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A reply to Seongjin Jeong on labor-time calculation
and 21st century socialism
===============================================
(from Detroit/Seattle Workers' Voice list, Oct. 14, 2018)
By Joseph Green
* Jeong takes the labor-hour as the bottom-line of communist economic
planning
* But the PLTC can't handle environmental issues
* Is reducing things to a single unit of measure necessary for economic
calculation?
* Marx vs. the single unit of measure
* Calculation with many units of measure
* The use of material balances does not prove an economic system is
socialist
* Input-output tables may or may not be material planning
* The supposed abolition of labor and economic planning
* Notes
The issue of what economic planning under socialism would look like was
discussed at one of the panels at the 50th anniversary conference of the Union
of
Radical Political Economists (URPE), which was held at the end of September at
the University of Massachusetts-Amherst. Seongjin Jeong put forward the view
that money would be replaced by labor certificates, and that planning would be
done according to the single measure of the labor hour.
I wasn't at the URPE conference; what I know about it is from a report written
up
by the left-wing economist Michael Roberts and placed on his blog, and from
Jeong's draft paper "Soviet planning and the labor-time calculation model:
implications for 21st-century socialism" which Roberts linked to. (1) In his
paper,
Jeong considers objections to his view, and as part of this, conscientiously
refers
to my three-part article "Labor-money and socialist planning", which puts
forward
a very different view. (http://www.communistvoice.org/00LaborHour.html) (2)
My article on socialist planning centered on showing that there was no single
measure that could serve as the natural unit of socialist planning, not even the
labor-hour, and that the use of the labor-hour as such a measure would result in
duplicating many faults of capitalism. It traced the history of the idea of
labor
money in the socialist movement, and the repeated failures of the attempts to
use
labor money. It pointed out that the labor certificate under communism, as
envisioned as a possibility by Marx, was only to be used for the distribution of
consumer goods and not for overall economic planning nor for how workplaces
would obtain the goods they needed for their operation. My article pointed to
the
development of methods to plan in material terms.
This might seem a rather obscure subject, but it bears on many practical
matters.
For example, the rationale for using market measures for environmental goals,
rather than relying mainly on regulation and planning, lies in the belief that a
single unit of measure is the way to achieve economic results. The rationale for
reducing every decision to a calculation of profit and loss lies in the belief
in a
single unit of measure. And yet in reality it won't matter that much if money
denominated in dollars or other national currency was replaced by calculation in
labor-hours.
Moreover, Jeong also claims that the Soviet planning agencies didn't really
calculate properly or use input-output tables, and that this was a major cause
of
the shortages and disproportions in the Soviet economy. According to Roberts,
this line of reasoning led to the view that "with the development of AI
[artificial
intelligence], algorithms, big data and quantum power, such planning by labour
time calculation is clearly feasible. Communism will work." In my view, such
views
slur over the fact that the problem with the Stalinist economy wasn't simply bad
choices by Stalin and his successors, nor was it bad calculation due to the
lack of
computing power, but that the Soviet Union under Stalinism became a
state-capitalist country with a new ruling class.
Given the importance of these issues, I would like to take this occasion to
reply to
Jeong's article, especially as Jeong focuses on several important points of
economic analysis.
