János Kornai recently died at the age of 93. He was a Hungarian economist noted for his analysis and criticism of the command economies of Eastern European communist states. He was widely acclaimed in Western academic circles. He eventually joined the faculty of Harvard University and was on the board of the Hungarian Central Bank after the Soviet Union collapsed. The prominent Sovietologist Alec Nove describes Kornai’s work as “a masterly presentation of the nature of the functioning of the Soviet-type system, and an equally masterly explanation of the failure of attempts to reform it.”
Kornai began his intellectual analysis of ‘socialism’ as a committed Marxist. But he became disillusioned with the Hungarian system of a planned economy after the repression of the Hungarian revolution of 1956. In his 1980 book, Economics of Shortage, perhaps his most influential work in mainstream economic circles (and among leftists), he argued that the chronic shortages seen throughout Eastern Europe in the late 1970s and continuing in the 1980s were not the consequences of planners’ errors or wrong pricing, but of systematic flaws in the planning mechanism. Planning does not work.
In his 1988 book, The Socialist System, The Political Economy of Communism, he argued that the command economy based on unchallenged control by a Marxist–Leninist communist party leads to a predominance of bureaucratic administration of state firms through centralized planning and management, and the use of ‘administrative pricing’ to eliminate the effects of the market. This culminates in shortages and misallocation of resources.
Kornai identified the Soviet economic system as fundamentally different from capitalism or ‘bourgeois democracy’ in three ways: 1) the rule of a Communist Party guided by the ideology of ‘Marxism-Leninism’; 2) the dominance of public ownership within the economy; and 3) the preponderance of ‘bureaucratic coordination’ in planning. For Kornai, this was the very definition of socialism in practice. All the countries that adopted these three characteristics after revolutions against capital aimed at ‘forced growth’ through bureaucratic, undemocratic planning that led to fluctuations in economic expansion.
Kornai identified on one of the features of this system: what he called the ‘soft budget constraint’ where state enterprises could make losses and were funded regardless of ‘market conditions’ and profitability, in contrast to capitalist economies. For Kornai, ‘soft budgets’ were disastrous for efficiency and created shortages. Ultimately, it was not the lack of democracy in the Soviet Union and similar ‘command economies’ that was the problem; it was very nature of planning without markets and prices to allocate resources. So Kornai went from a supporter of the end of capitalism in Hungary to accept the view of Austrian School and mainstream economics that publicly owned, planned economies cannot work. .
It is interesting to note that this idea of ‘soft’ and ‘hard’ budgets (the latter meaning maximum profitability should be the aim) is supported by those who not only are pro-capitalist, but also pro-austerity in opposing too much ‘soft’ government spending. Take the supposedly ‘liberal Keynesian’ Matthew Klein in the British FT in lauding Kornai’s concepts. Klein writes: “Anyone thinking seriously about the potential risks and rewards of the policy mix that might be called “full Keynesianism” should consider the ideas of the economist Janos Kornai, who died last month.” Klein is joint author with Michael Pettis of the award-winning Trade Wars and Class Wars, a Keynesian account of global imbalances.
For Kornai, his primary model for ‘soft and hard’ budgets was Soviet Russia. Kornai showed much more admiration for China’s economic success. But this was because China dropped two of his three features of the post-capitalist model. China kept the political monopoly of the Communist party, but allowed capitalism markets to flourish. That is why it has succeeded while the Soviet Union collapsed. Kornai: “the “ownership structure has undergone fundamental changes, in which the state-owned sector has given up its leading role. The role of bureaucratic coordination and central management has been drastically reduced and largely replaced by the market. China is not a classical socialist system and is closer to a typical capitalist system.”
Kornai argued that China’s economic success was only possible because it abandoned central planning and state dominance and moved to capitalism. Kornai accepted the arguments of pro-market economists like Alec Nove that the complexity of millions of transactions in a national economy made calculations to effectively regulate and plan impossible. He argued that only the free market can carry out these functions, which it does ‘automatically’. Under capitalism, the competition for markets between producers and sellers generates ferocious rivalry among capitalists. This makes capitalism ‘inherently dynamic and innovative’. The invention process under socialism is not matched by corresponding innovation, which involves “the organization of production and the diffusion of the new product or the application of a new organizational form”. The sluggish assimilation of new innovations under ‘socialism’ lay, in Kornai’s view, in the absence of ‘innovative entrepreneurship’.
All these arguments against planning (democratic or otherwise) are the basic ideology of mainstream capitalist economics. And yet these arguments of Von Mises, Nove and Kornai have been effectively refuted by various Marxist economists in the last few decades, even after the collapse of the Soviet Union. Making planning calculations is perfectly feasible, especially with modern computers (quantum or otherwise) and by developments in mathematics.
Moreover, contrary to Kornai’s view (and that of many pro-capitalist economists), the Soviet Union was no economic failure, as I have argued in a previous post. The strides made in economic expansion and living standards (despite the grotesque disasters of the Stalinist era) took Russian living standards past the previously richer economies of Latin America and even southern Europe.
For Kornai, as a socialist economic system is impossible, failed in Soviet Russia and was abandoned in China, he was reduced to considering only ‘varieties of capitalism’: ie democracy, autocracy and dictatorship. According to Kornai, democracy (undefined) can only exist under capitalism as socialism is restricted to dictatorial and autocratic forms: “democratic socialism is impossible”.
Kornai’s argument is that socialism is a historical system whose political and economic reign is a closed experience for humanity. This view was very close to that of former World Bank economist and quasi-socialist, Branco Milanovic whose recent book Capitalism Alone, also argues that there are only variations of capitalism available for the foreseeable future; either the ‘liberal democratic West’ or ‘autocratic China’. Capitalism Alone, Milanovic reckons that capitalism is not only the dominant mode of production globally, but it is here to stay. He concludes that “Capitalism gets much wrong, but also much right—and it is not going anywhere. Our task is to improve it.”
Milanovic argues that capitalism has triumphed because it works. It delivers prosperity and gratifies human desires for autonomy. But it comes with a ‘moral price’, pushing us to treat material success as the ultimate goal. And it offers no guarantee of stability. In the West, ‘liberal capitalism’ creaks under the strains of inequality and capitalist excess. That model now fights for hearts and minds with what Milanovic calls “political capitalism”, as exemplified by China, which many claim is more efficient, but which is more vulnerable to corruption (apparently unlike America or other capitalist states).
As Kornai and Milanovic admit, China has grown in real GDP and average living standards in 70 years faster than any other economy in human history. If this has been achieved by the adoption of the capitalist mode of production, that raises the possibility that capitalism is not in its ‘twilight era’, but instead having a new lease of life in taking humanity forward. But I remind readers that in the period of 1952 to 1978 when China had a fully state-owned planned economy where the capitalist mode of production was replaced, China achieved 6-7% per annum real GDP growth. Moreover, has capitalism really had a new lease of life globally? Real GDP growth in the major capitalist economies has slowed decade after decade, along with investment and productivity. And capitalist economies have been subject to regular and recurring slumps in investment and production of increasing severity in the 21st century.
