Wages, Prices, and Money in a Post-Capitalist Economy

Referring to one of my previous articles,Eric Patton, “An Introduction to Participatory Economics,” Dissident Voice. a blog commenter made the statement that, in his view, one of the problems with participatory economics (parecon) is that it “continues with prices and wages and money, instead of abolishing them all.” This view of wages, prices, and money is flawed, however. It is impossible to have an economy which excludes these things. That is, in any society, that society’s economy is necessarily going to include wages, prices, and money. Perhaps they will go by different names, but the concepts themselves are necessarily going to be part of any economy.

Why is this so? To understand this, we must look at what the concepts really mean. In any economy, there are workers and consumers, and there are goods produced. Most people are both workers and consumers; their roles as workers entitled them to a share of goods produced, and their roles as consumers obligate them to a certain percentage of production. And in all of this, the goods produced and consumed have some intrinsic value (which must be determined by the allocation system).

What does any of this mean, in simpler terms? Let’s take a person at random in our economy (whatever economy that might be — capitalism, socialism, or parecon); call her Jane. Jane is a worker and a consumer. Every year, in her role as a worker, Jane produces a small pile of stuff. (All workers together produce a big of stuff.) And every year, in her role as a consumer, Jane consumes a small pile of stuff. (And all consumers together consume a big pile of stuff.)

The work Jane does in the economy to produce the small pile of stuff that she produces entitles her to consume a small pile of stuff. To use an analogy from a children’s story, since Jane has helped to bake the cookies, she’s entitled to eat a few of the cookies. But how many cookies is Jane entitled to eat? That is, how do we measure Jane’s contribution to the cookie baking process? For if we have no way to measure Jane’s contribution, we really have no way of knowing whether or not Jane is entitled to a few cookies, or nearly all the cookies.

This valuation of how many cookies Jane is entitled to is done by the economy’s allocation system. Different economic models have different allocation systems, so different allocation models will determine differently how many cookies Jane is entitled to eat.

Under capitalism, if Jane owns the oven in which the cookies are baked, she gets to eat many many many cookies — perhaps most of the batch. Under capitalism, this is true even if Jane does literally none of the work in baking the cookies. Simply by virtue of her owning the oven, she gets to dictate the terms under which cookie distribution occurs. Not surprisingly, Jane’s owning of the oven means she’s going to take most of the cookies for herself.

Okay, well, how does socialism work? In a socialist economy, no one owns the oven (or perhaps the oven is owned by the state. But no private individual owns the oven). But if Jane keeps the cookie recipe in her office, doesn’t let others have access to it, procures the ingredients herself, and delegates responsibility for cookie preparation in such a way as to de-skill and disempower the people doing the actual work (so one person cracks eggs all day, another only adds water, while someone else only uses the mixer), she will again be able to take the lion’s share of cookies for herself.

Actually, before going on, it is worth pointing out that this last example is going to occur in any economy which is either capitalist, centrally-planned socialist, or market socialist. It is worth taking a few moments here to briefly explain the differences and similarities between the three aforementioned models.

At the first level of approximation, those of us who are not economists can most easily classify economies by looking at three aspects of a given economic model: ownership, production, and allocation. That is, if we know who owns the productive resources, how workplaces are structured, and how resource allocation occurs, we can uniquely classify a various economic model.Eric Patton, “Assessing Economic Options,” Dissident Voice. But it’s important enough to review and highlight some of it here.

In capitalist economies, ownership is private (i.e., private individuals own the means of production), workplace structure is corporate (i.e., workers and de-skilled and jobs are organized hierarchically), and allocation is by competitive markets (with buyers and sellers wrangling over resources, sellers attempting to sell dear and buyers attempting to buy cheap). An example of a capitalist economy is the United States.

In market socialist economies, there are no capitalists. So productive resources are owned by the state. Further, workplace structure is corporate, and allocation is by competitive markets. An example of a market socialist economy is the former Yugoslavia.

In centrally planned socialist economies, there are still no capitalists. Workplace structure is still corporate. But here, allocation is by central planning, not by markets. In centrally planned economies, a relatively small group of people makes decisions about how resources will be distributed throughout the economy (though highly truncated markets might be used for resource distribution at the economy’s lowest levels).

This is not to suggest that every capitalist economy is identical to every other capitalist economy, or that every centrally planned economy is identical to every other centrally planned economy. Capitalism, for example, takes on a different flavor in the U.S. than it does in, say, Sweden. But the broad institution features of both U.S. and Swedish capitalism are the same, and can be compared and contrasted to the broad institutional features of socialism between the former Soviet Union and Cuba.

The real point I wish to make here is that, in every variety of capitalism or socialism, workplaces were and are structured with workers de-skilled and disempowered, dominated above by a coordinator class which monopolizes decision-making tasks. Once cultural and language differences are accounted for, an auto worker would very likely to unable to distinguish between work in a U.S. Ford factory versus a Soviet Lada plant versus a Yugoslav Yugo plant. However, the real reasons why these workplaces look the same varies from economy to economy.

In capitalist economies, workplaces are too large and complex for capitalists to run the workplaces themselves. So the capitalists hire a skilled and well-educated class of people — the coordinator class — to run the workplaces for them. The competitive pressures of a market economy force firms to fight with one another over resources, lest firms go out of business. So naturally, the coordinators seek to cut wages and benefits for workers below, increase the workload, and so on, in order to gain a competitive edge and save the firm from bankruptcy.

