchange economy is a tautology in that an economy only comes into existence when wealth is produced for exchange. It is now clear why the term planned economy is unacceptable as a definition of socialism. Socialism is not the planned production of wealth as exchange value, nor the planned production of commodities, nor the planned accumulation of capital. That is what state capitalism aims to be. Planning is indeed central to the idea of socialism, but socialism is the planned (consciously coordinated) production of useful things to satisfy human needs precisely instead of the production, planned or otherwise, of wealth as exchange value, commodities and capital. In socialism wealth would have simply a specific use value (which would be different under different conditions and for different individuals and groups of individuals) but it would not have any exchange, or economic, value.

In socialist society productive activity would take the form of freely chosen activity undertaken by human beings with a view to producing the things they needed to live and enjoy life. The necessary productive work of society would not be done by a class of hired wage workers but by all members of society, each according to their particular skills and abilities, cooperating to produce the things required to satisfy their needs both as individuals and as communities. Work in socialist society could only be voluntary since there would be no group or organ in a position to force people to work against their will.

Socialist production would be production solely for use. The products would be freely available to people, who would take them and use them to satisfy their needs. In socialism people would obtain the food, clothes and other articles they needed for their personal consumption by going into a distribution centre and taking what they needed without having to hand over either money or consumption vouchers. Houses and flats would be rent-free, with heating, lighting and water supplied free of charge. Transport, communications, health care, education, restaurants and laundries would be organised as free public services. There would be no admission charge to theatres, cinemas, museums, parks, libraries and other places of entertainment and recreation. The best term to describe this key social relationship of socialist society is free access, as it emphasises the fact that in socialism it would be the individual who would decide what his or her individual needs were. As to collective needs (schools, hospitals, theatres, libraries and the like), these could be decided by the groups of individuals concerned, using the various democratic representative bodies which they would create at different levels in socialist society. Thus production in socialism would be the production of free goods to meet self-defined needs, both individual and collective

To advocate monetary calculation, is to advocate that only one consideration—the total average production time needed to produce goods—should be taken into account when making decisions about which productive methods to employ. This is patently absurd but it is what is imposed by capitalism. Naturally, it leads to all sorts of aberrations from the point of view of human interests. In particular it rules out a rational, long-term attitude towards conserving resources and it imposes intolerable conditions on the actual producers (speed-up, pain, stress, boredom, long hours, night work, shiftwork, accidents).

Socialism, because it will calculate directly it kind, will be able to take these other, more important, factors than production time into account. This will naturally lead to different, in many cases quite different, productive methods being adopted than now under capitalism. If the health, comfort and enjoyment of those who actually manipulate the materials, or who supervise the machines which do this, to transform them into useful objects is to be paramount, certain methods are going to be ruled out altogether. The fast moving production lines associated with the manufacture of cars would be stopped for ever ; night work would be reduced to the strict minimum; particularly dangerous or unhealthy jobs would be automated (or completely abandoned). Work can, in fact must, become enjoyable. But to the extent that work becomes enjoyable, measurement by minimum average working time would be completely meaningless, since people would not be seeking to minimize or rush such work.

The supply of some needs will take place within the local community and in these cases production would not extent beyond this .Other needs could be communicated as required things to the regional organisation of production. Local food production would require glass, but not every local community could have its own glass works . The requirements for glass could be communicated to a regional glass works . Some organisation for such as mining for raw material sources would require world co-ordination . When socialism is established it will be necessary to set up councils at local , regional and global levels for the administration of social affairs in every aspect of productive activity . Also there will have to be councils whose functions will be to co-ordinate the work of the various specific councils . The majority of the people in a local area will make decisions affecting that area specifically , the people in a certain region will make decisions for that region and everyone will make global decisions .

The problem with a centrally-planned model of socialism is amongst other things its inability to cope with change. It lacks any kind of feedback mechanism which allows for mutual adjustments between the different actors in such an economy. It is completely inflexible in this regard. A decentralised or polycentric version of socialism, on the other hand, overcomes these difficulties. It facilitates the generation of information concerning the supply and demand for production and consumption goods through the economy via a distributed information .Stock or inventory control systems employing calculation in kind are absolutely indispensable to any kind of modern production system.