Kornai and Milanovic ignore this. Milanovic concludes, as did Kornai, that: “I do believe, to a large extent, [capitalism] is sustainable. Even if all of inequality continue[s] to be the way that [it is], unchecked. It is sustainable, largely, because we don’t have a blueprint for an alternative system. However, something being sustainable, something being efficient, something being good, are two different things.” Milanovic does not like capitalism, but to use Margaret Thatcher’s phrase in referring to her neoliberal policies for capitalism: he reckons there is no alternative (TINA). So the aim must be, just as Keynes argued in the 1930s: “to make capitalism more sustainable. And that’s exactly what I think we should do now”. Given the existential challenges of climate change and environmental degradation, a ‘sustainable capitalism’ seems as impossible to me as ‘democratic socialism’ seemed to Kornai.
66 thoughts on “Kornai on capitalism and socialism”
Thanks for this Michael- there just aren’t enough socialist critiques that tackle Kornai directly out there considering how influential his work is in mainstream circles (especially the hard/soft budget constraint concept) so this is really helpful. I think a lot of this might be down to the point that socialist critics notice that Kornai was, relatively speaking, an intellectual lightweight who stood on the shoulders of Hayek, Von Mises etc. and so one’s energies are better spent critiquing these scholars.
However I think what Kornai did really effectively was articulate Hayek and Von Mises in a rhetorically very powerful and inuitively convincing way, adding the credibility of ‘well I was a socialist and trust me it doesn’t work’ to Austrian theoretical arguments. So it’s definitely worth diving into his work at length to point out where he went wrong.
You speak about China in the above, so you might find interesting (assuming you haven’t read them already) two articles from a Chinese academic Ping Chen who give me a more Chinese perspective on the critique of Kornai:
Has Capitalism Defeated Socialism Yet?—Kornai’s Turnaround on Liberalism,
and the Evaporation of Myths about Eastern Europe
I have a problem with texts that ignore the (presumed?) fact of a coming climate catastrophe. Does the writer expect a solution – even within capitalism? Or does the writer think that the climate panic is only a hoax, which coming generattions will laugh at? I think instead that capitalistic economies has time after time grown to destruction the niche for human life in the area in wich it functions. The first time in Mesopotamia some time 2ky before Christ. But now capitalism is global.
Capitalistic growth seems to be impossible to control. Probably by the competition between capitals.
” the command economy based on unchallenged control by a Marxist–Leninist communist party ”
Of course ‘the party”s rule was always challenged.
Not to recognise that every attempt to build a socialist alternative faces constant and ruthless challenges from capitalist states and their agents is to ignore the most important material force in the development of such socio economic experiments. From Barbarossa to the constant sabotaging of Cuba’s economy or even the hysterical mob response to Corbyn’s mild reform prescriptions these attacks are designed, in large part, to prevent popular governments from freely experimenting in alternatives to the dreary authoritarianism of bureaucratic government.
Socialism is all about democracy- the expression of popular definitions of production for need as opposed to the irrationality of the market which is the primary cause of environmental as well as social woe.
“In his 1988 book, The Socialist System, The Political Economy of Communism, he argued that the command economy based on unchallenged control by a Marxist–Leninist communist party”
That is utterly false, although we can excuse Kornai of ignorance here because the evidence was not available in the West at the time (but could already be inferred from the characteristics of the general-secretaries).
We know from the opened Soviet archives and from the released secret protocols of the VKP(B) that there was plurality of opinion and fierce dispute within the Party, and that they took the complaints of the people very seriously. There was essentially two factions in the VKP(B) after Stalin’s death: the reformists (inspired by Krushchev) and the conservatives (the “Stalinists” per se). Both factions competed between themselves fiercely, and relayed in power. Yeltsin et al were members of the VKP(B) – a third new faction that arose during the twilight of the USSR.
The thing is the VKP(B) adopted a principle called “democratic centralism”, which stated that, within the Party, all disagreement and freedom of expression was allowed, but, once the Party came up with a resolution, it should be defended publicly as if it was unanimous, as if the Party was one.
It was, therefore, a secret democracy, democracy behind closed doors. Sure, some people consider democracy can only exist “in the open air” – but that means little in History.
You lost me when you wrote about quantum computers making the calculations – such level of ignorance raises doubts about the rest of the argumentm
The role of quantum computers is something to discuss in the future – there was no space here.
Just watch Paul Cockshott’s videos or read his articles and books with Allyn Cottrell, which Dr Roberts linked here. If nothing else, watch his “Against von Mises” video where he shows that economic calculation is feasible in a planned economy, and no more information-costly than market calculation. His videos on harmonics for resource allocation and how to solve matrices for value allocation. It’s all feasible with standard, classical computers, just the software needs development. He runs simulations with thousands of different “products”, and estimates that the computing power needed by an entire national economy with millions of goods would be equivalent to a run-of-the-mill supercomputer any government can afford (i.e., not anything in the TOP500 Supercomputer list).
Robin Hahnel has also published on the use of computer resources for planning under a different paradigm.
Long story short, it’s demonstrably feasible with existing resources. Even Austrians have reluctantly agreed. In their modelling, there would be a residual market mechanism to marginally adjust prices of consumer goods only, with premiums or discounts on the bulk of the planned value according to demand, and which would be fed into the plan for the next period.
A few of the books I’ve read talk about planning in the USSR and central/eastern Europe indicate something else. Much of it revolves around the priority of military spending in the USSR/East Germany that starved other sectors; that planning was not carried out actually, as ‘factory’ or plant autonomy took over, advocated by Brezhnev; that there was no democracy in the planning system, but was all bureaucratic; consumer goods were given short shrift; that there was much duplication in the ‘eastern’ bloc, as decreed by Stalin first of all, so countries built industries they did not need to; that computerization was not used in planning. Plant autonomy actually plants the seeds of capitalist competition. All this seems to me to point to the fact that planning was done poorly, not that planning is bad. After all, every corporation and capitalist entity is ‘planned’ to the T, even including suppliers, until it meets the anarchy of the market.
Maybe economic planning is more determined by political necessity that you think. Whatever Stalin was (heartless?) he was no fool. From the beginning the Bolsheviks dealt with underdevelopment and all forms of foreign aggression without let up. Ful scale invasion from the West became a certainty by 1929. The Soviet defeat of fascism was a phyrric victory for the Soviets, but a positively real one for socialism.
That’s only true for R&D investment (which the military sector really drained after the creation of COCOM).
The USSR never had any problem with investment. The problem was that the returns over those investments in terms of labor productivity started to fall – sharply, after the 1970s.
One of the reasons the USSR experienced a sharp fall on the productivity returns over its investments was that it was too successful: birth rates quickly plummeted and “purchase power” (wages) rose. Families shrunk in size, and became more cosmopolitan in cultural style. There’s a limit for intensive methods of production: you always have to have some kind of extensive production. The USSR simply had no people to even operate the new machines. With time, incentive to even develop such new machines (outside the military sector) waned.
By Gorbachev’s era, the Soviet infrastructure and quality of durable consumer goods was completely outdated in relation to the advanced capitalist nations.
Yes. The repudiation of planning in Yugoslavia may have had a good deal to do with the failure there.
But Stalin’s insistence on local development may repudiate Ricardo’s theory of comparative advantage. I’m not so sure this entirely a bad thing.
The difference between a bureaucrat and an expert is not easy for me to recognize.
Good point. Just where did Stalin talk about local development? Wishes
Kornai’s claim to be a committed Marxist should not be given much weight, His transformation I think stems from the attempted counterrevolution of 1956. (Yes, I know this is contentious. But Kornai is himself an expression of the spirit, no?)
