Friday, 30 November 2012

Socialist Economics

Socialist economics refers to the economic theories, practices, and norms of hypothetical and existing socialist economic systems.
A socialist economy is based on some form of social ownership, which includes varieties of public ownership and independent cooperatives, over the means of production, wherein production is carried out to directly produce use-value sometimes, but not always, coordinated through economic planning and a system of accounting based on calculation-in-kind or a direct measure of labor-time.[1][2]
The term socialist economics may also be applied to analysis of former and existing economic systems that call themselves "socialist", such as the works of Hungarian economist János Kornai.[3]
Socialist economics has been associated with different schools of economic thought, most notably Marxian economics, institutional economics, evolutionary economics and neoclassical economics. Early socialism, like Ricardian socialism, was based on classical economics. During the 20th century, proposals and models for planned economies and market socialism were based heavily on neoclassical economics or a synthesis of neoclassical economics with Marxian or institutional economics.

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[edit] Description

See also: Socialist mode of production
A socialist economy is a system of production where goods and services are produced directly for use, in contrast to a capitalist economic system, where goods and services are produced to generate profit (and therefore indirectly for use).[4] Goods and services would be produced for their usefulness, or for their use-value, eliminating the need for market-induced needs to ensure a sufficient amount of demand for products to be sold at a profit. Production in a socialist economy is therefore "planned" or "coordinated", and does not suffer from the business cycle inherent to capitalism. In most socialist theories, economic planning only applies to the factors of production and not to the allocation of goods and services produced for consumption, which would be distributed through a market. Karl Marx stated that "lower-stage communism" would consist of compensation based on the amount of labor one contributes to the social product.[5]
The ownership of the means of production varies in different socialist theories. It can either be based on public ownership by a state apparatus; direct ownership by the users of the productive property through worker cooperative; or commonly owned by all of society with management and control delegated to those who operate/use the means of production.
Management and control over the activities of enterprises is based on self-management and self-governance, with equal power-relations in the workplace to maximize occupational autonomy. A socialist form of organization would eliminate controlling hierarchies so that only a hierarchy based on technical knowledge in the workplace remains. Every member would have decision-making power in the firm and would be able to participate in establishing its overall policy objectives. The policies/goals would be carried out by the technical specialists that form the coordinating hierarchy of the firm, who would establish plans or directives for the work community to accomplish these goals.[6]
However, the economies of the former Socialist states, excluding SFR Yugoslavia, were based on bureaucratic, top-down administration of economic directives and micromanagement of the worker in the workplace inspired by capitalist models of scientific management. As a result, socialists have argued that they were not socialist due to the lack of equal power-relations in the workplace, the presence of a new "elite", and because of the commodity production that took place in these economies. These economic and social systems have been classified as being either Bureaucratic collectivist, State capitalist or Deformed workers' states, the exact nature of the USSR et al remains unresolved within the socialist movement [7]

[edit] Socialist economic planning

Main article: Economic planning
Economic planning is a mechanism for the allocation of economic inputs and decision-making based on direct allocation, in contrast to the market mechanism, which is based on indirect allocation.[8] An economy based on economic planning appropriates its resources as needed, so that allocation comes in the form of internal transfers rather than market transactions involving the purchasing of assets by one government agency or firm by another. Decision-making is carried out by workers and consumers on the enterprise-level.
Economic planning is not synonymous with the concept of a command economy, which existed in the Soviet Union, and was based on a highly bureaucratic administration of the entire economy in accordance to a comprehensive plan formulated by a central planning agency, which specified output requirements for productive units and tried to micromanage the decisions and policies of enterprises. The command economy is based on the organizational model of a capitalist firm, but applies it to the entire economy.[9]
Various advocates of economic planning have been staunch critics of command economies and centralized planning. For example, Leon Trotsky believed that central planners, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and understand the local conditions and rapid changes in the economy. Therefore, central planners would be unable to effectively coordinate all economic activity because they lacked this informal information.[10]
Economic planning in socialism takes a different form than economic planning in capitalist mixed economies (such as Dirigisme, Central banking and Indicative planning); in the former case planning refers to production of use-value directly (planning of production), while in the latter case planning refers to the planning of capital accumulation in order to stabilize or increase the efficiency of this process.

[edit] Normative aspects

See also: Socialist critique of capitalism
The goal of socialist economics is to neutralize capital (or, in the case of market socialism, to subject investment and capital to social planning[11]), to coordinate the production of goods and services to directly satisfy demand (as opposed to market-induced needs), and to eliminate the business cycle and crisis of overproduction that occur as a result of an economy based on capital accumulation and private property in the means of production.
Socialists generally aim to achieve greater equality in decision-making and economic affairs, grant workers greater control of the means of production and their workplace, and to eliminate exploitation by directing the surplus value to employees. Free access to the means of subsistence is a requisite for liberty, because it ensures that all work is voluntary and no class or individual has the power to coerce others into performing alienating work.
The ultimate goal for Marxist socialists is the emancipation of labor from alienating work, and therefore freedom from having to perform such labor to receive access to the material necessities for life. It is argued that freedom from necessity would maximize individual liberty, as individuals would be able to pursue their own interests and develop their own talents without being coerced into performing labor for others (the power-elite or ruling class in this case) via mechanisms of social control, such as the labor market and the state. The stage of economic development in which this is possible is contingent upon advances in the productive capabilities of society. This advanced stage of social relations and economic organization is called pure communism.