In a market socialist economy, there are no capitalists. Workers have formal control over their firm. But the firm still has to compete or die. Therefore, wages and benefits still have to be cut, workload has to be increased, and so on — otherwise there will be no firm. This is an unpleasant task, though, and workers would understandably prefer not to perform it themselves. So they hire a coordinator class of workers to do it for them. Once in place, coordinators will naturally seek to protect and enhance their privileged position within the firm, further deskilling and disempowering workers. And the whole thing snowballs, with worker power continually under attack.

In a centrally planned economy, planners make decisions. Those decisions, naturally, they expect to be carried out as they have instructed. Therefore, overwhelming power is given to managers to punish employees as they see fit, in order to control the operations of the workplaces to planners’ dictates. Hence, the entire economy becomes highly authoritarian. Since the larger society exists inseparably from its economy, the entire society necessarily takes on an authoritarian cast.

But from a worker’s standpoint, the differences between capitalism, market socialism, and centrally-planned socialism really aren’t that great. You go to work, a boss tells you what to do, and you go home — not uncommonly tired, angry, and/or depressed.

However, what we really want to do here is understand wages, prices, and money, and how they are necessarily part of any economy. So, returning to Jane, is she is an oven-owning capitalist, she overwhelmingly determines how many cookies she gets to eat. If she is workplace-managing coordinator, she still has a large say in her take of cookies — though the amount of cookies she gets to eat herself will naturally vary depending on whether or not someone above her owns the oven.

What about the workers who are doing the real work of baking the cookies? We know what happens there. Whether or not someone owns the oven, the workers are going to be left with whatever crumbs they are able to eke out. And in case it’s not yet obvious, the analogy is this: In an economy with market-based allocation or centrally-planned allocation, the workers are going to get screwed. They’re going to do most of the work, and see comparatively none of the rewards.

What we really need is an economy where people are rewarded — or remunerated, to use the technical term — based on their effort and sacrifice in baking the cookies. But the only way this can ultimately be determined is through wages and prices.

The real issue is not that an economy has wages and prices. Workers don’t get screwed because an economy has wages and prices. Workers get screwed because they labor under an economic model whose method of allocation sets wages and prices unfairly. That is, when the economy’s mode of allocation rewards the ownership of productive property (as in capitalism) or the monopolization of decision-making tasks (as in socialism), then the workers are necessarily going to get short-shrift.

Let’s return to Jane, only now let’s assume she’s just a worker, and not a capitalist or coordinator. Jane does some amount of work as part of her job. She makes a small pile of stuff in her role as a worker. Her labors entitled to consume a small pile of stuff. The size of the small pile of stuff she’s entitled to consume is represented by her wage. Now, if you don’t like the term “wage,” well, okay. Call it something else, if you must. But the concept is necessarily there, regardless of what you call it.

That is, during the year, Jane works. She makes a small pile of stuff. She is entitled, by virtue of her effort and sacrifice, to consume a small pile of stuff, is she not? Well, how do you know how much stuff she is entitled to consume? Something has to indicate that. That is, there must be some way of quantifying the amount of consumption Jane is entitled to.

If you could really wave a magic wand, and completely eliminate the concept of wages, how would you know how much stuff Jane could consume? Put another way, let’s say Jane wants to consume a clock radio. Is she entitled to do that? Perhaps your answer is, “Yes, certainly.” Well, okay, suppose Jane wants to consume a car. Is she entitled to do that? Perhaps your answer is, “Well, maybe.” Okay, now suppose Jane wants to consume something larger — say, Montana. Is Jane entitled to have all of Montana?

Your answer is probably, “Of course not.” But how do you know? If you’ve eliminated wages as a yardstick of consumption entitlement, you have no way of knowing whether Jane is entitled to have Montana or not.

You might say, “Yes, but Montana is obviously too much. It’s obviously too valuable for any one person to have.” But, if you’re like many of the socialists I’ve seen discuss this topic, not only have you eliminated wages, you’ve eliminated prices too. But the “value” of Montana is indicated by its price. Or the value of a car. Or a clock radio.

Understand it this way: With every product a society’s economy makes, resources go into making that product — resources that necessarily can’t be used to make some other product. Whether we are talking about material resources or labor resources, any resources an economy puts into the production of clock radios can’t be put into the production of automobiles.

Society has to make decisions about what it wants to produce. That is, an economy can’t just make everything. The Earth’s resources are limited. As a society, we have to make choices. Do we want more clock radios or more cars? Or perhaps neither. Maybe we want books instead. Or maybe we want some radios, but we’d also like some milk and cheese too. Or whatever.

Any economy has to decide how to allocate its resources to bring these outcomes about. In a centrally planned economy, the planners simply decide that that society’s economy will produce X number of clock radios, Y number of books, Z gallons of milk, and so on. In a market economy, firms compete with one another based on what level of profit they believe they can attain. An electronics firm will base its decision on whether to make more clock radios or more television sets (as well as what type of each) based on whatever it thinks will make it the most money.

But in neither a market economy nor a centrally-planned economy are resources allocated with any notion of what we might call “wise use” or “fair use” in mind. In a market economy, power and profit drive all calculations. In a centrally-planned economy, planners look to preserve and enhance their status, and their decisions are made with these ends in mind.

Participatory (or horizontal) planning, as described in the work on participatory economics done by Michael Albert and Robin Hahnel, is a new way for an economy to allocate resources.See, for example, Albert and Hahnel’s The Political Economy of Participatory Economics, Princeton University Press, 1991. Participatory planning enables an economy to allocate resources based on the true social opportunity costs of goods. What is a good’s social opportunity cost?

Society derives benefits from making a certain number of radios. Society derives benefits from producing a certain number of books. But do we want more books and fewer radios? Or more radios and fewer books? How about less of both, and more milk instead? How about more of both, and less milk?