But the notion that the Soviet Union “failed” because a “middle class” (aka aspiring wannabe petty bourgeois) couldn’t buy whatever they wanted or travel abroad is itself highly ideological I think. It pretends capitalism is just the so-called wealthy countries while pretending the shortages in Haiti or Burkina Faso or Nepal or any number of countries are not shortages. Ignoring questions of long-term economic development and assuming the “market” will grow countries into copies of America is absurd. But most of all, in the days when talk about supply-chain breakdown is commonplace, the idea that central planning is the cause of shortages is embarrassing. Or it should be, anyhow. Shortages in a full employment economy are to be expected. The so-called failure of central planning to anticipate the proper physical plant for everybody to get everything they want is an insane standard. Or would be, were it honest. Capitalist markets don’t successfully invest for war production. That’s why every serious war means the government has to address the planning failures of capitalism. As pointed out above, every socialist state is at war, economically, a war imposed, not chosen.
Kornai, like von Mises and von Hayek, is a joke in my view. Isn’t it an indictment of economics that this ilk must be taken seriously, not laughed out of court?
I hope you’ll elaborate on that ladt point in the context of M-C-M’ relative to the necessity for growth and the purported imperative of zero growth in the future (for human survival). Thank you for these great analyses!
While the USSR’s demise obviously can’t be attributed merely to “middle class” elements having difficulty buying the latest in Western consumer goods, there was clearly a contradiction between the CPSU asserting that the USSR was steadily on the road to communism while ordinary citizens often struggled to obtain everyday goods (and, consequently, many resorted to black markets and bribery.)
Journalist Hedrick Smith, in his book “The Russians,” gave a few examples of the sort of problems ordinary urban consumers faced during his time spent there in the 1970s, e.g. “Leningrad can be overstocked with cross-country skis and yet go several months without soap for washing dishes. In the Armenian capital of Yerevan, I found an ample supply of accordions but local people complained they had gone for weeks without ordinary kitchen spoons or tea samovars. I knew a Moscow family that spent a frantic month hunting for a child’s potty while radios were a glut on the market. In Rostov, on a swelting mid-90s day in June, the ice-cream stands were all closed by 2 P.M. and a tourist guide told me that it was because the whole area had run out of ice cream, a daily occurrence. . . The list of scarce items is practically endless. They are not permanently out of stock, but their appearance is unpredictable—toothpaste, towels, axes, locks, vacuum cleaners, kitchen china, hand irons, rugs, spare parts for any gadget from a toaster or a camera to a car, stylish clothes or decent footwear, to mention only a few listed in the Soviet press.”
Joseph Stalin defined the “basic economic law of socialism as “the securing of the maximum satisfaction of the constantly rising material and cultural requirements of the whole of society through the continuous expansion and perfection of socialist production on the basis of higher techniques.” There was clearly a gap between theory and practice in that regard.
“But the notion that the Soviet Union “failed” because a “middle class” (aka aspiring wannabe petty bourgeois) couldn’t buy whatever they wanted or travel abroad is itself highly ideological I think.”
It is, highly ideological that is– the unspoken assumptions being that a) capitalism is “natural”– a biological trait based on innate qualities and b) that if only the fSU had adapted more rational “economic policy” it would have survived.
Historical, materialist critique tells us differently because its “assumptions” are explicit: a) the fSU failed as the result of the defeat of workers’ struggles internationally b)because of (a) the fSU was never to overcome poor agricultural productivity.
I would add that such arguments also deliberately neglect the fact that the post-war rise of middle class consumerist culture in the imperialist bloc was paid for by exploitation of the “global south”, especially in the neoliberal era . The Soviet bureaucracy, not being imperialist, did not have the luxury to bribe its working class with imperialistically embezzled use values and surplus value from foreign slave labor.
“Historical, materialist critique tells us differently because its “assumptions” are explicit: a) the fSU failed as the result of the defeat of workers’ struggles internationally b)because of (a) the fSU was never to overcome poor agricultural productivity.”
b) because of the collapse of the profitability of fSU oil production, as argued here: https://oilprice.com/Energy/Oil-Prices/Oil-Prices-And-The-Fall-Of-The-Soviet-Union.html#:~:text=Also%2C%20the%20Soviet%20Union%20was%20an%20oil%20exporter%2C,and%20a%20different%20political%20system%20was%20in%20power.
”a) the fSU failed as the result of the defeat of workers’ struggles internationally b)because of (a) the fSU was never to overcome poor agricultural productivity.” First, (b) is a non-sequitur. Second, it is too simplistic to the point of being fallacious: ”its productivity history, as measured by yields per acre, has been indistinguishable from that of environmentally similar regions in North America. There is no evidence of Soviet failure in this regard” (Robert C. Allen, ”Farm to Factory” 2003 P 71). I think we need to look elsewhere. For example, would not US transport be much superior, among other factors?
Productivity in agriculture is usually categorized as land productivity and labor productivity. My mistake for assuming rather than specifying labor productivity. In that same chapter of Allen’s book (p 91) he writes:
“These results have important implications for labor productivity when they are combined with the earlier findings on production. Output per worker in agriculture equals output per hectare multiplied by hectares per worker. Table 4.4 shows that output per hectare was similar in Russia and the Great Plains, while employment per hectare was about eight times higher in Russia than in North America. The implication is that output per worker was eight times greater on the Great Plains. The weakness of Russian agriculture was not so much in the biological aspects that determined output per hectare and yield per animal as in the organizational and mechanical dimensions that determined farm employment.”
Reviewing Soviet Economic Growth for the US Congress in 1957, the Legislative Reference Service of the US Library of Congress wrote:
“It should be noted here, however, that just 30 years ago the U. S. S. R. employed about 85 percent of its labor force in agriculture compared to less than 25 percent in the United States; and even in 1955 about half the civilian manpower in the U. S. S. R. was occupied in agriculture, compared to about 10 percent in the United States. In absolute terms, agriculture in the U. S. S. R. employed about 37 million persons on an approximately full-time basis in 1955, compared to only 6.7 million whose principal occupation was agricultural in the United States. The comparative data on agricultural employment, when taken with the comparative data on agricultural output given in table 1, imply that labor productivity in agriculture in the U. S. S. R. in 1955 was between one-sixth and one-twelfth that in the United States”
I believe that “gap” grew as US agricultural productivity continued to improve so that by the 1980s, the percent of the US population engaged in agricultural production was in the low single digits..