[edit] Economic value in socialism

Socialist economic theories base the value of a good or service on its use value, rather than its cost of production (labor theory of value) or its exchange value (Marginal Utility).[12]
Other socialist theories, such as mutualism and market socialism, attempt to apply the labor theory of value to socialism, so that the price of a good or service is adjusted to equal the amount of labor time expended in its production. The labor-time expended by each worker would correspond to labor credits, which would be used as a currency to acquire goods and services.
Market socialists that base their models on neoclassical economics, and thus marginal utility, such as Oskar Lange and Abba Lerner, have proposed that publicly owned enterprises set their price to equal marginal cost, thereby achieving pareto efficiency.
Anarcho-communism as defended by Peter Kropotkin and Errico Malatesta rejected the labor theory of value and exchange value iself, advocated a gift economy and to base distribution on need.[13]

[edit] Socialist economies in theory

Robin Hahnel and Michael Albert identify five economic models within the rubric of socialist economics:[14]
  • Public Enterprise Centrally Planned Economy in which all property is owned by the State and all key economic decisions are made centrally by the State, e.g. the former Soviet Union.
  • Public Enterprise State-Managed Market Economy, one form of market socialism which attempts to use the price mechanism to increase economic efficiency, while all decisive productive assets remain in the ownership of the state, e.g. socialist market economy in China after reform.
  • A mixed economy, where public and private ownership are mixed, and where industrial planning is ultimately subordinate to market allocation, the model generally adopted by social democrats e.g. in twentieth century Sweden.
  • Public Enterprise Employee Managed Market Economies, another form of market socialism in which publicly owned, employee-managed production units engage in free market exchange of goods and services with one another as well as with final consumers, e.g. mid twentieth century Yugoslavia, Two more theoretical models are Prabhat Ranjan Sarkar's Progressive Utilization Theory and Economic democracy.
  • Public Enterprise Participatory Planning, an economy featuring social ownership of the means of production with allocation based on an integration of decentralized democratic planning, e.g. stateless communism, libertarian socialism. An incipient historical forebear is that of Catalonia during the Spanish revolution. More developed theoretical models include those of Karl Polanyi, Participatory Economics and the negotiated coordination model of Pat Devine, as well as in Cornelius Castoriadis's pamphlet "Workers' Councils and the Economics of a Self-Managed Society"[15].
Additionally, János Kornai identifies five distinct classifications for socialism:
  • Classical / Marxist conception, where socialism is a stage of economic development in which wage labour, private property in the means of production and monetary relations have been made redundant through the development of the productive forces, so that capital accumulation has been superseded by economic planning. Economic planning in this definition means conscious allocation of economic inputs and the means of production by the associated producers to directly maximise use-values as opposed to exchange-values, in contrast to the "anarchy of production" of capitalism.
  • Walrasian / Market Socialist which defines socialism as public-ownership or cooperative-enterprises in a market economy, with prices for producer goods set through a trial-and-error method by a central planning board. In this view, socialism is defined in terms of de jure public property rights over major enterprises.
  • Leninist conception, which includes a form of political organisation based on control of the means of production and government by a single political party apparatus that claims to act in the interest of the working class, and an ideology hostile toward markets and political dissent, with coordination of economic activity through centralised economic planning (a "command economy").
  • Social Democratic concept, based on the capitalist mode of production, which defines socialism as a set of values rather than a specific type of social and economic organisation. It includes unconditional support for parliamentary democracy, gradual and reformist attempts to establish socialism, and support for socially progressive causes. Social democrats are not opposed to the market or private property; instead they try to ameliorate the effects of capitalism through a welfare state, which relies on the market as the fundamental coordinating entity in the economy and a degree of public ownership/public provision of public goods in an economy otherwise dominated by private enterprise.
  • East Asian model, or socialist market economy, based on a largely free-market, capital accumulation for profit and substantial private ownership along with state-ownership of strategic industries monopolised by a single political party. János Kornai ultimately leaves the classification of this model (as either socialist or capitalist) to the reader.[16]

[edit] Socialist economies in practice

Although a number of economic systems have existed with various socialist attributes, or have been deemed socialist by their proponents, almost all of the economic systems listed below have largely retained elements of capitalism such as wage labor, the accumulation of capital, and commodity production. Nonetheless, various elements of a socialist economy have been implemented or experimented with in various economies throughout history.
Various forms of socialist organizational attributes have existed as minor modes of production within the context of a capitalist economy throughout history — examples of this include cooperative enterprises in a capitalist economy, and the emerging free-software movement based on social peer-to-peer production.

[edit] Centrally planned economies

A centrally planned economy combines public ownership of the means of production with centralised state planning. This model is usually associated with the Soviet-style command economy. In a centrally planned economy, decisions regarding the quantity of goods and services to be produced are planned in advance by a planning agency. The planning process was based around material balances — balancing economic inputs with planned output targets for the planning period. Although nominally a "centrally planned" economy, in reality formulation of the plan took place on a more local level of the production process as information was relayed from enterprises to planning ministries. Aside from the USSR and Eastern bloc economies, this economic model was also utilized by the People's Republic of China, Socialist Republic of Vietnam, Republic of Cuba and North Korea.

[edit] Dispute that the Soviet model is socialism

Various scholars and political economists have criticized the claim that the centrally planned economy, and specifically, the Soviet model of economic development, constitutes a form of socialism. They argue that the Soviet economy was structured upon the accumulation of capital and the extraction of surplus value from the working class by the planning agency in order to reinvest this surplus into the economy — and to distribute to managers and senior officials, indicating the Soviet Union (and other Soviet-style economies) were state capitalist economies.[17] More fundamentally, these economies are still structured around the dynamic of capitalism: the accumulation of capital and production for profit (as opposed to being based on production for use — the defining criterion for socialism), and have not yet transcended the system of capitalism but are in fact a variation of capitalism based on a process of state-directed accumulation.[18]
Other socialist critics point to the lack of socialist social relations in these economies — specifically the lack of self-management, a bureaucratic elite based on hierarchical and centralized powers of authority, and the lack of genuine worker control over the means of production — leading them to conclude that they were not socialist but either bureaucratic collectivism or state capitalism.[19] Trotskyists argue they are neither socialist nor capitalist — but are deformed workers' states.
This analysis is consistent with Lenin's April Theses, which stated that the goal of the Bolshevik revolution was not the introduction of socialism, which could only be established on a worldwide scale, but was intended to bring production and the state under the control of the Soviets of Workers' Deputies. Furthermore, these "Communist states" often don't claim to have achieved socialism in their countries; on the contrary, they claim to be building and working toward the establishment of socialism in their countries. For example, the preamble to the Socialist Republic of Vietnam's constitution states that Vietnam only entered a transition stage between capitalism and socialism after the country was re-unified under the Communist party in 1976[20], and the 1992 Constitution of the Republic of Cuba states that the role of the Communist Party is to "guide the common effort toward the goals and construction of socialism".[21]
This view is challenged by Stalinists and their followers, who claim that socialism was established in the Soviet Union after Joseph Stalin came to power and instituted the system of five year plans. Joseph Stalin introduced the theory of Socialism in one country, which argued that socialism can be built in a single country, despite existing in a global capitalist economic system.

