Hi Charles,
> Paul Cockshott wrote:
> ...
> In 'Towards a New Socialism', we make it clear that in a planned
> socialist economy there is no buying and selling between factories.
> ...
>
> J. Green advocates a method of material balances to coordinate the work
> of factories.
>
> Both of them assume a conceptual framework of plan-versus-market, which
> has a tradition of many decades. Within that framework, the other choice
> - some variation of market socialism - soon leads back to capitalism.
>
> The problem with typical planning schemes, though, is that while they
> remove profit as a target and reward, they also lose the discipline of
> requiring producers to sell their product. The usual mantra is an escape
> to vague talk about democracy, but there is an economic solution:
> recharter corporations so they must operate on a breakeven basis. By
Actually the firms in the Labor Republic envisioned in your book do make a
profit. The "breakeven principle" actually means that the firm is supposed to
make a certain standard profit, and the state takes that profit in taxation,
along with any additional profit.Thus you wrote that "The firm is deprived of
private profit by means of the wage tax and by remittance of net profit if
any to the state." (p. 313)
You hold that because the state appropriates this profit, therefore it really
isn't profit. But that isn't so. It is an actual profit, and the fate of the
firm depends on whether it makes these profit.
Actually, the profit involves more than the wage tax and the net profit. It
also involves a special charge on each unit of output in order to pay for
investment. If the firm actually continually broke even, it could never make
any investments. But in fact, in the Labor Republic, it can have banks invest
in the firm. When this investment first takes place, the firm in essence
takes a loss: it expends more than it makes, with this loss covered by the
investment. Then it has to pay back the investment, which is done with "an
asset charge on each unit of output produced with the equipment [bought with
the funds from the investment]." This means that it makes a sufficient gross
profit to cover this asset charge, but when this asset charge is deducted,
the rest of the profit is supposed to cover just the wage tax.
> doing this, a new commonwealth can retain competitive discipline on
> producers while society takes control of economic destiny. As long-time
You can't have it both ways. If the profit really is irrelevant to the firm,
because (a) it all goes to the state, and (b) the state also covers all
losses, then there is no competitive discipline. If there really is a
competitive discipline, then the firm really does make a profit in the full
sense of the word. It may be an indirect one (the financial profit is
remitted to the state, but making the profit determines when the firm
continues to exist, whether it is able to get the banks to invest, whether
the workers in the firm have various good things happen to them, etc.) But it
still a transformed form of the profit.
Thus the way profit makes a difference to the firm may differ somewhat from
outright market capitalism, but it would be recognizable to anyone familiar
with the way Soviet state-capitalism worked. The banks and central investment
agency in the Labor Republic look to see that the firm does make a profit
which is exactly right, neither too large nor too small ("the breakeven
principle"), just as the Soviet planning agencies set their targets which the
firm had to meet. The reaction of the banks and central investment agency
constitutes the incentive to the firm to make this level of profits.
You envision that financial accounting and market pressure will motivate
people to do the things that are socially desireable. I would have imagined
that the fiasco of the Soviet planning agencies believing that if they set
the financial incentives rights, everything would work right, would have been
taken to heart by people. I would have imagined that the fiascos of energy
deregulation, cap and trade under Kyoto, and other market schemes that made
grand promises would have been taken to heart. Market forces have a way of
doing what they want, not what market-oriented theorists promise they will
do. Financial accounting that duplicates market forces will have the same
slippery results as market forces: if anything was proved by the problems of
Soviet state-capitalist planning, this was it.
So let's take a brief look at the type market you envision. What is it
supposed to orient the firms to do? You write that: "Firms aim to break
even. A measure of their success is that they break even at the largest
market share they can garner. ... The firm wants to increase output because
if it does not do so, other firms will, taking away market share." (p. 286)
Thus you envision that competition drives each firm to grow as far as it can.
But why should this be socially desireable? In some cases, an increase in
production -- indeed a rapid, dramatic increase in production -- may be just
what is needed. But in other cases, growth may be harmful. But in the Labor
Republic, the incentive is to grow, grow, grow. This is similar to ordinary
capitalism, where the general impetus is growth for the sake of growth.
This incentive to grow is mentioned over and over. "Firms need people ... who
really care about the role of their firm in the social division of labor.
*They want to expand market share* and make the firm a successful contributor
to the economy." (p. 291, emphasis added) Being successful is identified with
growing.
You recognize some exceptions to the desirability of growth in "the total
revenues of an industry", such as when it would make sense to reduce
"senseless variety and sales costs." But even then, you stress, "A successful
firm may *gain market share* while absolute revenues decline." (p. 288)
Perhaps you might answer that in the Labor Republic the firm is required to
carry out "socially necessary labor". Only the output that is "socially
necessary" counts. And isn't it good to have as much "socially necessary
labor" as possible? And yes, the criterion of what is "socially necessary" is
repeated constantly. But all it means is that the firms' products should
actually be bought, and shouldn't be produced at too great a cost. That's the
financial criterion for what is "socially necessary" labor.
Well, it might be that the "central investment agency" has a broader outlook;
or it might not. But the point is that the basic incentive in the system is
growth for the sake of growth, and any exceptions would have to be imposed
onto the system, reminiscent of the way Paul Cockshott envisions that a
*political* decision for environmental goals would be imposed on an economic
system that, left to its own basic *economic* mechanism, would devastate the
environment.
> PEN-Lers know, suggested details are in my book of a decade ago, From
> Capitalism to Equality: An Inquiry into the Laws of Economic Change.
> Back then J. Green indicated he would spell out his criticisms of that
> book, but to my knowledge he never did.
Yes, that's true. I had studied the book and prepared to write an article,
but got swamped by other work. Sorry. I've spent some time looking for my
former notes on the book, but so far I haven't found them. I did find my copy
of the book itself, and I started reexamining the chapters on the structure
of the Labor Republic in order to make this reply.
>
> There are very few examples of a concise program for socialism as a
> successor to a developed capitalist economy. That's not so remarkable,
> but what is remarkable is the lack of interest in them by socialists.
> --Charles Andrews
I do regard your book as one of the works worthy of attention and reply. It
was only lack of time that prevented me carrying through on writing on it. My
apologies.
But unfortunately, your book was one of several that I thought worthy of
attention but was unable to actually review. In particular, I regret not
writing on the work " 'Socialism', Stalinist or Scientific: The Marxist
Theory of State Capitalism" by Hayashi Hiroyoshi and Suzuki Kennichi,
translated by Roy West. The book is part of the debate over what constitutes
revisionist state capitalism, and what constitutes a transition in the
direction of socialism. It was interesting to me that, among other things,
these authors make the common assumption that there is no way to carry out
economic calculation without a standard such as the labor content. As you no
doubt realize by now, I disagree with that.
-- Joseph
>
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