Jeong takes the labor-hour as the bottom-line of
communist economic planning
----------------------------------------------------------------------------------------
Jeong holds that "The Marxian model of a communist economy, in its first phase,
is characterized by 'planning based on labor-time calculation' (hereafter
abbreviated as PLTC)." And he writes that "PLTC is one of the essential
components of Marx's communism." (3 - but from here on references to Jeong's
paper will simply give the page number)
Now, in order to use the labor-hour in this way, it can't be measured by the
labor
of any one person -- it has to be labor of an average intensity. This is
called the
abstract labor hour, not in order to denigrate it, but to distinguish it from
the
concrete or definite labor hour exerted by a definite person at a definite time
and
location. Jeong writes "...PLTC...is unthinkable if the unit of calculation is
actual
or individual labor-time. In the first phase of communism, where the economy of
time to cope with the state of scarcity is still needed, PLTC is unavoidable,
and its
unit should be social." (p.82)
In this system, in order to ensure that every workplace has the necessary
inputs,
every product is measured in terms of the amount of the congealed labor-time
embodied in it. So the PLTC means that one replaces the financial measure of
the US dollar or the South Korean won with the abstract labor-hour. And just as
financial calculation implies that two things with the same price are equal, the
PLTC would imply that two things embodying the same amount of congealed
labor-time are equal and interchangeable. (The congealed labor-time is what
Jeong calls "the total labor-time embodied in products", p. 83)
But the PLTC can't handle environmental issues
---------------------------------------------------------------------------------------------
Yet Jeong also admits that the PLTC has trouble with environmental issues. He
says that "it is difficult for Marxian PLTC to take into consideration all the
diversity
of human life in an emancipated communist society or ecological issues." (p. 84)
Nor is Jeong the only advocate of the PLTC who admits that it can't deal with
environmental issues. Allin Cottrell and W. Paul Cockshott are passionate
advocates of using labor-time as the socialist economic measure. And yet they
say that "We are not claiming that labor-time calculation would necessarily do
better [than capitalism] in cases where the market fails to conserve resources.
...
We have no problem with the idea that environmental considerations and
labour-time accounting are not necessarily reducible to a scalar common
denominator, and that the balancing of these considerations may require
political
judgment on which opinions can differ." (4)
I discussed this in my article on socialist planning. (5) Indeed, in my view
PLTC
would have trouble with other issues as well, including health care, education,
and child care. There would have to be one correction to PLTC after another to
allow sufficient attention to be paid to them. Oops. So much for planning with a
single measure.
For Jeong, these problems are simply shortcomings of the PLTC, which show that
it won't be used at a later stage of communism. He says that such
"qualifications
should not be considered a rejection of PLTC. Far from being incongruent with
the developed phase of communism, PLTC is indispensable to the advance of
communism to its developed phase." (p. 84)
But how can PLTC be a useful economic phase in the 21st century if it doesn't
deal with the pressing environmental issues? How can production be organized
properly without protecting the environment, and without considering such other
issues as the proper support for social programs, issues that PTLC doesn't deal
with? It's a farce to talk about "21st century socialism", which is faced with
global
warming, rampant pollution, and other problems, and put forward a planning
system which can't deal with them. And it's a farce to say one has a single
unit of
measure, if one has to made one correction after another in the calculations
with
that unit.
Jeong even says "Just replacing a market price-based coordination by a
labor-time calculation is not sufficient to free the system from the law of
value." (p.
83) And he goes on to say that "the Marxian communist model of PLTC is
inherently contradictory, in that it tends to virtually simulate and reproduce
the
capitalist labor-value system." (p. 84) I strongly agree that replacing
financial
calculation with labor-hour calculation tends to reproduce capitalist exchange.
But I disagree that it's Marx's model. On the contrary, Marx put forward the
labor
theory of value to show how capitalism operates and how workers are exploited,
not to show how to plan socialist production. I will come back to Marx's view
about
what's wrong with labor time calculation in a moment. But first let's see why
Jeong
insists on it as the bottom line of economic calculation.
Is reducing things to a single unit of measure
necessary for economic calculation?
----------------------------------------------------------------------------------------
Jeong adheres to the PLTC because he believes that rational economic planning
requires "using a single unit of measure". He writes that "it is impossible to
achieve macroeconomic coordination and balance without adopting a single unit
of measure that enables the calculation of social averages. ... Planning without
this single accounting unit is simply a contradiction in terms, tantamount to
the
rejection of planning altogether." (p. 81)
Using a single unit of measure means that this unit is the bottom line of
calculation - everything is measured or valued in accordance with this unit.