Anti-capital is of course absolutely correct with regard to Soviet agricultural labour -productivity. Having said that,”Meat from domestic livestock farming was a main food staple during communist rule in the region. In 1990, Soviet citizens each consumed an average 32 kilograms of beef a year — 27% more than Western Europeans and four times more than the global average at the time” (Nature” 1/7/19). Pork consumption per capita in Russia has in 2020 just reached the level of 1990. So for the deficiencies of Soviet agriculture we need I feel to look elsewhere. In any case there is surely a greater issue at stake here. There is strain of Marxism that holds that communism demands a higher level of labour-productivity than capitalism (e.g. Trotsky, ”The Revolution Betrayed” Ch3). As far as I can discern it seems to be the plan of the Chinese and Indian bourgeoisie to move hundreds of millions of more peasants into the cities to make way for capitalist style industrial farming. Some on the left see in this a progressive step in creating a huge urban proletariat and increasing food production. But can in fact the cities find employment for so many? This was the question posed to Marx by his Russian correspondents and occasioned him to renounce his holding any universal thesis of the path that all nations were fated to tread (cf the discussion in J.D. White, ”Marx and Russia” 2019). The Canadian scientist, Dr William Rees, one of those who helped create the ecological footprint analysis, has described modern cities as ”entropic black holes” and sustainable cities an ”oxymoron”! At a webinar I took part in the American agricultural chemist Bob Wallace ( author of”Big Farms Make Big Flu” 2016) cast the strongest doubts on Chinese industrial agriculture being able to support such vast urban numbers in the longer term.Already in his own day Marx was concerned about the long-term effects of capitalist agriculture: the shift from cereal to meat and dairy production, the depletion of the soil and the impoverishment of the agricultural labourer ( Ch4 in Foster and Clark’s ”The Robbery of Nature” 2020).I think we need in the face of the climate catastrophe to get away from stressing the virtues of labour-productivity per se. As Marx himself emphasises:”Productivity of labour in general==the maximum of profit with the minimum of work…instead of the scale of production being controlled by existing needs….its aim is that the individual product should contain as much unpaid labour as possible, and this is achieved only by PRODUCING FOR the SAKE of PRODUCTION” (Capital Pp1037-38. Marx’s emphasis). So if an acre of organic farming demands more labour-time than industrial farming, from the point of view of the reproduction of future generations let us embrace it. The cheapest is not the best!
Michael, planning is not a silicon relation but a social relation. Computers and mathematics are mere aids and to focus on them is a distraction. Workers give of their labour and are rewarded by the products of their choice. Thus there is an intimate and exciting relation between effort and reward in a communist society based on emancipated and freely associating producers. Exactly the opposite of what occurred in the USSR. There effort and reward were ripped asunder. Workers were stripped of their labour time only to be insulted by the products provided to them from on high. This was alienating and dispiriting and so in the end they pretended to work. Production became soulless. Stalin’s final and unintended gift to the capitalist class was to discredit planning because under Stalin centralized planning was imposed on society by an oppressive state where it was used to drive exploitation. It was inhuman.
My best suggestion is to read my programme where you will find what consumer led planning really means and the difference between planning and the social fund. https://theplanningmotivedotcom.files.wordpress.com/2021/04/21st-century-programme-2019-final.pdf
As for Von Mises and his ilk, just look at the debacle around the introduction of electric vehicles where each company is doing their own thing, where batteries are not interchangeable and are generally unrecyclable, requiring so many charging points they will have to be put into public toilets soon.
The best part of this response is the last paragraph.
Regarding your first paragraph, I sympathize with your wariness of putting too much hope (because it seems like just hope) in mathematical solutions to production and distribution problems of the type encountered in the Soviet Union–because, such hope ignores the fact those those “ecomomic” problems were more the product of insoluble political exngencies, than economic per se.
…But, for the rest of that paragraph, your almost scatalogical condemnation of a “Soviet Union” of your own making–hermetically sealed from actual historical circumstances–are unworthy of your analytical abilities. It seems that your idealism has trapped you in the real nightmare of actually existing capitalism. No exit.
Correction: insert….”,and especialy”… after “solutions” in the first sentence in the second paragraph
The notion that economic planning is logically impossible is idealist nonsense that presupposes absurd neoclassical dogmas and anti-dialectical metaphysics (neo-Kantianism especially for Hayek’s idiocy). There ‘s not much substance to these kinds of arguments, just question begging.
Kornai’s Economics of Shortage is an unmatched examination of Soviet-type economies [and supplements his Anti-Equilibrium, which destroyed neo-classical theory]. When it came to writing his The Socialist System, though, he failed to distinguish completely between the logic of the vanguard [for which the plan was their attempt to consider the whole as they conceived it] and the logic of the [bonus-maximising] managers for whom the plan was something to evade if possible; this was contrary to his discussion of the principal/agent problem described in his early Overcentralization. For a discussion, see Lebowitz, Contradictions of ‘Real Socialism: the Conductor and the Conducted [Monthly Review, 2012]. Of course, Kornai’s analysis is limited by definition to a study of a particular experience which bears little resemblance [except in the name] to the free association of producers envisioned in socialism as originally conceived.
“sustainable capitalism” -> Given the existential challenges of climate change and environmental degradation, a sustainable INDUSTRY is impossible. It is not a choice between capitalism and socialism. It doesn’t matter the property regime. We can have a sustainable environment or we can have industry, not both.
Seems I am being accused of being idealist. So let us understand precisely what is meant by a communist revolution. To become workers have to first become conscious. On the other hand the capitalist revolutions were driven by the capitalists becoming before they became conscious of their tasks. In other words capitalism developed in the womb of feudalism giving birth to a living contradiction. Conversely communism as a mode cannot gestate in the womb of capitalism. My programme seeks to assist the process of becoming conscious in order to become emancipated. I reject metaphysics dressed up as practical politics.
Brilliant and suggestive comment. But with some light and dark.
‘’ To become workers have to first become conscious. ’’ Yes, right, without knowledge there is nothing. Neither is a socialist revolution.
‘’ The capitalist revolutions were driven by the capitalists becoming before they became conscious of their tasks¡¡.
No. This is contradicted by the first statement. Is consciousness necessary, the knowledge of the workers, or is it not necessary? The Enlightenment (Voltaire, Rousseau, Montesquieu, Diderot, etc.) is widely accepted as the seed of the French Revolution and the rest of liberal revolutions ( capitalists). Any encyclopedia and any historian will tell you. Hasn’t the studies of Marx, Engels, etc., and their dissemination to the working classes contributed to all socialist revolutions since 1917 in Russia? Yes, objective material conditions matter for a revolution (especially the condition of extreme misery) but without the knowledge of those conditions (its history, its reason for being and its solution) the workers will not opt for the most valid solution.
‘’ Conversely communism as a mode cannot gestate in the womb of capitalism ’’.
No. Communism is already brewing within capitalism. Since 1917, to be exact. Yes, true, the same thing happened to Capitalism and the economic-political phenomenon is called revolutionary cycles. Cycles of class struggles, using socialist terms. With forward and reverse phases. A throwback, and since the 80s, that’s just, unique, and exactly what is happening to the cycle of communism.
A final note on gestations, newly conceived economic subjects, and Socialism. Just as Capitalism with its liberal revolutions gesture and conceived private companies as a new economic subject within Feudalism, surpassing and expanding individual feudal companies, Socialism is building the new and following economic subject since 1917. What is that new guy? The state. That State that since 1917 throughout the World-System (socialist and non-socialist) has MULTIPLIED BY FIVE (measured in annual GDP, from 10% to 50%) its size. This State has been conceived initially (in the first impulse-revolution) as an authoritarian State but it is more than probable that in the next impulse (not too far from the year 2,040) it will become a State under socialist workers’ democracy. If we add to current economic science a bit of evolutionary biology, which tells us about living beings (man, in this case) that integrate, unite and fuse more and more from the primitive initial cells, if it seems that Socialism be a gestation of a new subject. A new economic subject and…. a new living being.
That’s exactly Preobrazhensky’s analysis, which bases his entire theory of “socialist primitive accumulation”.
In his famous article, he argued that, contrary to capitalism, socialism was born politically first, while capitalism was born economically first. When the capitalists had to do political reform (French Revolution, Glorious Revolution), the feudal aristocracy was already completely surrendered.