[edit] Union of Soviet Socialist Republics

Main article: Economy of the Soviet Union
See also: Ministry of Finance (Soviet Union), Gosplan, and Five-Year Plans for the National Economy of the Soviet Union
The Soviet Union and some of its European satellites aimed for a fully centrally planned economy. They dispensed almost entirely with private ownership over the means of production. Workers were still, however, effectively paid a wage for their labour. Some believe that according to Marxist theory this should have been a step towards a genuine workers' state. However, some Marxists consider this a misunderstanding of Marx's views of historical materialism, and his views of the process of socialization.
The characteristics of this model of economy were:
  • Production quotas for every productive unit. A farm, mine or factory was judged on the basis of whether its production met the quota. It would be provided with a quota of the inputs it needed to start production, and then its quota of output would be taken away and given to downstream production units or distributed to consumers. Critics[who?] of both left and right persuasions have argued that the economy was plagued by incentive-related problems;[citation needed] claiming, for instance, that the system incentivized enterprise managers to underreport their unit's productive capacities so that their quotas would be easier to achieve, especially since the manager's bonuses were linked to the fulfillment of quotas.
  • Allocation through political control. In contrast with systems where prices determined allocation of resources, in the Soviet Union, allocation, particularly of means of production was determined by the bureaucracy. The prices that were constructed were done so after the formulation of the economy plan, and such prices did not factor into choices about what was produced and how it was produced in the first place.
  • Full employment. Every worker was ensured employment. However workers were generally not directed to jobs. The central planning administration adjusted relative wages rates to influence job choice in accordance with the outlines of the current plan.
  • Clearing goods by planning: if a surplus of a product was accumulated, then the central planning authority would either reduce the quota for its production or increase the quota for its use.
  • Five Year Plans for the long-term development of key industries.

[edit] Post-Soviet reforms

After the dissolution of the Soviet Union and the Eastern bloc, many of the remaining socialist states presiding over centrally planned economies began introducing reforms that shifted their economies away from centralized planning.
The Republic of Cuba, under the leadership of Raul Castro, has begun to encourage co-operatives and self-employment in a move to reduce the central role of state enterprise and state management over the economy, with the goal of building a co-operative form of socialism.[22]
Vietnam adopted an economic model it formally titled the socialist-oriented market economy. This economic system is a form of mixed-economy consisting of state, private, co-operative and individual enterprises coordinated by the market mechanism. This system is intended to be transitional stage in the development of socialism.

[edit] People's Republic of China

Main article: Economy of the People's Republic of China
China embraced a socialist planned economy after the Communist victory in its Civil War. Private property and private ownership of capital were abolished, and various forms of wealth made subject to state control or to workers' councils.
The Chinese economy broadly adopted a similar system of production quotas and full employment by fiat to the Russian model. The Great Leap Forward saw a remarkably large-scale experiment with rapid collectivisation of agriculture, and other ambitious goals. Results were less than expected, (e.g., there were food shortages and mass starvation) and the program was abandoned after three years.
In recent decades China has opened its economy to foreign investment and to market-based trade, and has continued to experience strong economic growth. It has carefully managed the transition from a planned socialist economy to a market economy, officially referred to as the socialist commodity market economy, which has been likened to capitalism by some outside observers.[23] As a result, centralized economic planning has little relevance in China today.
The current Chinese economic system is characterized by state ownership combined with a strong private sector that privately owned enterprises that generate about 33%[24] (People's Daily Online 2005) to over 50% of GDP in 2005,[25] with a BusinessWeek article estimating 70%[26] of GDP, a figure that might be even greater considering the Chengbao system. Some western observers note that the private sector is likely underestimated by state officials in calculation of GDP due to its propensity to ignore small private enterprises that are not registered.[27] Most of the state and private sectors of economy are governed by free market practices, including a stock exchange for trading equity. The free-market is the arbitrator for most economic activity, which is left to the management of both state and private firms. A significant amount of privately owned firms exist, especially in the consumer service sector.[28]
The state sector is concentrated in the 'commanding heights' of the economy with a growing private sector engaged primarily in commodity production and light industry. Centralized directive planning based on mandatory output requirements and production quotas has been superseded by the free-market mechanism for most of the economy and directive planning is utilized in some large state industries.[28] A major difference from the old planned economy is the privatization of state institutions. 150 state-owned enterprises remain and report directly to the central government, most having a number of subsidiaries.[29] By 2008, these state-owned corporations have became increasingly dynamic largely contributing to the increase in revenue for the state.[30][31] The state-sector led the economic recovery process and increased economic growth in 2009 after the financial crises.[32]
This type of economic system is defended from a Marxist perspective which states that a socialist planned economy can only be possible after first establishing the necessary comprehensive commodity market economy, letting it fully develop until it exhausts its historical stage and gradually transforms itself into a planned economy.[33] Proponents of this model distinguish themselves from market socialists who believe that economic planning is unattainable, undesirable or ineffective at distributing goods, viewing the market as the solution rather than a temporary phase in development of a socialist planned economy.
The Socialist Republic of Vietnam has pursued similar economic reforms, though less extensive, which have resulted in what is officially called a Socialist-oriented market economy, a mixed economy where the state plays a dominant role intended to be a transitional phase in establishment of a socialist economy.[34]