In a “free access” socialist economy income or purchasing power would, of course, be devoid of meaning. So too would the notion of status based upon the conspicuous consumption of wealth. Because individuals would stand in equal relation to the means of production and have free access to the resultant goods and services

Marx saw the communist administration as a federation of self-governing groups largely concerned with their internal affairs and collaborating for the comparatively few purposes that concern all the groups. The association of free producers , not a centrally planned State whose roots go back to “Bismarckian State-Socialism” and Lassalle , so readily endorsed by Lenin and his Bolsheviks yet so rarely acknowledged by his pupils .

How are these needs communicated? What allocation mechanism do you use? Certainly they won’t be by getting those individuals needs allotted to them .

Decisions involving choices of a general nature, such as what forms of energy to use, which of two or more materials to employ to produce a particular good, whether and where to build a new factory, there is a technique already in use under capitalism that could be adapted for use in socialism: so-called cost-benefit analysis and its variants. Naturally, under capitalism the balance sheet of the relevant benefits and costs advantages and disadvantagesof a particular scheme or rival schemes is drawn up in money terms, but in socialism a points system for attributing relative importance to the various relevant considerations could be used instead. The points attributed to these considerations would be subjective, in the sense that this would depend on a deliberate social decision rather than on some objective standard. In the sense that one of the aims of socialism is precisely to rescue humankind from the capitalist fixation with production time/money, cost-benefit type analyses, as a means of taking into account other factors, could therefore be said to be more appropriate for use in socialism than under capitalism. Using points systems to attribute relative importance in this way would not be to recreate some universal unit of evaluation and calculation, but simply to employ a technique to facilitate decision-making in particular concrete cases. The advantages /disadvantages and even the points attributed to them can, and normally would, differ from case to case. So what we are talking about is not a new abstract universal unit of measurement to replace money and economic value but one technique among othersfor reaching rational decisions in a society where the criterion of rationality is human welfare.

Planning in socialism is essentially a question of industrial organisation, of organising productive units into a productive system functioning smoothly to supply the useful things which people had indicated they needed, both for their individual and for their collective consumption. What socialism would establish would be a rationalised network of planned links between users and suppliers; between final users and their immediate suppliers, between these latter and their suppliers, and so on down the line to those who extract the raw materials from nature. There is no point in drawing up in advance the sort of detailed blueprint of industrial organisation that the old IWW and the Syndicalists used to , but it is still reasonable to assume that productive activity would be divided into branches and that production in these branches would be organised by a delegate body. The responsibility of these industries would be to ensure the supply of a particular kind of product either, in the case of consumer goods, to distribution centres or, in the case of goods used to produce other goods, to productive units or other industries.

Since the needs of consumers are always needs for a specific product at a specific time in a specific locality, we will assume that socialist society would leave the initial assessment of likely needs to a delegate body under the control of the local community (although, other arrangements are possible if that were what the members of socialist society wanted). In a stable society such as socialism, needs would change relatively slowly. Hence it is reasonable to surmise that an efficient system of stock control, recording what individuals actually chose to take under conditions of free access from local distribution centres over a given period, would enable the local distribution committee (for want of a better name) to estimate what the need for food, drink, clothes and household goods would be over a similar future period. Some needs would be able to be met locally: local transport, restaurants, builders, repairs and some food are examples as well as services such as street-lighting, libraries and refuse collection. The local distribution committee would then communicate needs that could not be met locally to the bodies charged with coordinating supplies to local communities.

The individual would have free access to the goods on the shelves of the local distribution centres; the local distribution centres free access to the goods they required to be always adequately stocked with what people needed; their suppliers free access to the goods they required from the factories which supplied them; industries and factories free access to the materials, equipment and energy they needed to produce their products; and so on. Production and distribution in socialism would thus be a question of organising a coordinated and more or less self-regulating system of linkages between users and suppliers, enabling resources and materials to flow smoothly from one productive unit to another, and ultimately to the final user, in response to information flowing in the opposite direction originating from final users. The productive system would thus be set in motion from the consumer end, as individuals and communities took steps to satisfy their self-defined needs. Socialist production is self-regulating production for use.

