Capitalism is in fact not just an exchange economy but an
exchange economy where the aim of production is to make a profit .Profit is the
monetary expression of the difference between the exchange value of a product
and the exchange value of the materials, energy and labour-power used to
produce it, or what Marx called “surplus value”. Defenders of capitalism never
seem to ask themselves the practical question about what the critical factor
determining a production initiative in a market system. The answer is obvious
from everyday experience. The factor that critically decides the production of
commodities is the judgement that enterprises make about whether they can be
sold in the market. Obviously, consumers buy in the market that they perceive
as being for their needs. But whether or not the transaction takes place is not
decided by needs but by ability to pay. So the realisation of profit in the
market determines both the production of goods and also the distribution of
goods by various enterprises. In the market system the motive of production,
the organisation of production, and the distribution of goods are inseparable
parts of the same economic process: the realisation of profit and the
accumulation of capital. The economic pressure on capital is that of
accumulation, the alternative is bankruptcy. The production and distribution of
goods is entirely subordinate to the pressure on capital to accumulate. The
economic signals of the market are not signals to produce useful things. They
signal the prospects of profit and capital accumulation, If there is a profit
to be made then production will take place; if there is no prospect of profit,
then production will not take place. Profit not need is the deciding factor.
Under capitalism what appear to be production decisions are in fact decisions
to go for profit in the market. With the capitalist system, information is a
contra-flow of information. It flows from producers, through distributors, to
the consumer. This information is the prices of goods determined by the
accumulating costs of production and distribution plus profit. Prices are
increased in each part of production, from mining through industrial
processing, manufacture and assembly, then accumulating further through
distribution until the final price is passed on to the consumer.
The function of cost/pricing is to enable a business
enterprise to calculate its costs, to fix its profit expectations within a
structure of prices, to regulate income against expenditure and, ultimately, to
regulate the exploitation of its workers. Unfortunately, prices can only
reflect the wants of those who can afford to actually buy what economists call
“effective demand”. - and not real demand for something from those without the
wherewithal - the purchasing power - to buy the product (or even to express a
preference for one product over another . I may want a sirloin steak but i can
only afford a hamburger).
Socialist determination of needs begins with consumer needs
and then flows throughout distribution and on to each required part of the
structure of production
Socialism will make economically-unencumbered production
decisions as a direct response to needs. With production for use, the starting
point will be needs.
By the replacement of exchange economy by common ownership
basically what would happen is that wealth would cease to take the form of
exchange value, so that all the expressions of this social relationship
peculiar to an exchange economy, such as money and prices, would automatically
disappear. In other words, goods would cease to have an economic value and
would become simply physical objects which human beings could use to satisfy
some want or other. The disappearance of economic value would mean the end of
economic calculation in the sense of calculation in units of value whether
measured by money or directly in some unit of labour-time. It would mean that
there was no longer any common unit of calculation for making decisions
regarding the production of goods. Socialism is a money-less society in which use
values would be produced from other use values, there would be no need to have
a universal unit of account but could calculate exclusively in kind .The only
calculations that would be necessary in socialism would be calculations in
kind. On the one side would be recorded the resources (materials, energy,
equipment, labour) used up in production and on the other side the amount of
the good produced, together with any by-products. This, of course, is done
under capitalism but it is doubled by an exchange value calculation: the
exchange value of the resources used up is recorded as the cost of production
while the exchange value of the output (after it has been realised on the
market) is recorded as sales receipts. If the latter is greater than the
former, then a profit has been made; if it is less, then a loss is recorded.
Such profit-and-loss accounting has no place in socialism and would, once
again, be quite meaningless. Calculation in kind entails the counting or
measurement of physical quantities of different kinds of factors of production.
There is no general unit of accounting involved in this process such as money
or labour hours or energy units. In fact, every conceivable kind of economic
system has to rely on calculation in kind, including capitalism. Without it,
the physical organisation of production (e.g. maintaining inventories) would be
literally impossible. But where capitalism relies on monetary accounting as
well as calculation in kind, socialism relies solely on the latter. That is one
reason why socialism holds a decisive productive advantage over capitalism by
eliminating the need to tie up vast quantities of resources and labour
implicated in a system of monetary/pricing accounting.
Socialism is a decentralised or polycentric society that is
self-regulating, self-adjusting and self-correcting, from below and not from
the top . It is not a command economy but a responsive one. Planning in
socialism is essentially a question of industrial organisation, of organising
productive units into a productive system functioning smoothly to supply the
useful things which people had indicated they needed, both for their individual
and for their collective consumption. What socialism would establish would be a
rationalised network of planned links between users and suppliers; between
final users and their immediate suppliers, between these latter and their
suppliers, and so on down the line to those who extract the raw materials from
nature. The responsibility of these industries would be to ensure the supply of
a particular kind of product either, in the case of consumer goods, to
distribution centres or, in the case of goods used to produce other goods, to
productive units or other industries. Planning is indeed central to the idea of
socialism, but socialism is the planned (consciously coordinated and not to be
confused with the central planning concept ) production of useful things to
satisfy human needs precisely instead of the production, planned or otherwise,
of wealth as exchange value, commodities and capital. In socialism wealth would
have simply a specific use value (which would be different under different
conditions and for different individuals and groups of individuals) but it
would not have any exchange, or economic, value.
Since the needs of consumers are always needs for a specific
product at a specific time in a specific locality, we will assume that
socialist society would leave the initial assessment of likely needs to a
delegate body under the control of the local community. In a stable society
such as socialism, needs would change relatively slowly. Hence it is reasonable
to surmise that an efficient system of stock control, recording what
individuals actually chose to take under conditions of free access from local
distribution centres over a given period, would enable the local distribution
committee to estimate what the need for food, drink, clothes and household
goods would be over a similar future period. Some needs would be able to be met
locally: local transport, restaurants, builders, repairs and some food are
examples as well as services such as street-lighting, libraries and refuse
collection. The local distribution committee would then communicate needs that
could not be met locally to the bodies charged with coordinating supplies to
local communities. The individual would have free access to the goods on the
shelves of the local distribution centres; the local distribution centres free
access to the goods they required to be always adequately stocked with what
people needed; their suppliers free access to the goods they required from the
factories which supplied them; industries and factories free access to the
materials, equipment and energy they needed to produce their products; and so
on. Production and distribution in socialism would thus be a question of
organising a coordinated and more or less self-regulating system of linkages
between users and suppliers, enabling resources and materials to flow smoothly
from one productive unit to another, and ultimately to the final user, in
response to information flowing in the opposite direction originating from
final users. The productive system would thus be set in motion from the
consumer end, as individuals and communities took steps to satisfy their
self-defined needs. Socialist production is self-regulating production for use.
This would achieve a rhythm of daily production in line with daily needs with
no significant growth. We are seeking a 'steady-state economy' which
corresponds to what Marx called 'simple reproduction' - a situation where human
needs were in balance with the resources needed to satisfy them. Such a society
would already have decided, according to its own criteria and through its own
decision-making processes, on the most appropriate way to allocate resources to
meet the needs of its members. This having been done, it would only need to go
on repeating this continuously from production period to production period.
Production would not be ever-increasing but would be stabilized at the level
required to satisfy needs. All that would be produced would be products for
consumption and the products needed to replace and repair the raw materials and
instruments of production used up in producing these consumer goods, a zero
growth society operating in a stable and ecologically benign way.
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