[edit] Social Democratic Mixed Economies

Main article: Social democracy
Many of the industrialized, open countries of Western Europe experimented with one form of social democratic mixed economies or another during the 20th century. These include Britain (mixed economy and welfare state) from 1945 to 1979, France (state capitalism and indicative planning) from 1945 to 1982 under dirigisme, Sweden (social democratic welfare state) and Norway (state capitalist mixed economy) to the present. They can be regarded as social democratic experiments, because they universally retained a wage-based economy and private ownership and control of the decisive means of production.
Nevertheless, these western European countries tried to restructure their economies away from a purely private capitalist model. Variations range from social democratic welfare states, such as in Sweden, to mixed economies where a major percentage of GDP comes from the state sector, such as in Norway, which ranks among the highest countries in quality of life and equality of opportunity for its citizens.[35] Elements of these efforts persist throughout Europe, even if they have repealed some aspects of public control and ownership. They are typically characterized by:
  • Nationalization of key industries, such as mining, oil, steel, energy and transportation. A common model is for a sector to be taken over by the state and then one or more publicly owned corporations set up for its day-to-day running. Advantages of nationalization include: the ability of the state to direct investment in key industries, the distribution of state profits from nationalized industries for the overall national good, the ability to direct producers to social rather than market goals, greater control of the industries by and for the workers, and the benefits and burdens of publicly funded research and development are extended to the wider populace.
  • Redistribution of wealth, through both tax and spending policies that aim to reduce economic inequalities. Social democracies typically employ various forms of progressive taxation regarding wage and business income, wealth, inheritance, capital gains and property. On the spending side, a set of social policies typically provides free access to public services such as education, health care and child care, while subsidized access to housing, food, pharmaceutical goods, water supply, waste management and electricity is also common.
  • Social security schemes where workers contribute to a mandatory public insurance program. The insurance typically include monetary provisions for retirement pensions and survivor benefits, permanent and temporary disabilities, unemployment and parental leave. Unlike private insurance, governmental schemes are based on public statutes and not contracts, so that contributions and benefits may change in time and are based on solidarity among participants. Its funding is done on an ongoing basis, without direct relationship with future liabilities.
  • Minimum wages, employment protection and trade union recognition rights for the benefit of workers. The objectives of these policies are to guarantee living wages and help produce full employment. There are a number of different models of trade union protection which evolved, but they all guarantee the right of workers to form unions, negotiate benefits and participate in strikes. Germany, for instance, appointed union representatives at high levels in all corporations and had much less industrial strife than the UK, whose laws encouraged strikes rather than negotiation.
  • National planning for industrial development.
  • Demand management in a Keynesian fashion to help ensure economic growth and employment.

[edit] State capitalism

Various state capitalist economies, which consist of large commercial state enterprises that operate according to the laws of capitalism and pursue profits, have evolved in countries that have been influenced by various elected socialist political parties and their economic reforms. While these policies and reforms did not change the fundamental aspect of capitalism, and non-socialist elements within these countries supported or often implemented many of these reforms themselves, the result has been a set of economic institutions that were at least partly influenced by socialist ideology.

[edit] Singapore

Main article: Economy of Singapore
Singapore pursued a state-led model of economic development under the People's Action Party, which initially adopted a Leninist approach to politics and a broad socialist model of economic development.[36] The PAP was initially a member of the Socialist International. Singapore's economy is dominated by state-owned enterprises and government-linked companies through Temasek Holdings, which generate 60% of Singapore's GDP.[37]
The state also provides substantial public housing, free education, health and recreational services, as well as comprehensive public transportation.[38] Today Singapore is often characterized as having a state capitalist economy that combines economic planning with the free-market.[39] While government-linked companies generate a majority of Singapore's GDP, moderate state planning in the economy has been reduced in recent decades.

[edit] India

Main article: Economy of India
After gaining independence from Britain, India adopted a broadly socialist-inspired approach to economic growth. Like other countries with a democratic transition to a mixed economy, it did not abolish private property in capital. India proceeded by nationalizing various large privately run firms, creating state-owned enterprises and redistributing income through progressive taxation in a manner similar to social democratic Western European nations than to planned economies such as the USSR or China. Today India is often characterized as having a free-market economy that combines economic planning with the free-market. It did however adopt a very firm focus on national planning with a series of broad Five-Year Plans.

[edit] Paris Commune

Main article: Paris Commune
The Paris Commune was considered to be a prototype mode of economic and political organization for a future socialist society by Karl Marx. Private property in the means of production was abolished so that individuals and co-operative associations of producers owned productive property and introduced democratic measures where elected officials received no more in compensation than the average worker and could be recalled at any time.[40]

[edit] Social ownership and peer-to-peer production

Various forms of socialist organization based on co-operative decision making, workplace democracy and in some cases, production directly for use, have existed within the broader context of the capitalist mode of production since the Paris Commune. New forms of socialist institutional arrangements began to take form at the end of the 20th century with the advancement and proliferation of the internet and other tools that allow for collaborative decision-making.
Michel Bauwens identifies the emergence of the open software movement and peer-to-peer production as an emergent alternative mode of production to the capitalist economy that is based on collaborative self-management, common ownership of resources, and the (direct) production of use-values through the free cooperation of producers who have access to distributed capital.[41]
Commons-based peer production generally involves developers who produce goods and services with no aim to profit directly, but freely contribute to a project relying upon an open common pool of resources and software code. In both cases, production is carried out directly for use — software is produced solely for their use-value.
Wikipedia, being based on collaboration and cooperation and a freely associated individuals, has been cited as a template for how socialism might operate.[42] This is a modern example of what the Paris Commune — a template for possible future organization — was to Marx in his time.

[edit] Socialist Federal Republic of Yugoslavia

Main article: Economy of SFR Yugoslavia
Yugoslavia pursued a socialist economy based on autogestion or worker-self management. Rather than implementing a centrally planned economy, Yugoslavia developed a market socialist system where enterprises and firms were socially owned rather than publicly owned by the state. In these organizations, the management was elected directly by the workers in each firm, and were later organized according to Edvard Kardelj's theory of associated labor.

