In recent years, with the revival of the ideological Right as a reaction to the failure\nof the wishy-washy middle-of-the-road social reformism that had been in vogue since the\nwar, we in the Socialist Party have been singled out for special attention by those\npartisans of unbridled capitalism who call themselves “libertarians” and\n“anarcho-capitalists”. This is probably because we are the only group calling\nitself socialist to put forward a coherent definition of what socialism is and prepared to\ngo into the details of how we think a classless, stateless and in particular moneyless\nsociety might work. <\/p>\n\n\n\n
The point these ideological defenders of capitalism love to attack us on is the idea of\nabolishing markets, prices, money and all other aspects of buying and selling. This they\nsay would be impossible, as demonstrated by a certain Ludwig von Mises in an article on\n“Economic Calculation in the Socialist Commonwealth” published in German in 1920\n(and first published in English in 1935 in Collectivist Economic Planning edited by\nHayek). <\/p>\n\n\n\n
Von Mises, they claim, showed that a socialist society was impossible because it would\nbe unable to calculate rationally which productive methods to adopt. This they call\n“the economic calculation argument”. According to von Mises, rational economic\ncalculation is only possible on the basis of prices fixed by the free play of market\nforces. In other words, the only form of rational calculation that can be applied to the\nproduction of wealth is monetary calculation. <\/p>\n\n\n\n
Although money, and so monetary calculation, will disappear in socialism this does not\nmean that there will no longer be any need to make choices, evaluations and calculations.\nOur argument is that these evaluations and calculations, including those conceding the\nnon-monetary “cost” of objects in terms of the effort and materials used to\nproduce them, will be done directly in kind, without any general unit of account or\nmeasurement, neither money nor labour-time. <\/p>\n\n\n\n
This follows from the very nature of socialism as a society geared to producing wealth\ndirectly to satisfy human needs. Wealth will be produced and distributed in its natural\nform of useful things, of objects that can serve to satisfy some human need or other. Not\nbeing produced for sale on a market, items of wealth will not acquire an exchange-value in\naddition to their use value. <\/p>\n\n\n\n
In socialism their value, in the normal non-economic sense of the word, will not be\ntheir selling price nor the time needed to produce them but their usefulness. It is for\nthis that they will be appreciated, evaluated, wanted … and produced. So estimates of\nwhat is likely to be needed over a given period will be expressed as physical quantities\nof definite types and sorts of objects. Nobody, not even von Mises has denied that this\ncould be done without problems: <\/p>\n\n\n\n
calculation in natura<\/em> in an economy without exchange can embrace\n consumption-goods only (von Mises, p. 104)<\/p><\/blockquote>\n\n\n\n
Von Mises’ argument was that the next step – working out which productive methods to\nemploy – would not be possible, or at least would not be able to be done\n“rationally” avoiding waste and inefficiency without “economic\ncalculation” – monetary calculation based on market prices. Our answer is that the\nchoice of which productive methods to employ, will like working out what consumer goods\nare needed, be based on estimations and calculations in kind. <\/p>\n\n\n\n
A monetary economy gives rise to the illusion that the “cost” of producing\nsomething is merely financial; indeed so associated is the word cost with financial and\nmonetary calculation that we are obliged to put it in inverted commas when we want to talk\nabout it in a non-monetary sense. But the real cost of the pencil I’m using to write this\narticle is not 10 pence, but the amount of wood, slate, labour, electricity, wear and tear\nof machines, used up in producing it. This will continue to be the case in socialism.\nGoods will not grow on trees, but will still require expenditure of effort and materials\nto produce them. <\/p>\n\n\n\n
The point is that in socialism this expenditure of effort and materials will be\nestimated and calculated exclusively in kind, directly in terms of wood, slate, machinery\nwear and tear, electricity, and so on (including working time, but as this will be a\nspecial case we’ll come back to it later). Since socialism will be concerned with\nconserving resources it will want to adopt those productive methods which, other things\nbeing equal, use less rather than more materials and energy and this will be one, but only\none, of the factors to be taken into account in deciding which technical method of\nproduction to adopt. <\/p>\n\n\n\n
