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Details of socialism

Dear Editors,

I am a 17-year old student who is a very keen proponent of the notion of socialism. I visited your web-site and thought you had very detailed and perceptive insights into what a socialist society might be like. I do not fully understand, however, some of the finer economic details in such a society, and was wondering if you could help explain:-

1) If production is solely for use rather than sale, how do industries pay for the cost of their capital. input costs etc? Perhaps I am bound by capitalist notions of value, but doesn't the cost of what goes into running an enterprise have to be recouped at some stage?

2) How would a socialist society run without money? If firms produce simply for use, how do they pay for their costs?

3) What went wrong with the economic system of the USSR, where enterprises had to be kept afloat through state subsidies? Doesn't this mean that these industries do not then contribute to the upkeep of other facilities such as hospitals, schools etc.

I know these questions are quite long, but I feel I need a firmer grasp on the finer economic details of socialism,

Brett Heino (by email)


Socialism is a society based on the common ownership by the population as a whole of the means of production (land, industry, transport, etc). It will be a moneyless society because this means that what is produced is also commonly owned and so the question that arises is not that of selling it but how to distribute directly among those who already own it in common, i.e. the members of society.

Separate enterprises with their own accounts which they have to try to at least balance won’t exist, not just because money and what it reflects (capitalist economic value) won’t exist but because, all industry being commonly owned, wider considerations such as pleasant working conditions and not harming the environment, will be able to be taken into account. Individual productive units will of course have to keep records of the materials they use and try not to waste them, but these records will be kept in physical amounts (tonnes, kilowatt-hours, metres, labour time, etc) not money. Similarly, hospitals, schools, etc will be built and maintained out of the physical resources available to society. Calculation in socialism will be calculation in kind.

What about the USSR? Well, for a start it wasn’t socialist but a form of state capitalism, and capitalism does require, as you point out, proper accounting in money to be able to calculate the rate of profit. The rulers of state-capitalist Russia sought to maximise profit at the level of the whole economy but in the end found they were unable to do this without proper financial information from industries and enterprises to enable to judge where to invest most profitably. Their centralised form of state capitalism became inefficient (in capitalist terms) compared with the mixed private/state capitalism of the West and eventually it collapsed. But this represented the failure of centralised state-capitalism not of socialism, which has never been tried - Editors