[edit] Self-managed enterprises

See also: Cooperative
The Mondragon Corporation, a federation of cooperatives in the Basque region of Spain, organizes itself as an employee-owned, employee-managed enterprise. Similar styles of decentralized management, which embrace cooperation and collaboration in place of traditional hierarchical management structures, have been adopted by various private corporations such as Cisco Systems, inc.[43] But unlike Mondragon, Cisco remains firmly under private ownership. More fundamentally, employee-owned, self-managed enterprises still operate within the broader context of capitalism and are subject to the accumulation of capital and profit-loss mechanism.

[edit] Anarchist Spain

Main article: Spanish revolution
See also: Anarcho-syndicalism
The Spanish Revolution was a workers' social revolution that began during the outbreak of the Spanish Civil War in 1936 and resulted in the widespread implementation of anarchist and more broadly socialist organizational principles throughout various portions of the country for two to three years, primarily Catalonia, Aragon, Andalusia, and parts of the Levante. Much of Spain's economy was put under worker control; in anarchist strongholds like Catalonia, the figure was as high as 75%, but lower in areas with heavy Communist Party influence, as the Soviet-allied party actively resisted attempts at collectivization enactment. Factories were run through worker committees, agrarian areas became collectivised and run as libertarian communes. Even places like hotels, barber shops, and restaurants were collectivized and managed by their workers. Sam Dolgoff estimated that over 10 million people participated directly or at least indirectly in the Spanish Revolution, which he claimed "came closer to realizing the ideal of the free stateless society on a vast scale than any other revolution in history."

[edit] History of socialist economic thought

Main article: History of socialism
Values of socialism have roots in pre-capitalist institutions such as the religious communes, reciprocal obligations, and communal charity of Mediaeval Europe, the development of its economic theory primarily reflects and responds to the monumental changes brought about by the dissolution of feudalism and the emergence of specifically capitalist social relations.[44] As such it is commonly regarded as a movement belonging to the modern era. Many socialists have considered their advocacy as the preservation and extension of the radical humanist ideas expressed in Enlightenment doctrine such as Jean-Jacques Rousseau's Discourse on Inequality, Wilhelm von Humboldt's Limits of State Action, or Immanuel Kant's insistent defense of the French Revolution.[45]
Capitalism appeared in mature form as a result of the problems raised when an industrial factory system requiring long-term investment and entailing corresponding risks was introduced into an internationalized commercial (mercantilist) framework. Historically speaking, the most pressing needs of this new system were an assured supply of the elements of industry – land, elaborate machinery, and labour – and these imperatives led to the commodification of these elements.[46]
According to influential socialist economic historian Karl Polanyi's classic account, the forceful transformation of land, money and especially labour into commodities to be allocated by an autonomous market mechanism was an alien and inhuman rupture of the pre-existing social fabric. Marx had viewed the process in a similar light, referring to it as part of the process of "primitive accumulation" whereby enough initial capital is amassed to begin capitalist production. The dislocation that Polyani and others describe, triggered natural counter-movements in efforts to re-embed the economy in society. These counter-movements, that included, for example, the Luddite rebellions, are the incipient socialist movements. Over time such movements gave birth to or acquired an array of intellectual defenders who attempted to develop their ideas in theory.
As Polanyi noted, these counter-movements were mostly reactive and therefore not full-fledged socialist movements. Some demands went no further than a wish to mitigate the capitalist market's worst effects. Later, a full socialist program developed, arguing for systemic transformation. Its theorists believed that even if markets and private property could be tamed so as not to be excessively "exploitative", or crises could be effectively mitigated, capitalist social relations would remain significantly unjust and anti-democratic, suppressing universal human needs for fulfilling, empowering and creative work, diversity and solidarity.
Within this context socialism has undergone four periods: the first in the 19th century was a period of utopian visions (1780s-1850s); then occurred the rise of revolutionary socialist and Communist movements in the 19th century as the primary opposition to the rise of corporations and industrialization (1830–1916); the polarisation of socialism around the question of the Soviet Union, and adoption of socialist or social democratic policies in response (1916–1989); and the response of socialism in the neo-liberal era (1990- ). As socialism developed, so did the socialist system of economics.

[edit] Utopian socialism

Main article: Utopian socialism
The first theories which came to hold the term "socialism" began to be formulated in the late 18th century, and were termed "socialism" early in the 19th century. The central beliefs of the socialism of this period rested on the exploitation of those who labored by those who owned capital or rented land and housing. The abject misery, poverty and disease to which laboring classes seemed destined was the inspiration for a series of schools of thought which argued that life under a class of masters, or "capitalists" as they were then becoming to be called, would consist of working classes being driven down to subsistence wages. (See Iron law of wages).
Socialist ideas found expression in utopian movements, which often formed agricultural communes aimed at being self-sufficient on the land. These included many religious movements, such as the Shakers in America.
Utopian socialism had little to offer in terms of a systematic theory of economic phenomena. In theory, economic problems were dissolved by a utopian society which had transcended material scarcity. In practice, small communities with a common spirit could sometimes resolve allocation problems.

[edit] Socialism and classical political economy

The first organized theories of socialist economics were significantly impacted by classical economic theory, including elements in Adam Smith, Robert Malthus and David Ricardo. In Smith there is a conception of a common good not provided by the market, a class analysis, a concern for the dehumanizing aspects of the factory system, and the concept of rent as being unproductive. Ricardo argued that the renting class was parasitic. This, and the possibility of a "general glut", an over accumulation of capital to produce goods for sale rather than for use, became the foundation of a rising critique of the concept that free markets with competition would be sufficient to prevent disastrous downturns in the economy, and whether the need for expansion would inevitably lead to war.