Monetary calculation, whether to discover which productive method is the most\nprofitable (as imposed by capitalism and praised by the followers of von Mises) or for any\nother purpose (as proposed by various partisans of state capitalism and other unrealistic\nwould-be reformers of capitalism), is a very peculiar sort of calculation since it\ninvolves reducing all use-values to an abstract common denominator. Use-values can indeed\nbe compared but only in concrete situations since the same object can have a different\nuse-value at different times and under different circumstances. <\/p>\n\n\n\n
Monetary calculation, however, seeks to compare all objects in terms of an objective\nstandard applicable in all circumstances; to do this it needs to identify a feature common\nto all objects. Such a common feature can indeed be found: that a certain “cost”\nin terms of materials, energy and labour expended has had to be incurred to produce them\n(ultimately the labour-time required to produce them from start to finish, and – this is\nthe basis of the labour theory of value – the materials and energy expended, being\nproduced by labour, can also be reduced to given amounts of necessary labour-time). It is\nthis cost that is supposed to be measured by money. <\/p>\n\n\n\n
Money, then is the universal unit of measurement, the “general equivalent”\nthat allows everything to be compared with everything else under all circumstances – but,\nand this is what the partisans of monetary calculation forget, only in terms of their\nlabour-time cost or the total time needed on average to produce them from start to finish.\n<\/p>\n\n\n\n
To make this the only consideration that counts (as is imposed by the economic laws of\ncapitalism) is an absurd aberration. It is like making volume the most important thing\nabout bottles containing different liquids and then concluding that a litre bottle of\nwater has the same significance as a litre bottle of wine or of oil or of sulphuric acid\nor whatever. But we are doing exactly the same if we say, or if we believe that different\ngoods selling at the same price have the same “value”, or are “worth”\nthe same, in terms of their real usefulness to people. <\/p>\n\n\n\n
Market Values or Human Values?<\/h3>\n\n\n\n
So the argument between monetary calculation and calculation in kind is much broader\nthan it first seems. It is not merely a technical argument about how to calculate and what\nunits to use for this, but is an argument about the real meaning of words like\n“value” and “worth”. Socialists, as opponents of monetary calculation,\nsay that it is not monetary or market values, in the end total average production time,\nthat is the most important thing about a good but its usefulness in satisfying some human\nneed; that the real values are use-values, human values. We are saying that these are the\nfactors that should be taken into account when making choices and calculations about\nproduction, not simply production time. <\/p>\n\n\n\n
This presupposes that calculations concerning production can be carried out without\nmoney or without some money-substitutes some other general unit such as labour-time. Such\nnon-monetary calculation of course already happens, on the technical level, under\ncapitalism. Once the choice of productive method has been made (according to expected\nprofitability as revealed by monetary calculation) then the real calculations in kind of\nwhat is needed to produce a specific good commence so much raw materials, so much energy,\nso much labour… <\/p>\n\n\n\n
In socialism it is not the case that the choice of productive method will become a\ntechnical choice that can be left to engineers, as is sometimes misunderstood by our\ncritics, but that this choice too will be made in real terms, in terms of the real\nadvantages and disadvantages of alternative methods and in terms of, on the one hand, the\nutility of some good or some project in a particular circumstance at a particular time\nand, on the other hand, of the real “costs” in the same circumstances and at the\nsame time of the required materials, energy and productive effort. <\/p>\n\n\n\n
To advocate monetary calculation, then, is to advocate that only one consideration –\nthe total average production time needed to produce goods – should be taken into account\nwhen making decisions about which productive methods to employ. This is patently absurd\nbut it is what is imposed by capitalism. Naturally, it leads to all sorts of aberrations\nfrom the point of view of human interests. In particular it rules out a rational,\nlong-term attitude towards conserving resources and it imposes intolerable conditions on\nthe actual producers (speed-up, pain, stress, boredom, long hours, night work, shiftwork,\naccidents). <\/p>\n\n\n\n