An item’s social opportunity cost represents its ideal level of production. If we produce so many radios that we end up losing out on the production of something society considers more valuable than the extra radios we’re making, then the social opportunity cost of radios exceeds their benefit.

That is, we can surely make radios. We can make lots and lots of radios. And keep making radios, until they pile up to the sky. We can do that. But if society thinks a certain amount of milk is more valuable than the extra radios we’re piling up, then those extra resources we’re dumping into making all those radios are being wasted. We’re making radios, yes, but society really doesn’t want all those radios. It would rather have a little bit of milk instead.

Of course, there is a certain level of radio production that makes sense. We don’t need to make radios until they pile all the way up to the moon, but if we only make, say, three radios for the entire economy for the entire year, that’s not necessarily a better outcome. Ideally, we’ll produce radios until the level of radio production meets some “reasonable” level of demand, without stupidly making so many radios that (a) we have no resources left over for milk, and (b) no one wants the extra radios we’re making anyway.

This “ideal” level of the production of an item (like radios) is the item’s social opportunity cost. It’s sort of like Goldilocks and the three bowls of porridge — we don’t want the level of an item’s production to be too much or too little, we want it to be just right.

The issue is complicated by the fact that we have all these items we’d like our economy to make, but only so much in the way of resources with which to do it all. Deciding how much of everything to produce is a big selection process. Some resources are easier to come by than others. Salt used in the production of tomato sauce might be easy to come by, but a particularly rare metal used in the construction of pacemakers might not be. And then, certain products like automobiles or cigarettes have pollution or health issues that really need to be accounted for in their cost, otherwise their social opportunity costs can’t be properly determined.

There’s a lot to keep track of when doing economic allocation. It is complicated, but not incomprehensible. A full treatment of participatory planning is beyond the scope of this essay. The point I wish to make here is simply that a good allocation system must be able to keep track of several variables. It must be transparent, and it must allow society to manage its own economic affairs without a small group of central planners making decisions, or the market forcing decisions on people solely in the interests of profitability and the survival of economic firms.

A good allocation system should allow us to determine the size of the small pile of stuff Jane can consume in a way that is fair. That is, Jane’s wage should be based on the effort and sacrifice she expends in her labors. On the other hand, a good allocation system should accurately value goods at the level of their true costs and benefits to society. That is, the prices of the items Jane consumes should reflect their true social opportunity costs.

These two concepts — wages and prices — necessarily exist in any economy. They are intrinsic to society-wide economic activity. The challenge is not to pretend they can be eliminated from an economy, any more than oxygen can be eliminated from the living human body. The challenge is devise an economic model that determines wages and prices accurately fairly. My claim is that parecon does this, while capitalism and socialism do not.Parties interested in further assessing this claim’s validity are recommended to read Michael Albert’s Parecon: Life After Capitalism, Verso Press, 2003.

One final note on the subject of money. “Money” means different things to different people. To some people, money means coins and dollar bills (and so on). Will this type of money exist in a post-capitalist economy? Maybe, maybe not. It depends on the technological level of the society, most likely. In the U.S., it is reasonable to think that an implementation of parecon would probably not use coins and dollar bills. People’s day-to-day consumption could more be easily tracked using computer databases very similar to the ones used currently by the credit card industry. In less technologically advanced societies, perhaps coins and bills will be retained as markers of day-to-day economic activity.

This conception of money though is not particularly important to those who are considering questions of economic vision. That is, one when considers what to replace capitalism with, thinking about whether or not to retain coins isn’t really very deserving of one’s time. It’s not the important way in which to understand the concept of money.

The important way is the way I just described: wages and prices. When thinking about economic theory and post-capitalist options, this is the conception of money you want to keep in mind. Whether or not people use coins (the other, more popular conception of money) is probably, at best, a third-order concern.

Eric Patton lives in Cincinnati, Ohio. He can be reached via e-mail at: ebpatton@yahoo.com. Read other articles by Eric, or visit Eric's website.

22 comments on this article so far ...

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  1. Max Shields said on May 29th, 2007 at 12:34pm #

    Firest, Eric, thank you for keeping this very important discussion going.

    The problem I find with your argument, and what I’ve gleaned from your other articles and Michael Albert’s site on parecon, is the central place you’ve given to economics, whether it’s production, consumption or an exchange system. I’m not arguing that these should not exist. It seems reasonable to continue them in some form within a humanly designed economic system.

    Again, the issue is the inappropriately central role you’re giving the economic system. This system is really a designed subsystem which, if it is to be truly sustainable, if it is to matter in the long run to people, not elitist or some other sub-category of people, must yield to the larger ecosystem or natural system. I know Albert has included this in his last book, but it needs to be central. I would add that the role of economics need not (should not?) dictate the societial behaviour of all involved; that is, an economy should serve people, it should not define them – e.g., capitalist, socialist, pareconist. I think this was in large part Marx’s error. Economists (and those who support their efforts) are just far too stuck on their economic worldview to see the world in its entirety.

    Humanly design subsystems, like economics, to be sustainable need to start with humilty; start with the living system – ecosystem. Then I, to affect change, understand the dynamics of culture – economic – polity as the basis for what drives transformation. Finally I would implore you to understand human nature, it is not merely based on being a consumer/producer and buy/seller; and for sure we are not clearly rational in its behavioral patterns.

    I’d suggest a reading of the seminal work by Jerry Mander and Edward Goldsmith: The Case Against The Global Economy, and some insights afforded by economist Daniel Kahneman into the psychology of happiness (so missing in most of our obsessive formulas for economic health).