But we could make another analysis. Before the 20th Century, illiteracy was the rule, and even the upper classes didn’t think scientifically, in terms of theories or programs. It was a pre-ideology era. Socialism had to be born in the era of ideology, of mathematical thinking and modelling, of statistics, mass communications, theories and formulas. In that case, socialism just happened to be born in the era where it is impossible to conceal one’s intent for revolution.
In fact, the October Revolution is the first-ever planned revolution. It is the first-ever theoretically based revolution.
I think some aspects of criticism from Kornai and the rest are correct and require serious reflection. This is gonna be a longish text.
1) For one, the it is true that “command” economies like the USSR had serious issues when it came to civilian production. The soviet union actually provides a perfect example in this discussion. Many people generally point to USSRs innovation to counter arguments that it had a sad state of an economy. But the driver of innovation in USSR was exclusively the military, and the military operates under “planning”, not under “market” conditions. And that is how it should be. But to say then that “ha! the military was socialist then!” would be preposterous. All militaries in the world operate with planning. If a military operates under market conditions, it will be disastrous – case in point. the US “adventourism” and eventual defeat in middle east. Civilian economy cannot operate for long under military-style planning, because of i) technical/logistical reasons (too much complexity) and ii) psychological reasons. While Cockshott might say that point (i) is largely historic and now we can do calculations based on raw computational power, (ii) still stands. I wouldn’t like to be assigned to a siberian plant because a computerized system decided so any more than I would if a central committee did. If you have a capitalist market, then, like it or not, going to a siberian plant APPEARS as a choice (it really isn’t). In that sense, it is a much more effective mediator.
2) On the planning issue: there is planning in capitalist markets as well. The bourgeoisie collectively have developed an entire field of science devoted to planning for capitalist markets. It’s called operations research. So we really need to make our definitions clear and with content. What do we mean when we say (socialist) planning? Our marxist critique can be “correct” with regards to capitalisms downsides, but it is absolutely true that, as a system, capitalism has a “metric” which acts as an “objective function” so to speak. That objective function is the profit, and production units (businesses) aim to maximize their profit. This already provides STRUCTURE to the system. What is the corresponding “objective function” for a socialist economy? And by socialist economy I mean the civilian part, not the military one. The AES countries had no such objective function to drive innovation or trickle down effects from military innovation because there was no such “objective function” (call it “incentives” if you want). The result was that USSR had a military technology which was on par or even better than the combined west, an absolutely impressive feat, but when it came to civilian tech and commodities, it was garbage. And we are talking about the largest country that has ever existed, with the whole periodic table as resources available. Add to that the fact that USSR civil society in 1975 was largely urban, educated wannabe petty bouj, while in 1917 it was the revolutionary proletariat and peasants. You would expect the “materialist” science would be able to forecast that an industrial and, most importantly, massive modern military infrastructure would require a corresponding division of labor in society which would translate to masses of urban educated population. Well, that urban population happened to have more consumer needs than their grandfathers in 1917. If you grew up in the “West”, that might sound as “ideology” from my part but it was absolutely real in USSR and other AES. As a statistic, the educated and technical masses have “higher standards” than proletarians, who were always a minority(around 10-15% of the pop) in the West due to imperialism. It is no wonder that the primary “subject” and force of color revolutions in service of imperialism are students.
3) And that is my issue with the whole “calculation” debate: yes, we have the computational power to “plan” (the USSR didn’t have it btw, Cockshott agrees there) but so far we haven’t established a metric, counterpart to the profit metric, that would give socialism structure. The military sector for example has such a metric: it is survival and victory, the most concrete metric. That is why, historically, the military sector was the source of innovation in ALL societies. “Democratic planning” is a phrase that sounds good but I honestly cannot see what content it has from a technical perspective. The problems we have to reflect on is how the things we talk about scale. Democracy, unfortunately, doesn’t scale well.
4) Michael Roberts said: “But I remind readers that in the period of 1952 to 1978 when China had a fully state-owned planned economy where the capitalist mode of production was replaced, China achieved 6-7% per annum real GDP growth.”
But high growth rates are to be expected in backwards economies. especially in contact with more advanced ones. It had similar groth rates after Deng’s reforms.
I’ll only comment on point 3 because I’m interested in that (and have read Cockshott, with Hahnel on queue).
I’m not sure we need a singular metric like profit. In Cockshott’s modelling, we have an economy of labour credits (corresponding to worker-hours in productive sectors), which are allocated to different sectors according to a plan mandated by broad investment goals set by citizens. So industrial bureaus would receive budgets in labour credits corresponding to the plan, and would use them to procure inputs and distribute credits to workers so they can use them to purchase consumer goods. Marginal premiums and discounts would be applied according to demand. The economy would break even as labour credits are extinguished at the point of spending. And the non-productive sector (welfare, pensions, infrastructure) would come from the budget as mandated, in the equivalent of taxation (on income, if memory serves). The computational power is needed to calculate individual product prices based on the amount of worker-hours they require by solving I/O matrices. (If I understood it right.)
So instead of profit, the plan would decide what to allocate resources to: a space programme, nuclear fusion research, retrofitting of houses, urban improvements etc. in addition to the resources already committed to production.
Can you elaborate on why an equivalent metric to profit is needed?
“Can you elaborate on why an equivalent metric to profit is needed?”
Because all you describe here is what the Soviet system was, except they didn’t have labor credits, but money which was circulating. But other than that, everything else was pretty much the same. Now, you need an equivalent metric to provide incentives. Incentives matter in a mass society (scale). Planning works when there is a definite and short-term goal – a space project like moon/Mars landing, Nuclear infrastructure etc. Planning is fine there. But unless you are able to continuously provide a new “aim”, then this will not last long. In fact, what might actually happen is that corruption will kick in and you will end up having committees introducing new targets just to make a plan for so that budget is allocated to their sector–> corruption. That happens already in capitalism as well, with sectors of sensitive content (weapons manufacturers for example). You need a metric that will add structure to the system and provide incentives for people to do stuff. The soviet union didn’t have that because while the central committee could wonderfully (and successfully) plan for Sputnik, it cannot plan for the myriads of other products/commodities that the west was pumping out. And the ones it did was of much lower quality (again, talking for the civilian sector).
One other issue I have is with the so called narrative of the decimation of the so-called “productive” sector in the west. It is true that investment there has slowed down and the anglosaxon countries have been “de-industrialized” (actually, they moved production to cheaper places and enjoy lower and more competitive prices). But at the same time there has been an explosion, since the 90s, of productivity in the digital sector. Virtually every digital product we use is US. Maybe the labor theory of value doesn’t apply for such products, but it is absolutely true that it is a result of a productive process with hundreds of thousands of people working in production and maintenance of such products. That explosion was also largely facilitated by the existence of an incentives structure in place. I am sure we are all aware of Gerovich’s work on the failure of USSR to implement the equivalent of the internet in the 60s. It hit the bureaucracy wall because the system of incentives in place blocked any such innovation taking place in civilian society (ironically, Marx’s schema for historical progress comes to mind here). Well, internet became widespread eventually not because for some idealistic reason (that was the PR), but because there was strong commercial/corporate (AND security) incentive.
Wait, wait, wait, I don’t get this.
You’re saying that what a socialist/communist system needs is an equivalent of the profit metric of capitalism to provide incentives for continued technical progress.