Socialism, because it will calculate directly it kind, will be able to take these\nother, more important, factors than production time into account. This will naturally lead\nto different, in many cases quite different, productive methods being adopted than now\nunder capitalism. If the health, comfort and enjoyment of those who actually manipulate\nthe materials, or who supervise the machines which do this, to transform them into useful\nobjects is to be paramount, certain methods are going to be ruled out altogether. The fast\nmoving production lines associated with the manufacture of cars would be stopped for ever\n(except perhaps in a museum of the horrors of capitalism); night work would be reduced to\nthe strict minimum; particularly dangerous or unhealthy jobs would be automated (or\ncompletely abandoned). <\/p>\n\n\n\n
Work can, in fact must, become enjoyable. But to the extent that work becomes\nenjoyable, measurement by minimum average working time would be completely meaningless,\nsince people would not be seeking to minimize or rush such work. <\/p>\n\n\n\n
However there will still be some kinds of work that socialist society will want to\nminimize. For instance, dangerous or repetitive work. Once again, this would be one of the\nreal factors that will have to be taken into account when decisions are made as to what\nproductive methods to adopt. Other factors would be conserving resources (so out would go\n“planned obsolescence” and in would come solid goods made to last), saving\nenergy, avoiding pollution and generally maintaining a sustainable ecological balance with\nthe rest of nature. <\/p>\n\n\n\n
As a matter of fact, even under capitalism, enterprise managers do not just base their\ndecisions on market prices, long-term or short-term. They are obliged by law (and also by\ntrade union pressure) to take into account a whole series of other factors such as safety,\nanti-pollution and planning permission. The over-riding consideration remains of course\nexpected profits (the difference between anticipated sales receipts and monetary cost of\nproduction). This means that these factors are of minor importance and only reflect the\nminimum standards that are not incompatible with profitmaking and, being imposed from\noutside against the logic of short-term profit-making are always being broken. But they\ndo, however marginally, enter into productive decisions, thus showing that it is possible\nto take into account other considerations than minimum production time. <\/p>\n\n\n\n
The Priorities in Socialism<\/h3>\n\n\n\n
In socialism the situation will be quite different: these factors will be automatically\ntaken into account in the decision-making process and will not have to be imposed from\noutside as a sort of after-thought, since among the highest priorities of production will\nbe the health and welfare of the producers. We can imagine the decisions as to choice of\nproductive methods being made by a council elected by the work force, or by a technical\nsubcommittee of such a democratically-elected council. In making their choice they will\nfirst take into account, not minimizing average total production time as the economic laws\nof capitalism enforce today, but the health, comfort and enjoyment of the work force, the\nprotection of the environment and the conservation of materials and energy. <\/p>\n\n\n\n
Since materials and energy, and work to the extent that it is not interesting and\ncreative but only routine, are real “costs” the aim will be to minimize them. As\nthere will be these clearly defined objectives and constraints, mathematical aids to\ndecision-making such as operational research and linear programming, at present\nprostituted to the end of maximizing profits, can be used to find the optimum productive\nmethods. <\/p>\n\n\n\n
Another point that must be understood is that socialism will not have to start from\nscratch. It will inherit from capitalism a going technical system of production which it\nwill be able to adapt to production for use. Some methods will have to be stopped straight\naway or as soon as possible but others will only need modifying to a greater or lesser\nextent. Again, when socialism will have cleared up the mess inherited from capitalism, it\nwill become a society in which methods of production too will only change slowly. This\nwill make decision-making about production much simpler. <\/p>\n\n\n\n
We add straight away to avoid any misunderstanding that, even in the period at the\nbeginning of socialism when production will be clearing up the mess in terms of\ndeprivation and poverty left by capitalism, monetary calculation won’t be necessary. The\nnecessary expansion of production can be planned and executed in real terms. <\/p>\n\n\n\n
So, the so-called “economic calculation argument” against socialism collapses\nin the face of detailed analysis. The alternative to monetary calculation in terms of\nexchange value is calculation in kind in terms of use values, of the real advantages and\nreal costs of particular real alternatives in particular real circumstances. <\/p>\n\n\n\n
Author: ALB <\/p>\n\n\n\n
\n\n\n\nPlease email your comments about this article to feedback@worldsocialism.org<\/a><\/p>\n\n\n\n
\n\n\n\n