[edit] Socialist political economy before Marx


Charles Fourier, influential early French socialist thinker
A key early socialist theorist of political economy was Pierre-Joseph Proudhon. He was the most well-known of nineteenth century mutualist theorists and the first thinker to refer to himself as an anarchist. Others were: Technocrats like Henri de Saint Simon, agrarian radicals like Thomas Spence, William Ogilvie and William Cobbett; anti-capitalists like Thomas Hodgskin; communitarian and utopian socialists like Robert Owen, William Thompson and Charles Fourier; anti-market socialists like John Gray and John Francis Bray; the Christian mutualist William Batchelder Greene; as well as the theorists of the Chartist movement and early proponents of syndicalism.[47]
The first advocates of socialism promoted social leveling in order to create a meritocratic or technocratic society based upon individual talent. Count Henri de Saint-Simon was the first individual to coin the term "socialism".[48] Simon was fascinated by the enormous potential of science and technology, which led him to advocate a socialist society that would eliminate the disorderly aspects of capitalism and which would be based upon equal opportunities.[49] Simon advocated a society in which each person was ranked according to his or her capacities and rewarded according to his or her work.[48] This was accompanied by a desire to implement a rationally organized economy based on planning and geared towards large-scale scientific and material progress, which embodied a desire for a semi-planned economy.[48]
Other early socialist thinkers were influenced by the classical economists. The Ricardian socialists, such as Thomas Hodgskin and Charles Hall, were based on the work of David Ricardo and reasoned that the equilibrium value of commodities approximated producer prices when those commodities were in elastic supply, and that these producer prices corresponded to the embodied labor. The Ricardian socialists viewed profit, interest and rent as deductions from this exchange-value.[50]

[edit] Das Kapital

Main article: Das Kapital
Karl Marx employed systematic analysis in an ambitious attempt to elucidate capitalism's contradictory laws of motion, as well as to expose the specific mechanisms by which it exploits and alienates. He radically modified classical political economic theories. Notably, the labor theory of value that had been worked upon by Adam Smith and David Ricardo, was transformed into his characteristic "law of value" and used for the purpose of revealing how commodity fetishism obscures the reality of capitalist society.
His approach, which Engels would call "scientific socialism", would stand as the branching point in economic theory: in one direction went those who rejected the capitalist system as fundamentally anti-social, arguing that it could never be harnessed to effectively realize the fullest development of human potentialities wherein "the free development of each is the condition for the free development of all.".[51]
Das Kapital is one of the many famous incomplete works of economic theory: Marx had planned four volumes, completed two, and left his collaborator Engels to complete the third. In many ways the work is modelled on Adam Smith's Wealth of Nations, seeking to be a comprehensive logical description of production, consumption and finance in relation to morality and the state.
It is a work of philosophy, anthropology and sociology as much as one of economics. However, it has several important statements:
  • The Law of Value Capitalist production is the production of “an immense multitude of commodities” or generalised commodity production. A commodity has two essential qualities firstly, they are useful, they satisfy some human want, “the nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference,” [52] and secondly they are sold on a market or exchanged. Critically the exchange value of a commodity “is independent of the amount of labour required to appropriate its useful qualities.” [52] But rather depends on the amount of socially necessary labour required to produce it. All commodities are sold at their value, so the origin of the capitalist profit is not in cheating or theft but in the fact that the cost of reproduction of labour power, or the worker's wage, is less than the value created during their time at work, enabling the capitalists to yield a surplus value or profit on their investments.
  • Historical Property Relations Historical capitalism represents a process of momentous social upheaval where rural masses were separated from the land and ownership of the means of production by force, deprivation, and legal manipulation, creating an urban proletariat based on the institution of wage-labour. Moreover, capitalist property relations aggravated the artificial separation between city and country, which is a key factor in accounting for the metabolic rift between human beings in capitalism and their natural environment, which is at the root of our current ecological dilemmas.[53]
  • Commodity Fetishism Marx adapted previous value-theory to show that in capitalism phenomena involved with the price system (markets, competition, supply and demand) constitute a powerful ideology that obscures the underlying social relations of capitalist society. "Commodity fetishism" refers to this distortion of appearance. The underlying social reality is one of economic exploitation.
  • Economic Exploitation Workers are the fundamental creative source of new value. Property relations affording the right of usufruct and despotic control of the workplace to capitalists are the devices by which the surplus value created by workers is appropriated by the capitalists.
  • Accumulation Inherent to capitalism is the incessant drive to accumulate as a response to the competitive forces acting upon all capitalists. In such a context the accumulated wealth which is the source of the capitalist's social power derives itself from being able to repeat the circuit of Money-->Commodity-->Money', where the capitalist receives an increment or "surplus value" higher than their initial investment, as rapidly and efficiently as possible. Moreover this driving imperative leads capitalism to its expansion on a worldwide scale.
  • Crises Marx identified natural and historically specific (i.e. structural) barriers to accumulation that were interrelated and interpenetrated one another in times of crises. Different types of crises, such as realization crises and overproduction crises, are expressions of capitalism's inability to constructively overcome such barriers. Moreover, the upshot of crises is increased centralization, the expropriation of the many capitalists by the few.
  • Centralization The interacting forces of competition, endemic crises, intensive and extensive expansion of the scale of production, and a growing interdependency with the state apparatus, all promote a strong developmental tendency towards the centralization of capital.
  • Material Development As a result of its constant drive to optimize profitability by increasing the productivity of labour, typically by revolutionizing technology and production techniques, capitalism develops so as to progressively reduce the objective need for work, suggesting the potential for a new era of creative forms of work and expanded scope for leisure.
  • Socialization, and the pre-conditions for Revolution By socializing the labour process, concentrating workers into urban settings in large-scale production processes and linking them in a worldwide market, the agents of a potential revolutionary change are created. Thus Marx felt that in the course of its development capitalism was at the same time developing the preconditions for its own negation. However, although the objective conditions for change are generated by the capitalist system itself, the subjective conditions for social revolution can only come about through the apprehension of the objective circumstances by the agents themselves and the transformation of such understanding into an effective revolutionary program.[54]

[edit] Anarchist economics

Main article: Anarchist economics
Anarchist economics is the set of theories and practices of economics and economic activity within the political philosophy of anarchism.
Pierre Joseph Proudhon was involved with the Lyons mutualists and later adopted the name to describe his own teachings.[55] Mutualism is an anarchist school of thought that originates in the writings of Pierre-Joseph Proudhon, who envisioned a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market.[56] Integral to the scheme was the establishment of a mutual-credit bank that would lend to producers at a minimal interest rate, just high enough to cover administration.[57] Mutualism is based on a labor theory of value that holds that when labor or its product is sold, in exchange, it ought to receive goods or services embodying "the amount of labor necessary to produce an article of exactly similar and equal utility".[58] Receiving anything less would be considered exploitation, theft of labor, or usury.