But in the capitalist system, profits accrue solely to shareholders, the owners of the means of production. I very much doubt that any wage worker is motivated by profit. I certainly am not, but as a civil servant I’m not in the productive sector and thus don’t count.
That is tantamount to saying it’s the capitalists that drive human progress in the current system. By that token, we have to instantly classify China as capitalist, because what drives their productive sector is very much profit, no? Otherwise their staggering economic success wouldn’t be conceivable. Or are you saying another incentive metric is already in operation there?
The corollary to this is that capitalists are needed to keep the system working, and that exploitation of workers (to generate profit by extracting surplus value from their work) is needed for human progress.
As for the Soviet Union, you may say that labour credits are the only thing they didn’t have. But according to Cockshott, it was THE fatal flaw of their system, because money circulation instead of labour credits that are cleared on the act of being spent allowed for differential pay, leading to undervaluation of agricultural commodities, shortages of foodstuff and the rise of an intelligentsia that ended up eroding the superstructure of Soviet society as they pursued their own class interest.
(Of course, labour credits would have been impossible because their implementation depends on the correct calculation of prices at the individual product level, which was far beyond anything Gosplan could compute with the technology of that age. Soviet cybernetics, I’m given to understand, made some strides in devising forms of efficient planning but they were not implemented in the end. So it wasn’t totally their fault.)
I’m slightly disturbed now, because I cannot devise a metric that provides socialism with an incentive for progress like profit in capitalism, if we are to accept your contention. And I cannot escape the creeping thought that socialism would require an impossible change in “human nature”, which is what its detractors contend. And as such we’re stuck with capitalists because we need their profit to drive mankind forward. TINA, in other words.
And in that case, what are we doing here, even?
I have to think about this, honestly.
“Because all you describe here is what the Soviet system was, except they didn’t have labor credits, but money which was circulating. But other than that, everything else was pretty much the same. ”
It is a myth that the Soviet Union (post-Stalin) functioned in the claimed way (ie as a centrally planned command economy). To the contrary, profit as an economic incentive was restored in the USSR during the revisionist era.
“Let us consider profit, one of the economic instruments of socialism. A considerable enhancement of its role in socialist economy is an indispensible requisite for cost accounting”.
(Editorial: “Economic Policy and the Work of Communism”, in: “Pravda” (Truth), January 14th., 1966, in: “The Soviet Economic Reform: Main Features and Aims”; Moscow; 1967; p.11).”
@DGE The worker in capitalism is not motivated by profit obviously. He is motivated due to the existence of a permanent reserve army of labor. Also yes, china after WTO has introduced capitalist reforms. The system china has resembles the economic doctrines of List. It was economists like Galbraith and Kornai who advised the Chinese after the opening up.
“But according to Cockshott, it was THE fatal flaw of their system, because money circulation instead of labour credits that are cleared on the act of being spent allowed for differential pay, leading to undervaluation of agricultural commodities, shortages of foodstuff and the rise of an intelligentsia that ended up eroding the superstructure of Soviet society as they pursued their own class interest.”
I fail to see how labour credits would have made the situation any different. But maybe I am wrong. Differential pay exists in capitalism as well between employees/workers. I think the USSR also had instituted a system of differential pay, even before the effects of monetary transactions, am I wrong?
The rise of the intelligentsia is a necessary fact of growth, not of monetary policies.
On labour credits, the inhibition of differential pay stems mainly from the fact that the credits are literally time units. A worker in the productive sector works 100 hours, for example. Let’s say he gets taxed in 40 hours, mandated by a democratically outlined plan, so that pensions, the welfare net and things like research and infrastructure are funded. (This taxation means that people working on these areas are paid and thus able to sustain their livelihoods.)
It’s VERY difficult to convince workers that it’s fair that they are paid less than, say, a surgeon, when the means of payment is a constant, permanent reminder that they’ve toiled about the same number of hours. In fact, Cockshott argued that a first step in a transition to socialism in Britain might well be to stamp on every pound sterling (or adding in brackets next to your bank account balance) how many minutes of work that’s worth. This is easy to calculate nowadays, with thoroughly detailed labour and production statistics being kept by most countries. So it would be hard to sell the snake oil that a CEO gets 30,000 hours of work equivalents per month, for example. Like I said in a reply to Wal Buchenberg below, small premiums and penalties might apply due to differences in productivity in the factory floor, but that’s it. Money circulation muddles this nexus: most workers don’t know they work half an hour for themselves, half an hour for their boss (his 90s estimate for the UK).
Another inhibitor to differential pay is the elimination of finance. What hours you work are what credits you get (minus taxation), and there’s no financial instrument to increase that amount. So a rentier class is impossible.
As for the intelligentsia, denying them extra economic clout is a strong inhibitor to their rise. An extra inhibitor is his Aristotelian solution to the dilemmas of democratic centralism: appointment to political office by lot, instead of elections. But this departs from the theme of this thread, so I won’t elaborate.
“But high growth rates are to be expected in backwards economies. especially in contact with more advanced ones. It had similar groth rates after Deng’s reforms.”
Not necessarily and, even if that was the case, not for such long period of time (27 years).
Backwards economies (i.e. Third World countries) tend to have highly cyclical, “chicken flight” patterns of GDP growth. They have up to a decade of significant growth (but never extreme growth of 10%+, like the ones the USSR and China had) of some 4%-6% per annum, only to be plunged into a crisis of equal period (usually related to the commodity cycle), evening out the “boom”. The resultant vector is some vegetative growth of 2% max.
The argument of “lower base, higher % growth” and, by logic, the “middle income trap” cannot explain the phenomenon of both the USSR’s “industrialization at breakneck speed” of 1929-1951 or China’s phenomenon of economic growth since, really, 1950. China certainly doesn’t follow the pattern of Third World country economic growth, even though it is still a very poor country.
Indeed, that’s one aspect of communism that makes it attractive to Third World peoples that the peoples of the First World don’t understand: even though a communist revolution and early socialism implies in a brutal battle against imperialism and very poor conditions of living (e.g. Cuba), it gives the people hope. They will not live to see the better world they’re building now, but they can glimpse it for the great-grandchildren. It gives that good sensation that your hard work will be worth it. That kind of hope – even if very faint – is not offered by capitalism (i.e. neoliberalism), which only offers eternal damnation, or, for the comprador elites and their middle class lackeys, a vain life in the Matrix, moved only by senseless gluttony.
My point still stands: countries with much lower levels of production forces grow faster and grow even faster if they trade with already advanced ones. China in particular had Soviet Union and then, after Deng, the western capital. The USSR itself traded a lot with the West from the 1920s and on, even with fascist italy by the way.
For countries in the global south, marxism-leninism is attractive because the truth element at its core corresponds to their needs; which, for the mid 20th century was liberation and independent development. No country can hope to really develop using “liberalism” as an ideology because liberalism is a cultural fifth column using by imperialist countries. But it is not only marxism-leninism that could facilitate this development for underdeveloped countries. Friedrich List, a contemporary of Marx if I am not mistaken, had an economic program for backward countries to develop. Lenin’s NEP and China post-Deng follow List, rather Marx in the economic aspect.
P.S.- Also, is there any source for 10% growth rate for USSR?