  2. alan johnstone said on May 29th, 2007 at 1:30pm #

    “ It is impossible to have an economy which excludes these things [wages ,prices and money], that society’s economy is necessarily going to include wages, prices, and money. …These two concepts — wages and prices — necessarily exist in any economy.”
    Sorry to say but it is well documented by anthropologists , that there has been many societies which has not involved a monetary economy – in fact some exist even today in isolated parts of the world . Dollars and cents , salary checks , and price tags on goods are not an intrinsic part of the human essence as such statements imply.

    As I said previously , simpler is better . Jane gives according to her abilities and takes according to her needs . Free access to goods and services denies to any group or individuals the political leverage with which to dominate others . This will work to ensure that a socialist society is run on the basis of democratic consensus.

    More can be of course said but briefly

    “Workers don’t get screwed because an economy has wages and prices. Workers get screwed because they labor under an economic model whose method of allocation sets wages and prices unfairly….a good allocation system should accurately value goods at the level of their true costs and benefits to society. That is, the prices of the items Jane consumes should reflect their true social opportunity costs.” –

    Yet Marx cautioned – “Instead of the conservative motto, A fair day’s wage for a fair day’s work! they ought to inscribe on their banner the revolutionary watchword, Abolition of the wages system!”

    According to capitalist economic theory, prices are the means for determining the rational allocation of resources in a money economy. But, in fact, prices are not intended for the purpose of organising production. The function of pricing is to fix costs with a view to making profit. In practice, costing and pricing are ultimately about calculating the exploitation of labour, enabling the capitalist class to live and accumulate capital from the wealth that the working class produces but does not consume. The problem of rationally allocating productive resources in an economy is common to all human societies at least as long as these resources remain relatively limited compared to needs. However, there is no need to assume that this allocation could be effected rationally only through the exchange of resources taking the value -“price”- form.
    Labour power, your ability to work, is a commodity that is sold on
    the open market like anything else, the `price’ you get for it is
    your wage. If you have special natural skills or a training to
    perform a particular kind of labour which is in high demand then
    like everything else you can command a higher price for it, as well
    as good working conditions

    A monetary economy gives rise to the illusion that the “cost” of producing something is merely financial . Money is the universal unit of measurement, the “general equivalent” that allows everything to be compared with everything else under all circumstances—but only in terms of their labour-time cost or the total time needed on average to produce them from start to finish.
    Such non-monetary calculation of course already happens, on the technical level, under capitalism. Once the choice of productive method has been made (according to expected profitability as revealed by monetary calculation) then the real calculations in kind of what is needed to produce a specific good commence so much raw materials, so much energy, so much labour…
    In socialism it is not the case that the choice of productive method will become a technical choice that can be left to engineers, as is sometimes misunderstood by critics, but that this choice too will be made in real terms, in terms of the real advantages and disadvantages of alternative methods and in terms of, on the one hand, the utility of some good or some project in a particular circumstance at a particular time and, on the other hand, of the real “costs” in the same circumstances and at the same time of the required materials, energy and productive effort.

    Production- for- use would operate in direct response to need . These would arise in local communities expressed as required quantities such as grammes , kilos , tonnes , litres , metres , cubic metres , etc , of various materials and quantities of goods . These would then be communicated as required elements of productive activity , as a technical sequence, to different scales of social production , according to necessity .
    Each particular part of production would be responding to the material requirements communicated to it through the connected ideas of social production . It would be self -regulating , because each element of production would be self-adjusting to the communication of these material requirements . Each part of of production would know its position . If requirements are low in relation to a build-up of stock , then this would an automatic indication to a production unit that its production should be reduced . If The register of needs and the communication of every necessary element of those needs to the structure of production would be clear and readily known . The supply of some needs will take place within the local community and in these cases production would not extent beyond this , as for example with local food production for local consumption .
    Other needs could be communicated as required things to the regional organisation of production. Local food production would require glass, but not every local community could have its own glass works . The requirements for glass could be communicated to a regional glass works . These would be definite quantities of required glass . The glass works has its own suppliers of materials , and the amounts they require for the production of 1 tonne of glass are known in definite quantities. The required quantities of these materials could be passed by the glass works to the regional suppliers of the materials for glass manufacture . This would be a sequence of communication of local needs to the regional organisation of production, and thus contained within a region .
    Local food production would also require tractors, and here the communication of required quantities of things could extend further to the world organisation of production . Regional manufacture could produce and assemble he component parts of tractors for distribution to local communities .These would be required in a definite number and , on the basis of this definite number of final products , the definite number of component parts for tractors would also be known . The regional production unit producing tractor would communicate these definite quantities to their own suppliers , and eventually this would extend to worl production units extracting and processing the necessary materials .
    This would be the self-regulating system of production for need , operating on the basis of the communication of need as definite quantities of things throughout the structure of production . Each production unit would convert the requirements communicated to it into its own material requirements and pass these on to its suppliers . This would be the sequence by which every element of labour required for the production of a final product would be known .
    This system of self-regulating production for use is achieved through communications . Socialism would make full use of the means communications which have developed . These include not only transport such as roads , railways , shipping etc. They also include the existing system of electronic communications which provide for instant world-wide contact as well as facilities for storing and processing millions of pieces of information . Modern information technology could be used by socialism to integrate any required combination of different parts of its world structure of production .
    Simpler is Better

    For a fuller explanation see –
    How Socialism Can Organise Production Without Money

  3. alan johnstone said on May 29th, 2007 at 1:31pm #

    Simpler is indeed better , should have just provided a working link instead of messing about with html codes


  4. Eric Patton said on May 29th, 2007 at 7:33pm #

    I have never claimed, nor do I believe, that economics is more important that other social spheres. Nor has Albert, for that matter.