The Conquest of Bread by Peter Kropotkin, influential work which presents the economic vision of anarcho-communism
Collectivist anarchism (also known as anarcho-collectivism) is a revolutionary[59] doctrine that advocates the abolition of the state and private ownership of the means of production. Instead, it envisions the means of production being owned collectively and controlled and managed by the producers themselves. Once collectivization takes place, workers' salaries would be determined in democratic organizations based on the amount of time they contributed to production. These salaries would be used to purchase goods in a communal market.[60] Collectivist anarchism is most commonly associated with Mikhail Bakunin, the anti-authoritarian sections of the First International, and the early Spanish anarchist movement.
Anarchist communism is a theory of anarchism which advocates the abolition of the state, private property, and capitalism in favor of common ownership of the means of production,[61][62] direct democracy and a horizontal network of voluntary associations and workers' councils with production and consumption based on the guiding principle: "from each according to ability, to each according to need".[63][64] Unlike mutualism, collectivist anarchism and marxism, anarcho-communism as defended by Peter Kropotkin and Errico Malatesta rejected the labor theory of value altogether, instead advocating a gift economy and to base distribution on need.[65]
Anarchist communism as a coherent, modern economic-political philosophy was first formulated in the Italian section of the First International by Carlo Cafiero, Emilio Covelli, Errico Malatesta, Andrea Costa and other ex-Mazzinian Republicans.[66] Out of respect for Mikhail Bakunin, they did not make their differences with collectivist anarchism explicit until after Bakunin's death.[67] By the early 1880s, most of the European anarchist movement had adopted an anarchist communist position, advocating the abolition of wage labour and distribution according to need. Ironically, the "collectivist" label then became more commonly associated with Marxist state socialists who advocated the retention of some sort of wage system during the transition to full communism.

[edit] After Marx

Marx's work sharpened the existing differences between the revolutionary and non-revolutionary socialists[citation needed].
Non-revolutionary socialists took inspiration from the work of John Stuart Mill, and later Keynes and the Keynesians, who provided theoretical justification for (potentially very extensive) state involvement in an existing market economy[citation needed]. According to the Keynesians, if the business cycle could be solved by national ownership of key industries and state direction of their investment, class antagonism would be effectively tamed; a compact would be formed between labour and the capitalists. There would be no need for revolution; instead Keynes looked to the eventual "euthenasia of the rentier" sometime in the far future[citation needed]. Joan Robinson and Michael Kalecki employed Keynesian insights to form the basis of a critical post-Keynesian economics that at times went well beyond liberal reformism. Many original socialist economic ideas would also emerge out of the trade union movement[citation needed](see Guild Socialism).
In the wake of Marx, "Marxist" economists developed many different, sometimes contradictory tendencies[citation needed]. Some of these tendencies were based on internal disputes about the meaning of some of Marx's ideas, including the 'Law of Value' and his crisis theory[citation needed]. Other variations were elaborations that subsequent theorists made in light of real world developments[citation needed]. For example the monopoly capitalist school saw Paul A. Baran and Paul Sweezy attempt to modify Marx's theory of capitalist development, which was based upon the assumption of price competition, to reflect the evolution to a stage where both economy and state were subject to the dominating influence of giant corporations. World-systems analysis, would restate Marx's ideas about the worldwide division of labour and the drive to accumulate from the holistic perspective of capitalism's historical development as a global system[citation needed].
Accordingly, Immanuel Wallerstein, writing in 1979, maintained that "There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don't see this projection as being in the least utopian but I also don't feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in all the areas of the world-economy."[68]
Meanwhile other notable strands of reformist and revolutionary socialist economics sprung up that were either only loosely associated with Marxism or wholly independent. Thorsten Veblen is widely credited as the founder of critical institutionalism. His idiosyncratic theorizing included acidic critiques of the inefficiency of capitalism, monopolies, advertising, and the utility of conspicuous consumption. Some institutionalists have addressed the incentive problems experienced by the Soviet Union. Critical institutionalists have worked on the specification of incentive-compatible institutions, usually based on forms of participatory democracy, as a resolution superior to allocation by an autonomous market mechanism[citation needed].
Another key socialist, closely related to Marx, Keynes, and Gramsci, was Piero Sraffa[citation needed]. He mined classical political economy, particularly Ricardo, in an attempt to erect a value theory that was at the same time an explanation of the normal distribution of prices in an economy, as well that of income and economic growth. A key finding was that the net product or surplus in the sphere of production was determined by the balance of bargaining power between workers and capitalists, which was in turn subject to the influence of non-economic, presumably social and political factors. The mutualist tradition associated with Proudhon also continued, influencing the development of libertarian socialism, anarchist communism, syndicalism and distributivism[citation needed].
In the real world, revolutionary socialists were confronted by the necessity of running an economy, and generally a war economy, and developed ideas and practice in response to the situations they found themselves in[citation needed].