The Soviet Union was not planned in a meaningful sense after Stalin and especially after the Kosygin reforms of the 1960s. The USSR was effectively a capitalist state with all of the market anarchy of capitalist economies but with less competition and without the spoils of imperialism. See here for more on the historical transition from socialist planning to monopoly capitalism in the USSR: http://www.oneparty.co.uk/html/book/ussrchap1.html
Of course you can have a planned economy with markets. But the corporations must be chartered and run to break even, and they must get their investments as part of the overall allocation of investment by methods of planning—no profit, no capitalist accumulation. See From Capitalism to Equality.
In 1985 Chinese officials and academics charged with figuring details of how to go over to capitalism invited Kornai, along with other capitalist economists, to an intense week-long seminar. It was held on a luxury boat that cruised down the Yangtze River – in complete secrecy from everyone but the highest officials. (see Gewirtz, Unlikely Partners). Kornai did not merely admire China. He worked with the capitalist-roaders to overthrow socialism.
“He worked with the capitalist-roaders to overthrow socialism.”
Your comment assumes that the “capitalist roaders” wished to overthrow socialism (or that no changes in the assumed anti-socialist leadership have occurred). But empirical evidence suggests that your assumptions are incorrect, China is far from an India or Brazil, or even Russia (before Putin’s admittedly meagre re-nationalizations).
But China’s collapse into full blown comprador capitalism couldn’t happen at worse time in the history of capitalism: the neoliberal period, which is capitalism’s final solution for its recurrent and increasingly severe crises and wars. Neoliberalism’s, and therefore, capitalist China’s solution to its socialist problem would be market based, profitable solutions. But such solutions have resulted everywhere, but in China, in the increasing precariousness and degradation of labor.
In any case, if China is really capitalist, it should be turning comprador by now, as Samir Amin warned. The over-all improvement in China’s working population’s standard of living would be be declining, along with the dismantling of much of the country’s technically advanced infrastructure (a la liberated Russia). But the opposite seems to be the case. China even seems to be turning more toward socialism!
That should be hopeful for most socialists. However, keep your hopes alive. For the empire, where there is death, there’s hope.
Correction: remove “and wars” from the first sentence of the second paragraph, which should end with “crises”. War is one of capitalisms solutions for its crises!
J.K. Galbraith asserted that socialist planning abolished the market, while capitalist planning aimed to meet it; but this is to posit the market as antecedent to the economic exchanges that constitute the social nexus of which ‘the market’ is the ideological expression. To what extend does Walmart in accessing its supplies exactly ‘approach the market’? A friend of mine told me that Walmart informed him that for a coffee table he was manufacturing how many they would take and the price they would pay for each item. He for his part did not then go to ‘market’ and see what wood was available and what prices suited him best, but contacted his supplier who told him what price he would HAVE to pay for the requisite wood. The deal fell through, for the price that Walmart demanded did not cover the COST of PRODUCTION. Now, I can see demand and supply in operation here, but I do not comprehend that the economic process is regulated by ‘market signals.’
“Now, I can see demand and supply in operation here, but I do not comprehend that the economic process is regulated by ‘market signals.’”
Because you are not supposed to, in the same way it is not immediately apparent that the earth is curved (it looks flat to us) or, in general, that structure can arise from uncoordinated action of many units, which are subject to a field(gravity, value, etc:P ).
that structure can arise from uncoordinated action of many units, ” My point is that it is not uncoordinated action. Can anyone offer further insights?
This will be my last comment as I do not want to abuse our host’s hospitality.
Paul Cockshott and algorithms are important but as we have learnt about algorithms they are only as good as the assumptions they are based on. Planning is a quintessentially human activity. To obtain and use universal labour time three steps are needed. Step 1. Intensity must be homogenized based on capacity. This can only be done through commissions set up after the revolution not by algorithms as it is it an exquisitely democratic process. Otherwise physical hours become meaningless. They would disadvantage workers as they age and women workers inter alia. (Incidentally this is the only error in the Critique of the Gotha Programme, and it occurred because in Marx’s time most labour was physical unlike today where a plethora of mechanical aids exist.) Thus in the equation intensity is now reduced from a variable to 1 (a constant). Step 2. Once physical hours are set this way, they need to be converted into economic hours by adding in the coefficient of skills. Because of skills and depending on the density of skills, economic hours will exceed physical hours. In turn it is the SIMPLE average of these economic hours that now forms universal labour time, allowing it to become the standard to cost production. Step 3. We are left with productivity. Unlike the former two steps productivity can only be taken on the output side rather than on the input side. Here we find that within an industry workers work with more or less means of production both in terms of quantity and quality and thus their productivities vary. No worker can be advantaged or disadvantaged by this without turning common ownership of the means of production into a nonsense. So here we work with WEIGHTED average labour times not average labour times and it is this weighted average time that is used to establish a single price per article ensuring all workers, regardless of the variation in productivity, are rendered equal. (Marx’s market values which he explained was the most concrete form of social labour time corresponds to weighted average labour time.) (Price is here understood to be the phenomenal form actual costs take in the sphere of consumption once cost is converted, by means of imagination, into units of universal labour time.)
Unless all of this is fed into algorithms it will tear society apart through producing inequalities and by ensuring imbalances exist between the labour time expended in production and consumed in consumption. Unfortunately Cockshott is unaware of these necessities and still thinks like a capitalist despite his declarations to the contrary when in he introduces elements like social utility. In a communist society based on consumer planning, planners act only on the instructions given to them by consumers. The utility is already baked into the instruction.
So before we discuss algorithms, computers and mathematics we first have to understand and clarify the web of social relations that forms and constitutes planning.
In any case, after the revolution the closure of the financial centers in Wall Street, the City of London, Shanghai, Singapore, Frankfurt together with all those redundant rockets scientists who work there, will provide more than enough computing and brain power to plan 10 world economies. The problem is getting there.
Charles A. Planning and the market cannot coexist because money and labour vouchers cannot coexist. Money, real money would introduce demand and supply tearing prices away from actual costs of production making conscious planning impossible and debauching vouchers. I have written this up on my site. In any case with consumer led planning where everything is transparent and pro-active who needs something as primitive as markets.
Cockshott is against differential pay according to skill, other than maybe on-site differentials according to productivity (he talks of three tiers within a given factory, a normal one where one hour of work equals one hour of pay, one for over-performers that pays 1.2 and one for under-performers that pays 0.8).
His arguments sounds good to me: he says that if a surgeon earns more than a blue collar worker, such society will inevitably engender an intelligentsia/professional class that will undermine socialism in pursuit of its own class interest.
What are your thoughts on this? You may point me to any document where you address this issue if you don’t want to clutter this comment section.
I will address all these points in a post on my site within the next two weeks. theplanningmotive.com
Let us assume that 100 old people live in a community, 10 of whom need a wheelchair, 20 need insulin every day, 30 need Makromar, 90 need daily care and maintenance. None of these 100 old people work in production. How can we meet their specific needs? Labour vouchers and working time calculation don’t help us a bit.
In 2018, the working population in Germany (wage workers 43%, small self-employed 3%, capitalists 1%) made up 47 percent of all. This means that the majority (53%) of people in Germany are children and young people before starting work (24%), retirees after the end of working life (22%), as well as the poor and sick who live on social benefits (7%).
A non-capitalist, moneyless system in Germany would therefore have to practice a distribution system for the majority of people who do not work that goes beyond “labour vouchers”. Why using labour vouchers anyway?