  5. Eric Patton said on May 29th, 2007 at 7:36pm #

    Is it better to have, say, a single bicycle factory in Kansas City make all the bikes for the U.S.? Or is it better for each county/parish in the U.S. to have its own bicycle factory? Or is the answer something in between? And, if so, where in between is it? “Simpler is better” doesn’t answer this. But parecon does, by providing a process to deal with the problem.

  6. alan johnstone said on May 29th, 2007 at 8:28pm #

    “I have never claimed, nor do I believe, that economics is more important that other social spheres. Nor has Albert, for that matter.”

    Nor do socialists since we desire to abolish economics

    No exchange, no economy
    Socialism, being based on the common ownership of the means of production by all members of society, is not an exchange economy. Production would no longer be carried on for sale with a view to profit as under capitalism. In fact, production would not be carried on for sale at all. Production for sale would be a nonsense since common ownership of the means of production means that what is produced is commonly owned by society as soon as it is produced. The question of selling just cannot arise because, as an act of exchange, this could only take place between separate owners. Yet separate owners of parts of the social product are precisely what would not, and could not exist in a society where the means of production were owned in common.

    However, socialism is more than just not an exchange economy; it is not an economy at all, not even a planned economy. Economics, or political economy as it was originally called, grew up as the study of the forces which came into operation when capitalism, as a system of generalised commodity production, began to become the predominant mode of producing and distributing wealth. The production of wealth under capitalism, instead of being a direct interaction between human beings and nature, in which humans change nature to provide themselves with the useful things they need to live, becomes a process of production of wealth in the form of exchange value. Under this system, production is governed by forces which operate independently of human will and which impose themselves as external, coercive laws when men and women make decisions about the production and distribution of wealth. In other words, the social process of the production and the distribution of wealth becomes under capitalism an economy governed by economic laws and studied by a special discipline, economics.

    Socialism is not an economy, because, in re-establishing conscious human control over production, it would restore to the social process of wealth production its original character of simply being a direct interaction between human beings and nature. Wealth in socialism would be produced directly as such, i. e. as useful articles needed for human survival and enjoyment; resources and labour would be allocated for this purpose by conscious decisions, not through the operation of economic laws acting with the same coercive force as laws of nature. Although their effect is similar, the economic laws which come into operation in an exchange economy such as capitalism are not natural laws, since they arise out of a specific set of social relationships existing between human beings. By changing these social relationships through bringing production under conscious human control, socialism would abolish these laws and so also the economy as the field of human activity governed by their operation. Hence socialism would make economics redundant.
    What we are saying, in effect, is that the term exchange economy is a tautology in that an economy only comes into existence when wealth is produced for exchange. It is now clear why the term planned economy is unacceptable as a definition of socialism. Socialism is not the planned production of wealth as exchange value, nor the planned production of commodities, nor the planned accumulation of capital. That is what state capitalism aims to be. Planning is indeed central to the idea of socialism, but socialism is the planned (consciously coordinated) 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…

    …In socialist society productive activity would take the form of freely chosen activity undertaken by human beings with a view to producing the things they needed to live and enjoy life. The necessary productive work of society would not be done by a class of hired wage workers but by all members of society, each according to their particular skills and abilities, cooperating to produce the things required to satisfy their needs both as individuals and as communities. Work in socialist society could only be voluntary since there would be no group or organ in a position to force people to work against their will.

    Socialist production would be production solely for use. The products would be freely available to people, who would take them and use them to satisfy their needs. In socialism people would obtain the food, clothes and other articles they needed for their personal consumption by going into a distribution centre and taking what they needed without having to hand over either money or consumption vouchers. Houses and flats would be rent-free, with heating, lighting and water supplied free of charge. Transport, communications, health care, education, restaurants and laundries would be organised as free public services. There would be no admission charge to theatres, cinemas, museums, parks, libraries and other places of entertainment and recreation. The best term to describe this key social relationship of socialist society is free access, as it emphasises the fact that in socialism it would be the individual who would decide what his or her individual needs were. As to collective needs (schools, hospitals, theatres, libraries and the like), these could be decided by the groups of individuals concerned, using the various democratic representative bodies which they would create at different levels in socialist society. Thus production in socialism would be the production of free goods to meet self-defined needs, both individual and collective…

    from final chapter of State Capitalism: the Wages System Under New Management-

    To advocate monetary calculation, is to advocate that only one consideration—the total average production time needed to produce goods—should be taken into account when making decisions about which productive methods to employ. This is patently absurd but it is what is imposed by capitalism. Naturally, it leads to all sorts of aberrations from the point of view of human interests. In particular it rules out a rational, long-term attitude towards conserving resources and it imposes intolerable conditions on the actual producers (speed-up, pain, stress, boredom, long hours, night work, shiftwork, accidents).

    Socialism, because it will calculate directly it kind, will be able to take these other, more important, factors than production time into account. This will naturally lead to different, in many cases quite different, productive methods being adopted than now under capitalism. If the health, comfort and enjoyment of those who actually manipulate the materials, or who supervise the machines which do this, to transform them into useful objects is to be paramount, certain methods are going to be ruled out altogether. The fast moving production lines associated with the manufacture of cars would be stopped for ever ; night work would be reduced to the strict minimum; particularly dangerous or unhealthy jobs would be automated (or completely abandoned).

    Work can, in fact must, become enjoyable. But to the extent that work becomes enjoyable, measurement by minimum average working time would be completely meaningless, since people would not be seeking to minimize or rush such work.

    from Why we don’t need money

  7. alan johnstone said on May 30th, 2007 at 4:54am #

    the psychology of happiness (so missing in most of our obsessive formulas for economic health) – Max

    “Work can, in fact must, become enjoyable. But to the extent that work becomes enjoyable, measurement by minimum average working time would be completely meaningless, since people would not be seeking to minimize or rush such work.”