[edit] Criticisms

Main article: Criticism of socialism
Criticism of socialist economics comes from market economists, including the classicals, neoclassicals and Austrians, as well as from some anarchist economists. Besides this, some socialist economic theories are criticized by other socialists. Libertarian socialist, mutualist, and market socialist economists, for example, criticize centralized economic planning and propose participatory economics and decentralized socialism.
Market economists generally criticise socialism for eliminating the free market and its price signals, which they consider necessary for rational economic calculation. They also consider that it causes lack of incentive. They believe that these problems lead to a slower rate of technological advance and a slower rate of growth of GDP.
Austrian school economists, such as Friedrich Hayek and Ludwig Von Mises, have argued that the elimination of private ownership of the means of production would inevitably create worse economic conditions for the general populace than those that would be found in market economies. They argue that without the price signals of the market, it is impossible to calculate rationally how to allocate resources. Mises called this the economic calculation problem. Polish economist Oskar Lange and Abba Lerner rebutted Mises' argument by developing the Lange Model during the Economic calculation debate. The Lange model states that an economy in which all production is performed by the state, where there is a functioning price mechanism, has similar properties to a market economy under perfect competition, in that it achieves Pareto efficiency.
The neoclassical view is that there is a lack of incentive, not a lack of information in a planned economy. They argue that within a socialist planned economy there is a lack of incentive to act on information. Therefore, the crucial missing element is not so much information as the Austrian school argued, as it is the motivation to act on information.[69]

[edit] See also






[edit] References

  1. ^ Market Socialism: The Debate Among Socialists, by Schweickart, David; Lawler, James; Ticktin, Hillel; Ollman, Bertell. 1998. From "The Difference Between Marxism and Market Socialism" (P.61-63): "More fundamentally, a socialist society must be one in which the economy is run on the principle of the direct satisfaction of human needs...Exchange-value, prices and so money are goals in themselves in a capitalist society or in any market. There is no necessary connection between the accumulation of capital or sums of money and human welfare. Under conditions of backwardness, the spur of money and the accumulation of wealth has led to a massive growth in industry and technology...It seems an odd argument to say that a capitalist will only be efficient in producing use-value of a good quality when trying to make more money than the next capitalist. It would seem easier to rely on the planning of use-values in a rational way, which because there is no duplication, would be produced more cheaply and be of a higher quality."
  2. ^ Socialism and Calculation, on worldsocialism.org. Retrieved February 15, 2010, from worldsocialism.org: http://www.worldsocialism.org/spgb/overview/calculation.pdf: "Although money, and so monetary calculation, will disappear in socialism this does not mean that there will no longer be any need to make choices, evaluations and calculations...Wealth will be produced and distributed in its natural form of useful things, of objects that can serve to satisfy some human need or other. Not being produced for sale on a market, items of wealth will not acquire an exchange-value in addition to their use-value. In socialism their value, in the normal non-economic sense of the word, will not be their selling price nor the time needed to produce them but their usefulness. It is for this that they will be appreciated, evaluated, wanted. . . and produced."
  3. ^ Kornai, János: The Socialist System. The Political Economy of Communism. Princeton: Princeton University Press and Oxford: Oxford University Press 1992; Kornai, János: Economics of Shortage. Munich: Elsevier 1980. A concise summary of Kornai's analysis can be found in Verdery, Katherine: Anthropology of Socialist Societies. In: International Encyclopedia of the Social and Behavioral Sciences, ed. Neil Smelser and Paul B. Baltes. Amsterdam: Pergamon Press 2002, available for download here [1].
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  5. ^ Karl Marx — Critique of the Gotha Programme. 1875 Full Text. Part 1: "Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labor, and because, on the other hand, nothing can pass to the ownership of individuals, except individual means of consumption. But as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labor in one form is exchanged for an equal amount of labor in another form."
  6. ^ ref name="The Political Economy of Socialism, 1982. P.197">The Political Economy of Socialism, by Horvat, Branko. 1982. (P.197): "The sandglass (socialist) model is based on the observation that there are two fundamentally different spheres of activity or decision making. The first is concerned with value judgments, and consequently each individual counts as one in this sphere. In the second, technical decisions are made on the basis of technical competence and expertise. The decisions of the first sphere are policy directives; those of the second, technical directives. The former are based on political authority as exercised by all members of the organization; the latter, on professional authority specific to each member and growing out of the division of labor. Such an organization involves a clearly defined coordinating hierarchy but eliminates a power hierarchy."
  7. ^ "What was the USSR" in depth look at various ideas as to what the economy of the Soviet Union was in relation to socialism http://libcom.org/library/what-was-the-ussr-aufheben-1
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[edit] Further reading

  • Albert, Michael & Hahnel, Robin: The Political Economy of Participatory Economics, Princeton University Press, 1991. (Available online)
  • Amin, Samir: Spectres of Capitalism: A Critique of Current Intellectual Fashions, 1998, Monthly Review Press
  • Cole, G.D.H.: Socialist Economics, 1950, London: Victor Gollancz Ltd.
  • G.A. Cohen: If you're an Egalitarian, How Come You're So Rich?: Harvard UP
  • Horvat, Branko: The Political Economy of Socialism, 1982, M.E. Sharpe, Inc.
  • Kennedy, Liam (ed.): Economic Theory of Co-operative Enterprises: Selected Readings, 1983, The Plunkett Foundation for Co-operative Studies.
  • Lebowitz, Michael A.: Beyond Capital, Marx's Political Economy of the Working Class, 1992, 2003, Palgrave.
  • Noel Thompson Left in the Wilderness: The Political Economy of British Democratic Socialism since 1979 2002, Acumen Publishing ISBN 1-902683-54-4
  • Sweezy, Paul M.: The Theory of Capitalist Development, 1942, Monthly Review Press.
  • Veblen, Thorstein: The Theory of the Leisure Class: An Economic Study of Institutions, 1899, New York Macmillan Company.
  • Von Mises, Ludwig, Socialism.
  • Makoto Itoh, Political Economy of Socialism.




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  1. Unknown11 July 2013 at 19:44

    Dear
    I am Heaven.
    I write this message by borrowing Mitsuki’s hands.
    We gods of Heaven have started project to build up socialist earth government from 2012.
    Project needs to inform humankind widely.
    So we gods of Heaven ordered Mitsuki to make H.P. of our project.

    http://auwa.sakura.ne.jp/forum/socialism/index.html

    There are no idea of Mitsuki.
    All contents are from gods of Heaven.
    Please read our message.
    Do your mission.

    ReplyDelete

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