It is generally wrong to base a planned economy on the distribution of consumer goods. That bridles the horse’s tail.
Wal Buchenberg, Hannover
Cockshott says that’s why some form of taxation would apply to labour credits to pay for the welfare network, as well as infrastructure, research etc.
Basically, if you’re a worker involved in the production of consumer goods, or more broadly directly employed in the reproduction of society (is that the correct term), of each hour of work, a fraction of your labour credits go to your pension, health, education, research etc. This would be outlined by the plan, mandated by citizens voting on the percentages that go to each of these domains.
In practical terms, a factory worker’s or a farmer’s output would help support the livelihood and education of the doctor (who is paid in labour credits, too), by producing the goods necessary for them. The old people you mention would receive labour credits from their pensions, which they’d use for discretionary spending, and be supported by healthcare and other services paid in credits (as in, credits that go to support the manufacturing of wheelchairs etc. and the personnel that provide care).
At least that’s my understanding of it.
The key to transformation will be the advance of the struggles the working class undertakes as a whole– and that necessarily must be one for the abolition of wage differentials based on “skill” “productivity” “education” or amount of dead labor (machinery, goods) animated by labor in any sector. “One big wage” at the highest possible level embodies the class recognition of itself as a class, that all workers sacrifice time, and the differentials are imposed by the capitalist mode of production. A neurosurgeon adds no more value than a janitor; and compensation on the basis of utility is an impossibility, so in the transition the “raw equality” of labor time is the linch-pin.
„Instead of the conservative motto: ‘A fair wage for fair work!’” Cockshot&Co “should write the revolutionary slogan on their banner: ‘Down with the wage system!’” K. Marx, Lohn, Preis und Profit, MEW 16, 151.
(Marx’s market values which he explained was the most concrete form of social labour time corresponds to weighted average labour time.) Surely it is the socially necessary labour that determines the market value? cf Marx’s discussion TSV Part 2 Pp203-206.”Which of the categories has a decisive effect on the average value will depend on the numerical ratio or proportional size of the categories….the value of each individual commodity in a particular sphere of production is determined by the total mass of social labour time REQUIRED by the total mass of the commodities…and not by ..the labour time the individual commodity has cost….therefore with unequal productivity of labour, the commodities thus represent unequal quantities of labour time. The commodity produced under more favourable conditions contains less labour time than that produced under less favourable conditions, but it sells at the same price and has the same value as if it contained the same labour time, though this is not the case.”
Worthy of reply. Only the weighted average labour time multiplied by the volume of articles produced and sold can equal the total labour time expended on it. The simple average cannot. Let me explain numerically. Take three producers of the same article. So. The first produces 100 items and each takes 3 hours. The second produces 200 and each takes 2 hours. The third produces 300 and each takes 1 hour. The average labour time is 2 hours (3+2+1 divided by 3) The total labour time is 1000 hours (300+400+300) The total number of items is 600. If we multiply 600 by the average labour time of 2 we get a total of 1200 hours expended not 1000. On the other hand if we seek out the weighted average labour time which is usually obtained by dividing the total expenditure of hours by the volume of product it is 1.67. The reason the weighted average of 1.67 is less than 2 is due to a preponderance of the article being produced more cheaply at 1 hour rather than 3 (Marx’s expression Chapter 10 Volume3) Thus the differing weight of production must always be taken into account because not only do individual values vary but also individual volumes. That is why market values which embody values as well as volumes is the most concrete expression of social labour time. (It is worth adding in that market value is not synonymous with abstract value because abstract value abstracts variation in volumes.) The immensity and importance of Chapter 10 is often not appreciated because it lives in the shadow of Chapter 9.
I agree with what Ucanbpolitical has to say about Ch10, which supplements what Marx has to say in TVS Part 2. Particularly important is the matter of preponderance:”Let us now assume that great quantities of these commodities are produced in something like the same social conditions, so that this value is also the individual value of the the individual commodities making up this mass…the market value is determined by the value of the commodities produced under average conditions” ( P283). If we read this in conjunction with TSV part 2, ” The commodity produced under more favourable conditions contains less labour time than that produced under less favourable conditions, but it sells at the same price and has the same value as if it contained the same labour time, though this is not the case” then this can only mean that the value of preponderance of commodities determines the market value of all the commodities, including those which have been produced under better than average conditions and thus embody less than the socially necessary labour, and those that have been produced under worse and thus embody more labour than is socially necessary. Thus they sell at the same price, depending on demand. Recall that determine means to set limits to; thus those commodities produced under better than average conditions may sell below the dominant market price.
I should add that Marx’s very sophisticated discussion in Ch 10, which ucanbpolitical rightly emphasises, gives the solution I think to the debate of whether the value of a commodity is determined by current costs of production or historic ones. It depends, on the basis of Marx’s exposition, I think, on demand and supply: for example if the supply of new cheaper or more efficient computers meets the demand, then the market price of such computers expresses their value and previous models are devalued; however, I should guess ( perhaps anti-Capital could comment) that with oil tankers it is the historic average costs that determine their value, since presumably the latest tankers cannot dominate the market in sufficient numbers so immediately as to determine the current value of all tankers. Note it is the NECESSARY labour time that determines (i.e. sets limits to) a commodity’s value, around which its market price may then oscillate.
”Note it is the NECESSARY labour time that determines (i.e. sets limits to) a commodity’s value, around which its market price may then oscillate.” This should read ”the market price of the INDIVIDUAL commodity may then oscillate.”
Tell me capitalism can solve the climate crisis. Go on … all you smart arses.
There is no way a profit based system will challenge climate change.
Off topic: maybe Michael would like to react on https://www.project-syndicate.org/commentary/macroeconomic-policy-fiscal-stimulus-lacks-robust-theory-by-robert-skidelsky-2021-11
Yes, Victor “Monetary policy works in theory but not in practice; fiscal policy works in practice but not in theory. Fiscal Keynesianism is still a policy in search of a theory. ” But does fiscal policy really work either? Anyway Skidelsky falls back on ‘uncertainty’ as the missing ingredient in macro theory. But that is really saying that there can be no theory with any predictive power. Macroeconomics whether monetarist or Keynesian is apparently helpless.
” But does fiscal policy really work either? ”
You believe in Ricardian Equivalence?
Strangely, it cannot be demonstrated that Ricardo believed in RE. When Barro, who coined the phrase, was told there was no evidence that Ricardo thought in this way, he ran a “sophistric” mile to explain himself.
But then again, Keynes himself may have pre-empted Barro. See pages 94-95 of GT, paragraph beginning “(5) Changes in Fiscal Policy…”.
” But that is really saying that there can be no theory with any predictive power.”
Theory may not be able to precisely quantify any effects but surely it can predict direction?
And point (6) on page 95 looks remarkably like Friedman’s Permanent Income Hypothesis which might also weaken fiscal policy. So Keynes may have also pre-empted Friedman.
//Under capitalism, the competition for markets between producers and sellers generates ferocious rivalry among capitalists.//
Are producers and sellers the same ?
Are not the producers, capitalists?
I have now published the promised post which brings together intensity, skill and productivity. Calculating universal labour time is a complex process. https://theplanningmotivedotcom.files.wordpress.com/2021/11/universal-labour-time-and-its-3-variables.pdf
It would be great if Michael could address such planning issues, so as to open them up to wider debate.