To ensure the smooth functioning of the system, a central statistical office would be needed to provide estimates of what would have to be produced to meet peoples likely individual and collective needs. These could be calculated in the light of consumer wants as indicated by returns from local distribution committees and of technical data (productive capacity, production methods, productivity, etc) incorporated in input-output tables. For, at any given level of technology (reflected in the input-output tables), a given mix of final goods (consumer wants) requires for its production a given mix of intermediate goods and raw materials; it is this latter mix that the central statistical office would be calculating in broad terms. Such calculations would also indicate whether or not productive capacity would need to be expanded and in what branches. The centre (or rather centres for each world-region) would thus be essentially an information clearing house, processing information communicated to it about production and distribution and passing on the results to industries for them to draw up their production plans so as to be in a position to meet the requests for their products coming from other industries and from local communities. The only calculations that would be necessary in socialism would be calculations in kind. On the one side would be recorded the resources (materials, energy, equipment, labour) used up in production and on the other side the amount of the good produced, together with any by-products.

Stock or inventory control systems employing calculation in kind are, as was suggested earlier, absolutely indispensable to any kind of modern production system. While it is true that they operate within a price environment today, that is not the same thing as saying they need such an environment in order to operate. The key to good stock management is the stock turnover rate – how rapidly stock is removed from the shelves – and the point at which it may need to be re-ordered. This will also be affected by considerations such as lead times – how long it takes for fresh stock to arrive – and the need to anticipate possible changes in demand.

A typical sequence of information flows in a socialist economy might be as follows. Assume a distribution point (shop) stocks a certain consumer good – say, tins of baked beans. From past experience it knows that it will need to re-order approximately 1000 tins from its suppliers at the start of every month or, by the end of the month, supplies will be low. Assume that, for whatever reason, the rate of stock turnover increases sharply to say 2000 tins per month. This will require either more frequent deliveries or, alternatively, larger deliveries. Possibly the capacity of the distribution point may not be large enough to accommodate the extra quantity of tins required in which case it will have to opt for more frequent deliveries. It could also add to its storage capacity but this would probably take a bit more time. In any event, this information will be communicated to its suppliers. These suppliers, in turn, may require additional tin plate (steel sheet coated with tin), to make cans or beans to be processed and this information can similarly be communicated in the form of new orders to suppliers of those items further down the production chain. And so on and so forth. The whole process is, to a large extent, automatic – or self regulating – being driven by dispersed information signals from producers and consumers concerning the supply and demand for goods and, as such, is far removed from the gross caricature of a centrally planned economy.
It may be argued that this overlooks the problem of opportunity costs .For example, if the supplier of baked beans orders more tin plate from the manufacturers of tin plate then that will mean other uses for this material being deprived by that amount. However, it must be born in mind in the first place that the systematic overproduction of goods that Marx talked of – i.e. buffer stock – applies to all goods, consumption goods as well as production goods. So increased demand from one consumer/producer, need not necessarily entail a cut in supply to another – or at least, not immediately. The existence of buffer stocks provides for a period of re-adjustment.

Liebig’s Law of the Minimum – states is that plant growth is controlled not by the total amount of resources available to a plant but by the particular factor that is scarcest. This factor is called the limiting factor. It is only by increasing the supply of the limiting factor in question – eg nitrogen fertiliser – that you promote plant growth.
Liebig’s Law can be applied equally to the problem of resource allocation in any economy.It makes sense from an economic point of view to economise most on those things that are scarcest and to make greatest use of those things that are abundant.To claim that all factors are scarce (because the use of any factor entails an opportunity cost) and, consequently, need to be economised is actually not a very sensible approach to adopt.You cannot treat every factor equally – that is, as equally scarce – or, if you do, this will result in gross misallocation of resources and economic inefficiency.The most sensible basis on which to make such a discrimination is the relative availability of different factors and this is precisely what the law of the minimum is all about.When a particular factor is limited in relation to the multifarious demands placed on it, the only way in which it can be “inefficiently allocated” (although this is ultimately a value judgement) is in choosing “incorrectly” to which particular end use it should be allocated . Beyond that, you cannot misuse or misallocate a resource if it simply isn’t available to misallocate (that is, where there are inadequate or no buffer stocks on the shelf, so to speak). Of necessity, one is compelled to seek out a more abundant alternative or substitute .