    Is it better to have, say, a single bicycle factory in Kansas City make all the bikes for the U.S.? Or is it better for each county/parish in the U.S. to have its own bicycle factory? Or is the answer something in between? And, if so, where in between is it? -Eric

    The supply of some needs will take place within the local community and in these cases production would not extent beyond this .Other needs could be communicated as required things to the regional organisation of production. Local food production would require glass, but not every local community could have its own glass works . The requirements for glass could be communicated to a regional glass works . Some organisation for such as mining for raw material sources would require world co-ordination . When socialism is established it will be necessary to set up councils at local , regional and global levels for the administration of social affairs in every aspect of productive activity . Also there will have to be councils whose functions will be to co-ordinate the work of the various specific councils . The majority of the people in a local area will make decisions affecting that area specifically , the people in a certain region will make decisions for that region and everyone will make global decisions .

    The problem with a centrally-planned model of socialism is amongst other things its inability to cope with change. It lacks any kind of feedback mechanism which allows for mutual adjustments between the different actors in such an economy. It is completely inflexible in this regard. A decentralised or polycentric version of socialism, on the other hand, overcomes these difficulties. It facilitates the generation of information concerning the supply and demand for production and consumption goods through the economy via a distributed information .Stock or inventory control systems employing calculation in kind are absolutely indispensable to any kind of modern production system.

    In a “free access” socialist economy income or purchasing power would, of course, be devoid of meaning. So too would the notion of status based upon the conspicuous consumption of wealth. Because individuals would stand in equal relation to the means of production and have free access to the resultant goods and services

    Marx saw the communist administration as a federation of self-governing groups largely concerned with their internal affairs and collaborating for the comparatively few purposes that concern all the groups. The association of free producers , not a centrally planned State whose roots go back to “Bismarckian State-Socialism” and Lassalle , so readily endorsed by Lenin and his Bolsheviks yet so rarely acknowledged by his pupils .

  8. Max Shields said on May 30th, 2007 at 8:42am #

    Eric Patton said on May 29th, 2007 at 7:33 pm #

    “I have never claimed, nor do I believe, that economics is more important that other social spheres. Nor has Albert, for that matter.”

    It is really a matter of omission. Central to economic theories (with rare exception and usually little dominance in acedemia as well as in practice) is the focus on production/consumption and seller/buyer while down playing the larger context. That focus (and my issue is with the focus) is clearly there in Karl Marx and Adam Smith and their variations.

    I agree that work, not jobs, is at the core of our well being. And certainly class roles undermine that well-being. So, I’m not arguing with what you present, as much as the overwhelming emphasis of the dichotomies I mentioned.

    To the “bicycle factory” metaphor, I would refer you to the transformation of Cuba’s argriculture system. Socialism of the Soviet style failed. Cuba had been the beneficiary of that Communist state. When the Soviet Union collapsed, Cuba was totally isolated from the world economies. It then went about transforming their argiculture from large scale mechanized and emphasis on exporting to small local organic farms to supply the Cuban people. By all accounts this has become a model of counter corporate global economics. It is finding its application throughout the South. And it has thus far been a sustainable and successful means of “exploiting” smallness versus the kind of large scale state subsidized agribusiness represented by the Soviet Union and US.

    The question is, is this transformed, private Cuban farms socialism? Or is it something else? I would also refer you to the worker’s rights in Cuba. Independent studies have glowing claims to make about the control the worker has over his/her life. I think this is more that an economic system.

    (For me the larger question is the ability of any system to transform itself. Only ideologues hold on to the sustainability of the original system, a system which is in such need of transformation that it is no longer what it once was – regardelss of what it’s called.)

  9. Eric Patton said on May 30th, 2007 at 9:15am #

    How are these needs communicated? What allocation mechanism do you use?

  10. Eric Patton said on May 30th, 2007 at 9:38am #

    It’s not a matter of omission. I can’t write about everything. I’ve already stated my position. Albert has written extensively about this, including whole books (e.g., Realizing Hope and Thought Dreams). Read the books for yourself if you want to know more. Otherwise, judge what I write on its merits, or lack thereof.

  11. Max Shields said on May 30th, 2007 at 2:13pm #

    Eric said,
    “It’s not a matter of omission. I can’t write about everything. I’ve already stated my position. Albert has written extensively about this, including whole books (e.g., Realizing Hope and Thought Dreams). Read the books for yourself if you want to know more. Otherwise, judge what I write on its merits, or lack thereof.”

    Maybe I’m addressing my questions to the wrong person, but it seems you’ve been presenting the salient – as you see them – points of Albert’s Parecon; and again, I thank you for your contribution.

    If the ecosystem was central to Albert’s thesis than I would have expected it to be central to your posts. But I won’t quibble, instead I’d be interested in your position vis a vis Parecon to address this.

    Asking me to read two volumes of books is like Alan Johnstone telling me to scram and read Das Kapital if I really want to understand Marx’s view of a wageless society.

    I hope this is taken in the spirit intented – more of an interested party already knee deep in his reading to immerse himself in 2 additional volumes and who is appreciative of your efforts to roll out parecon in small doses.
    Max Shields

  12. alan johnstone said on May 30th, 2007 at 7:56pm #

    How are these needs communicated? What allocation mechanism do you use? – Eric

    Certainly won’t be by getting those individuals needs allotted to them .