This is
what is done in capitalist society with money, where the dollar reigns supreme
in
the US. And then the best alternative is supposedly that which gives the most
profit, or which come out highest in a cost-benefit comparison. It is because we
are so used to it from everyday market experience that this seems utterly
natural
to us. Jeong's picture of the early phase of communism preserves this use of a
single measure by replacing money with labor certificates based on labor hours,
but he recognizes, as we have seen, that having such a single unit "tends to
virtually simulate and reproduce the capitalist labor-value system".
But what is the alternative? Is there a way to carry out economic planning
without
relying on a single unit as the bottom line? Well, first let's see that Marx
showed
that no single unit would suffice, and then see whether alternative methods of
calculation and planning have ever been used in modern industrial economies.
Marx vs. the single unit of measure
------------------------------------------------------------------------------------
Jeong cites a passage from Marx's "Grundrisse" to back up his claim that a
single
unit of economic measurement is needed, and that this unit is the labor hour.
But
when we look a little closer at the passage, it turns out that Marx was
actually in
the midst of reiterating one of his main theoretical arguments against the use
of a
single unit of measurement.
Marx wrote: "On the basis of communal production, the determination of time
remains, of course, essential. ... Economy of time, to this all economy
ultimately
reduces itself. ... Thus, economy of time, along with the planned distribution
of
labor time among the various branches of production, remains the first economic
law on the basis of the communal production. However, this is essentially
different from a measurement of exchange values (labor or products) by labor
time." (6)
By itself, this looks like Marx was emphasizing the use of a single unit, the
labor
time. The problem, however, is that Jeong left out the rest of the paragraph,
which deals with one of the ways in which the treatment of labor time in
communal society will differ from that of capitalist society. Marx wrote:
"The labour of individuals in the same branch of work, and the various kinds of
work, are different from one another not only quantitatively but also
qualitatively.
What does a solely quantitative difference between things presuppose? The
identity of their qualities. Hence, the quantitative measure of labours
presupposes
the equivalence, the identity of their quality." (emphasis as in the original)
This is a contrast of abstract and concrete labor. The abstract labor hour only
measures labor quantitatively, while concrete labor has definite properties,
which
are important. Equating things quantitatively, or comparing them only
quantitatively, means ignoring the qualitative differences between them.
This is a major theme which he returned to repeatedly in the "Grundrisse" and,
for
that matter, in "Capital". Clearly Marx's idea was that future society will
need to
take account of the qualitative differences, something which no single measure,
neither money nor measurement by the abstract labor hour, can accomplish. One
can't deal seriously with Marx's standpoint about economic planning without
taking this into account. At the same time, what's true or not doesn't depend
simply on textual analysis. Marx's standpoint and writings deserve close study,
but what he said about qualitative differences is correct, not because he said
it,
but because it corresponds to economic reality.
For example, if labor time were the single unit of measure, then one hour of a
carpenter's labor would equal one hour of a welders' labor. Marx is saying no,
they are qualitatively different. For example, if we need so many carpenters, we
cannot replace them by so many welders. The carpenter and the welder might be
paid the same, but if we are to ensure that construction can take place, we need
to keep track of carpenters and welders separately.
The same thing holds when one compares two different products or material
goods. One labor hour's worth of one material good is not qualitatively equal to
one labor hour's worth of a different good. For example, economic planning
needs to keep track separately of such things as how much food there is, and
how much steel. Food that took one hour of labor time to produce (counting both
direct and indirect labor) isn't the same thing as, say, steel that took one
hour to
produce. With respect to the abstract labor hour, one hour = one hour = one
hour.
With respect to money, one dollar = one dollar = one dollar. But with respect to
rational economic planning, they're different. We can't eat steel. We can't use
food to build bridges and buildings. So the amount of food and steel available
has
to be calculated separately. Thus, effective planning for a project cannot
leave it
at there are supplies available worth, say, a million labor hours, but has to
break
down what is needed into different categories. So, while Jeong claims that
economic calculation absolutely requires using a "single unit of measure", the
opposite is true.