To determine priorities Maslow’s “hierarchy of needs” would be a guide to action. It would seem reasonable to suppose that needs that were most pressing and upon which the satisfaction of others needs were contingent, would take priority over those other needs. We are talking here about our basic physiological needs for food, water, adequate sanitation and housing and so on. This would be reflected in the allocation of resources: high priority end goals would take precedence over low priority end goals where resources common to both are revealed using the earlier discussed “points” system of cost benefit analysis.

To sum up , a communist steady-state equilibrium, will have been reached. Gradual change, growth, will be simple and painless. The task of planning becomes one of simple routine; the role of economics is virtually eliminated.

 Marx said in communism it is now society’s free (disposable) time and no longer labor time that becomes the true measure of society’s wealth.

When Michael Albert of Parecon  state that “from each according to abilities, to each according to needs” is an unachievable utopian and unpractical demand, it proves just how non-radical he is. In Parecon webpages Paul Mattick and Anton Pannekoek feature as influences yet it should be remembered that when they were being ostracised by the orthodox left and the libertarian left, it was the small World Socialist Movement that were still offering them an outlet to express their views when they had little opportunity to do so. They shared the real socialist demand for free access and the end to wage slavery an one the problems with participatory economics (parecon) is that it continues with prices and wages and money, instead of abolishing them all. It is NOT impossible that such a society offered by free-access socialiststo be feasiblebut is in fact more desirable than the alternative  present within the Parecon model.

Unlike Parecon, many socialists caution against the creation of blueprints (“recipes for the cook-shops of tomorrow” as Marx called them ). There is no point in drawing up in advance the sort of detailed blueprint of industrial organisation that the old IWW and the Syndicalists or the Guild Socialists used to do and what Parecon now does . For a small group of socialists , as we are now , to do so would be undemocratic. It would also be dumb. Socialists don’t have crystal balls to determine what the conditions will be when socialism is established. As the socialist majority grows, when socialism is within the grasp of the working class, then will be the proper time for making such important decisions. It is imprudent for today’s socialist minority to be telling people how to administer a socialist society. When a majority of people understand what socialism means, the suggestions for socialist administration will solidify into an appropriate plan. It will be based upon the conditions existing at that time, not today.

We also recognise that there may not be one single way of doing things, and precise details and ways of doing things might vary from one part of the world to another, even between neighbouring communities. Of course, we can reach some generalised conclusions based on basic premises – that socialism will be necessarily democratic, for example – and can outline broad principles or options that could be applied. That is, we do not have to draw up a plan for socialism, but simply and broadly demonstrate that it is possible and therefore refute the label of “utopianism”.

We look to the real world to see how it is, and how it could be. Socialist society is not starting from a blank sheet and we are inheriting an already existing economic system. Workers with all their skills and experience of co-operating to run capitalism in the interests of the capitalists could begin to run society in their own interest. We do not need to build the new society in the womb of the old, that is here already.

 Marx cautioned – “Instead of the conservative motto, A fair day’s wage for a fair day’s work! they ought to inscribe on their banner the revolutionary watchword, Abolition of the wages system!”


scarcity or abundance and allocation of resources

Abundance is not a situation where an infinite amount of every good could be produced . Similarly, scarcity is not the situation which exists in the absence of this impossible abundance. Abundance is a situation where productive resources are sufficient to produce enough wealth to satisfy human needs, while scarcity is a situation where productive resources are insufficient for this purpose. "Unlimited wants " is an abstraction of Capitalism . Needs are indeed finite .

Not all resources are available in sufficient supply to meet all uses for them. Land is an obvious case in point: a piece of land cannot be used at the same time for housing and for farming . Some criteria will indeed have to be developed for deciding what use to put them to .Maslow’s “hierarchy of needs” , perhaps . Needs that were most pressing and upon which the satisfaction of others needs were contingent, would take priority over those other needs, high priority end goals would take precedence over low priority end goals where resources common to both are revealed to be in short supply .
Cost benefit analysis is an elaborate skill in capitalism and could be a neutral tool based on a “points system” to evaluate a range of different projects facing society.

Allocation calculations in socialism will not be economic but technical . In socialism calculations will be done directly in physical quantities of real things [calculation in kind ] , in use-values , without any general equivalent unit of calculation ie money and prices

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