    Decisions involving choices of a general nature, such as what forms of energy to use, which of two or more materials to employ to produce a particular good, whether and where to build a new factory, there is a technique already in use under capitalism that could be adapted for use in socialism: so-called cost-benefit analysis and its variants. Naturally, under capitalism the balance sheet of the relevant benefits and costs advantages and disadvantagesof a particular scheme or rival schemes is drawn up in money terms, but in socialism a points system for attributing relative importance to the various relevant considerations could be used instead. The points attributed to these considerations would be subjective, in the sense that this would depend on a deliberate social decision rather than on some objective standard. In the sense that one of the aims of socialism is precisely to rescue humankind from the capitalist fixation with production time/money, cost-benefit type analyses, as a means of taking into account other factors, could therefore be said to be more appropriate for use in socialism than under capitalism. Using points systems to attribute relative importance in this way would not be to recreate some universal unit of evaluation and calculation, but simply to employ a technique to facilitate decision-making in particular concrete cases. The advantages /disadvantages and even the points attributed to them can, and normally would, differ from case to case. So what we are talking about is not a new abstract universal unit of measurement to replace money and economic value but one technique among othersfor reaching rational decisions in a society where the criterion of rationality is human welfare.

    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. There is no point in drawing up in advance the sort of detailed blueprint of industrial organisation that the old IWW and the Syndicalists used to , but it is still reasonable to assume that productive activity would be divided into branches and that production in these branches would be organised by a delegate body. 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.

    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 (although, other arrangements are possible if that were what the members of socialist society wanted). 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 (for want of a better name) 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.

    To ensure the smooth functioning of the system, a central statistical office would be needed to provide estimates of what would have to be produced to meet peoples likely individual and collective needs. These could be calculated in the light of consumer wants as indicated by returns from local distribution committees and of technical data (productive capacity, production methods, productivity, etc) incorporated in input-output tables. For, at any given level of technology (reflected in the input-output tables), a given mix of final goods (consumer wants) requires for its production a given mix of intermediate goods and raw materials; it is this latter mix that the central statistical office would be calculating in broad terms. Such calculations would also indicate whether or not productive capacity would need to be expanded and in what branches. The centre (or rather centres for each world-region) would thus be essentially an information clearing house, processing information communicated to it about production and distribution and passing on the results to industries for them to draw up their production plans so as to be in a position to meet the requests for their products coming from other industries and from local communities. 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.

    Stock or inventory control systems employing calculation in kind are, as was suggested earlier, absolutely indispensable to any kind of modern production system. While it is true that they operate within a price environment today, that is not the same thing as saying they need such an environment in order to operate. The key to good stock management is the stock turnover rate – how rapidly stock is removed from the shelves – and the point at which it may need to be re-ordered. This will also be affected by considerations such as lead times – how long it takes for fresh stock to arrive – and the need to anticipate possible changes in demand.

    A typical sequence of information flows in a socialist economy might be as follows. Assume a distribution point (shop) stocks a certain consumer good – say, tins of baked beans. From past experience it knows that it will need to re-order approximately 1000 tins from its suppliers at the start of every month or, by the end of the month, supplies will be low. Assume that, for whatever reason, the rate of stock turnover increases sharply to say 2000 tins per month. This will require either more frequent deliveries or, alternatively, larger deliveries. Possibly the capacity of the distribution point may not be large enough to accommodate the extra quantity of tins required in which case it will have to opt for more frequent deliveries. It could also add to its storage capacity but this would probably take a bit more time. In any event, this information will be communicated to its suppliers. These suppliers, in turn, may require additional tin plate (steel sheet coated with tin), to make cans or beans to be processed and this information can similarly be communicated in the form of new orders to suppliers of those items further down the production chain. And so on and so forth. The whole process is, to a large extent, automatic – or self regulating – being driven by dispersed information signals from producers and consumers concerning the supply and demand for goods and, as such, is far removed from the gross caricature of a centrally planned economy.
    It may be argued that this overlooks the problem of opportunity costs .For example, if the supplier of baked beans orders more tin plate from the manufacturers of tin plate then that will mean other uses for this material being deprived by that amount. However, it must be born in mind in the first place that the systematic overproduction of goods that Marx talked of – i.e. buffer stock – applies to all goods, consumption goods as well as production goods. So increased demand from one consumer/producer, need not necessarily entail a cut in supply to another – or at least, not immediately. The existence of buffer stocks provides for a period of re-adjustment.

    Liebig’s Law of the Minimum – states is that plant growth is controlled not by the total amount of resources available to a plant but by the particular factor that is scarcest. This factor is called the limiting factor. It is only by increasing the supply of the limiting factor in question – eg nitrogen fertiliser – that you promote plant growth.
    Liebig’s Law can be applied equally to the problem of resource allocation in any economy.It makes sense from an economic point of view to economise most on those things that are scarcest and to make greatest use of those things that are abundant.To claim that all factors are scarce (because the use of any factor entails an opportunity cost) and, consequently, need to be economised is actually not a very sensible approach to adopt.You cannot treat every factor equally – that is, as equally scarce – or, if you do, this will result in gross misallocation of resources and economic inefficiency.The most sensible basis on which to make such a discrimination is the relative availability of different factors and this is precisely what the law of the minimum is all about.When a particular factor is limited in relation to the multifarious demands placed on it, the only way in which it can be “inefficiently allocated” (although this is ultimately a value judgement) is in choosing “incorrectly” to which particular end use it should be allocated . Beyond that, you cannot misuse or misallocate a resource if it simply isn’t available to misallocate (that is, where there are inadequate or no buffer stocks on the shelf, so to speak). Of necessity, one is compelled to seek out a more abundant alternative or substitute .