In the quote from "Grundrisse", Marx was saying that economic calculation is
always necessary, even under communism (we shall see later on that Jeong
doesn't believe this is so in later-phase communism), but it cannot be done with
the single measure.
As we have seen, Jeong himself recognizes that PLTC has difficulty accounting
for qualitative diversity and environmental issues. But he doesn't realize why
this
is so. Effective calculation must take account of the abstract labor hour, but
it
must also deal with other factors of economic importance. It must not reduce
matters to a single factor.
Calculation with many units of measure
-------------------------------------------------------------------------------
Still, thanks to living in a capitalist society and having to buy and sell
things all the
time, it might seem to be only common sense that calculation requires a single
unit of measure. This might seem particularly so if, as is probably only too
common, one wasn't taught the spirit of mathematics in school, but only one
mechanical rule of calculation after another. But during the last century
methods
were developed to plan in physical terms. They were used by governments of
vastly different types, not just the Soviet Union but to some extent by Western
capitalist countries and also some newly-independent countries. This type of
planning didn't just take into consideration the overall size of the economy,
or the
Gross Domestic Product. Nor did it simply list the different types of material
goods
that existed. It paid attention to the "intersectoral flows" that connected one
branch of the economy with the other. Steel, for example, wouldn't be measured
simply by how much it cost, nor by the total labor-hours needed to produce it.
Instead steel would be measured by the resources that were needed from each
other sector of the economy for the production of steel, while the other
sectors of
the economy were measured, in part, by how much steel they needed for their
production.
This new type of calculation was first put forward in the Soviet Union in the
1920s,
and was called "material balances". The method used to adjust these material
balances was mathematically crude, but was an important new departure in
planning. It seems to have helped inspire the development of input-output tables
in Western capitalist countries, which were also taken up to some extent in the
Soviet Union. In parts one and two of my article on the "labor hour and
socialist
planning" I explain the basic idea behind these methods in more detail, and I
also
show that Marx foreshadowed these methods in volume II of "Capital" where he
wrote equations connecting how different sectors of a capitalist economy
interact
with each other.
These methods of physical planning were not communist planning, and as
mentioned, were used by governments of all types. But they did show that it is
possible to calculate using multiple units of measure, and that it was
absolutely
necessary to do so to achieve realistic results. That's why even diehard
capitalist
governments make a certain use of them, albeit only as an occasional
supplement to overall financial planning. So these methods did not achieve, or
in
most cases even aim at, a fully planned economy, but they showed that some
physical planning was needed even for very limited goals.
Jeong holds that I champion the way the Soviet Union prepared material
balances as against input-output tables. But in my article, I wrote that the
"Western input-output methods...are essentially a variant of the method of
material balances. Input-output methods start ... from the point of working with
balances of goods regarded as qualitatively different. ... Western economic
authors like to make various fine distinctions between material balances,
input-output methods, and linear programming. ... [But these distinctions] don't
affect the issue raised in this article. What is important, is that all these
methods
use a multitude of separate balances of qualitatively distinct goods." (7) So I
sometimes grouped all these methods, including the "Soviet version of material
balances", under the general term "material balances". I stressed that the
various
forms of material balances were not socialist planning, and all that they had
"in
common with the future economic calculation of a classless society, is that they
both have to keep track of society's production in material terms." (8)
The use of material balances does not prove
an economic system is socialist
-------------------------------------------------------------------------------------
Jeong seeks to discredit the idea of material balances because it means
abandoning the single unit. He promotes input-output tables, because he believes
this means using a single measure.
To do so, he writes "It is ... not correct to regard material balances as a
specifically communist method of resource allocation. Even in capitalism,
variants
of material balances have been frequently used to allocate some strategically
crucial goods when the monetary economy does not work, like during wartime."
(p. 81) I agree strongly with him on this, and I repeatedly made the same point,
right up to the use of the same example of wartime planning, in my article on
socialist planning.
But the same points also apply to input-output tables and linear programming.
They are only technical planning tools, while socialism is based on whether the
working class owns and directs the economy. It's the social structure of a
country,
the class regulations, that define socialism, not the planning tools. And
socialist
planning involves planning from below as well as above. Without a socialist
structure, no matter how much planning is attempted, only a limited amount can
be achieved.
For that matter, in my article on socialist planning I pointed out that material
balances and input-output tables aren't even the last word in physical planning.
For example, these methods depend on certain assumptions about the economy,
which are only approximately true (such as that twice as much production always
requires exactly twice as much resources). Environmental issues could be
included in the calculations but generally aren't. And so forth. These methods
are
but a step in the direction of realistic physical planning. They have in common
with future communist planning that they make use of not one, but many separate
natural units.
Input-output tables may or may not be material planning
---------------------------------------------------------------------------------------
Jeong writes in praise of input-output tables that "input-output tables can be
compiled in terms of physical natural units as well as monetary or labor-time
ones". (p. 81) And this is true. But what Jeong misses is that when input-output
tables are written in terms of many physical natural units, then they are being
used as material balances, whereas otherwise they might not be. There is a
subtlety here. The difference isn't simply whether the table has entries
written in
financial terms. It's whether the table attempts to combine categories which are
qualitatively different into a single combined or aggregate category (for
example,
combining the quantity of food and that of steel into a combined category which
embraces both). This is explained in more detail in my article on socialist
planning, which also refers to how this distinction was drawn by the late
Wassily
Leontief, the bourgeois economist who was the father of Western input-output
analysis. (9)
The point here is that when input-output tables represent material planning,
they
are an example of calculations that go beyond using a single unit of measure.
When, instead, they use a single unit of measure, whether the dollar or the
labor-hour, to combine entries with qualitatively different properties, they
have
what Leontief very politely called "a faint but unmistakable air of unreality".
(10)
The supposed abolition of labor and economic planning
------------------------------------------------------------------------------------------
Jeong insists that the PLTC is indispensable in the early stage of communism,
but says it will vanish in developed communism. That is how he reconciles his
recognition that using the abstract labor-hour as the single unit will be
similar to
"the capitalist labor-value system" with his picture of communism. (p. 84) He
holds that PLTC will lead to economic advances that will lay the basis for the
advanced phase of communism that will do without the PLTC.
But wait a minute! If economic calculation is supposed to require a single unit
of
calculation, namely the abstract labor hour of the PLTC, how can economic
calculation be carried out in advanced communism without the PLTC? Apparently
Jeong believes that there will be no economic calculation in advanced
communism. This is utterly astonishing, but that is where his argument leads.
Moreover, he writes that "labor will ... be transformed into activities", and that
"the
essence of Marxian communism is not the domination of labor but its abolition."
(p. 84) True, Marx envisioned in his "Critique of the Gotha Program" that labor
will
change from something workers have to do into "life's prime want". But Jeong
goes further, and describes this as the abolition of labor. And, of course, if
labor is
abolished, then it follows that labor-time vanishes too. But according to
Jeong's
system, with the lack of that single unit of measurement, the abstract
labor-hour,
"macroeconomic coordination and balance" is impossible to achieve, and there
would be "the rejection of planning altogether."
Now, Marx too thought that labor certificates would vanish as communism
developed. Jeong writes about "needs-based distribution" and pays attention to
how from the start of communism some of the social product will be distributed
freely. (pp. 83-84) This is in accordance with Marx. But Jeong then identifies
how
much economic planning takes place with how many labor certificates are
circulating. This means to forget about the planning that is necessary in order
to
produce the goods. Marx, on the contrary, distinguished between how goods are
distributed, and whether there had to be economic planning.
After all, where do the necessities and luxuries of life come from? From where
do
all the good things come that are distributed among people, and how does one
ensure that production is carried out in a way that protects the environment?
This
requires planning. Marx stressed repeatedly that economic planning wouldn't
vanish in communism, but simply take on another form. Recall that Jeong himself,
when arguing for the single economic measure, cites a passage in which Marx
says that "the planned distribution of labour time among the various branches of
production remains the first economic law" of communist production. Indeed,
Marx wrote that such planning "becomes law, to an even higher degree" than
existed under capitalism. Nowhere does Marx suggest or even hint that this
planning will diminish as communism develops.
It is not Marx, but Jeong, who first assumes that the economic planning must be
carried out in a way similar to that of "the capitalist labor-value system",
and then
concludes that therefore, to avoid the capitalist labor-value system, there
must be
an end to labor and calculation itself.
While I disagree with many things that Jeong puts forward, I think he has done a
service by putting them forward and looking into the contradictions in them. If
I
have time, I will take up the issue of what went wrong with the Soviet economy
in
a continuation of this reply.
Notes
------------------------------------------------------------------------------
(1) Roberts wasn't at the conference either, and says that his report is "solely
based on some of the papers presented that I have obtained and also from some
of the comments on the sessions by participants." His report on the 50th URPE
conference can be found at
https://thenextrecession.wordpress.com/2018/10/02/50-years-of-radical-political-e
conomy/ under the title "50 years of radical political economy".
Jeong's draft article, "Soviet planning and the labor-time calculation model:
implications for 21st century socialism", can be found at
https://thenextrecession.files.wordpress.com/2018/10/sovietplanningltc_seongjin_
urpe20180928.pdf. It is contained in "Varieties of Alternative Economic
Systems",
pp. 71-87.
(2) The table of contents of the entire three-part article with the overall
title
"Labor-money and socialist planning" and links to all three parts can be found
at
http://www.communistvoice.org/00LaborHour.html. The article opposes the idea
of labor money and advocates that the Marxist labor theory of value does *not*
mean that the labor-hour is the natural unit of socialist calculation. Jeong's
criticism of my article occurs on p. 81 of his article.
(3) From Jeong's draft paper, p. 71, the parenthetical comment is Jeong's.
(4) The quote from Cottrell and Cockshott is from "Calculation, Complexity and
Planning: The Socialist Calculation Debate Once again", in Review of Political
Economy, vol. 5, no. 1, 1993, Section II.3.1. It is also available at
https://www.semanticscholar.org/paper/Calculation-%2C-Complexity-And-Plannin
g-%3A-The-Debate-Cottrell-Cockshott/6f6e2d52da790c839d3e52a02d2e8f321a8
b4640.
(5) See "The environment and things of zero labor content" in part 2 of "Labor
money and socialist planning",
http://www.communistvoice.org/26cLaborHour2.html.
(6) "Grundrisse: Foundations of the Critique of Political Economy", Translated
with a Foreword by Martin Nicolaus, Pelican Marx Library (Penguin Classics), The
Chapter on Money, p. 173. The passage is cited by Jeong on p. 71. I discuss this
passage in some detail in the section "Concrete and abstract labor" of part 3 of
my article on socialist planning.
(7) See the section "Soviet material balances and Western input-output methods"
in "Labor-money and socialist planning, pt.
2".http://www.communistvoice.org/26cLaborHour2.html.
Strictly speaking, the use of input-output tables is similar to the method of
material balances only when those input-output tables keep track exclusively of
material goods and the intersectoral connections between them. Input-output
tables can also be used for ordinary financial planning, and are widely so used
by
bourgeois economists and even international capitalist agencies. This is
developed further in the section "Input-output tables may or may not be material
planning".
(8) See the section "One, two, three, many natural units (the method of material
balances)" in "Labor-money and socialist planning, pt. 1"
http://www.communistvoice.org/25cLaborHour.html.
(9) See the section "Soviet material balances and Western input-output methods"
in "Labor-money and socialist planning, pt. 2". It should be noted that the use
of
"shadow prices" in linear programming shows the departure from physical
planning. This doesn't mean linear programming is useless, but that it can't
serve
as the bottom line of realistic calculation.
(10) See Leontief, "Essays in Economics", ch 2 and 4. <>
(From the Oct. 14 issue of D/SWV list, with minor corrections)
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