    To determine priorities Maslow’s “hierarchy of needs” would be a guide to action. It would seem reasonable to suppose that needs that were most pressing and upon which the satisfaction of others needs were contingent, would take priority over those other needs. We are talking here about our basic physiological needs for food, water, adequate sanitation and housing and so on. This would be reflected in the allocation of resources: high priority end goals would take precedence over low priority end goals where resources common to both are revealed using the earlier discussed “points” system of cost benefit analysis.

    To sum up , a communist steady-state equilibrium, will have been reached. Gradual change, growth, will be simple and painless. The task of planning becomes one of simple routine; the role of economics is virtually eliminated.

    As an aside , to refer once again to Max Shields and his disappointment that general happiness is not a main objective was it not Marx who said in communism it is now society’s free (disposable) time and no longer labor time that becomes the true measure of society’s wealth.

  13. Eric Patton said on May 30th, 2007 at 8:26pm #

    You’re right. It’s not fair to ask someone to read entire books just to convince them that I think non-economic issues are important. The best I can do is to say that I take other issues very seriously. Anyone who is serious about winning a new world must address not only class, but race, gender, and authority as well. The world is bigger than just economics, and there are more oppressions than just classism.


    Perhaps I can write something. Let me think about it.

  14. Eric Patton said on May 30th, 2007 at 8:30pm #

    The allocation response I am going to have to deal with in a separate article.

  15. alan johnstone said on June 14th, 2007 at 3:21pm #

    I thought i re-post a comrades view of Parecon .

    Hi, the main problem that I have with Parecon is that while it is trying to get to somewhere that could (arguably) be thought of as fairly close to what world socialists want, it seems – if I have it right – to be going a long and difficult way round.

    For me Parecon appears to address the political sphere while leaving relatively intact the economic sphere.

    To have a system that allows wages to be dispensed on the basis of work carried out, allows money to circulate, and presumably restricts access to wealth (eg food or housing) unless you have sufficient money to purchase something, doesnt seem to be too far from capitalism for me in terms of its outward appearance. More importantly, despite its relatively limited ambitions, I fail to see how it could actually work.

    For example, if a factory unit obtained a more efficient item of plant and become more productive for a given amount of labour, would that not increase the remuneration of those working there ? If so (and I cant think how an incentive scheme could work that didn’t depend on productivity), there would be an obvious incentive for the workers to obtain more efficient plant & machinery – even if this wasnt permitted by regulations. But Parecon would apparently stop this by prohibiting unauthorised investment. But in reality I think that someone who had saved up their money, rather than bought lots of “little toys” would offer (albeit under the table)their dosh to the factory on the understanding that they would get a cut of the increased remuneration won by the factory workers. It would be a private investment – just as happens in capitalism. And before long, those who had invested well would be able to stop working because their investments were providing them with enough income to buy all the big teddies they could want. Resut ? – a new owning class in all but name (like M Albert’s co-ordinator class ?)

    The fact that Parecon apparently wouldnt permit this to happen is irrelevant – most countries in the world have very strict laws regarding the production and selling of drugs. Thousands of laws, massive police resources and the threat of draconian punishments appears to do little to deter those who see a quick way to get/keep themselves out of poverty.

    Why and how does Parecon think that it will be able to police every sphere or sector of production to ensure no illicit investment/profiteering occurs ?
    Capitalism finds it hard to cope with the few black markets that exist on the untaxed margins of the legitimate market system, (eg drugs, sex industry, gambling/ organised crime). Parecon would appear to provide an immediate incentive to break the law in a number of ways in every sector of production.

    It seems to me that it would be far better and easier to actually just go one step further. Dont just remove ownership of the means of production (as Parecon wants) but remove ownership of money – by opening up access to wealth, thereby making money redundant.

    Parecon appears to me to be about building a fairly massive (and socially unproductive) state administration for policing all the wage levels, labour outputs etc. In contrast the practical aspects of a (world-)socialist revolution is not about creating ever greater bureaucratic structures, but probably quite the opposite – it will be about removing the barriers capitalism has developed which prohibit access to wealth, and at a stroke create an economic environment without individual (ie monetary) incentives (“from each according to ability, to each according to need”)

    The reason that Parecon has to go to such lengths to construct such a complex and wasteful system of checks and balances is ultimately that its proponents are unwilling/unable to challenge one of the central arguments propping up capitalism, that humans can – if given the right economic framework (or arguably no economic framework) in fact consciously co-operate, work and consume.

    I am certainly sympathetic to Miss Guided’s view that anti-capitalists should be moving beyond just being “anti” and need to start discussing how an alternative system could operate. But in my view, Parecon doesn’t just “not go far enough”: it offers a model that retains major elements of the market system, but more importantly is simply highly unlikely to be workable in the real world.

    Parecon is attractive to those who dislike capitalism, but who, in the final analysis, lack confidence that either there are sufficient resources on the planet, or that human beings can:

    – work voluntarily, and/or
    – co-operate to organise production & distribution of wealth without chaos, and/or
    – consume wealth responsibly without some form of rationing

    Brian Gardner
    Glasgow Branch, SPGB

  16. Eric Patton said on June 14th, 2007 at 7:32pm #

    I’d really like to see anti-pareconists begin quoting from descriptions of the model when they find fault with it.

  17. alan johnstone said on June 15th, 2007 at 2:17am #

    Eric , what i have been doing is trying to demonstrate that when Albert and Parecon associates state that “from each according to abilities , to each according to needs” is an unachievable utopian and unpractical demand , it is himself and they who are the non-radical .

    There has been a Marxist- based ( a William Morris – Peter Kropotkin amalgam , may be a better description ) but non -Social Democrat 2nd Internationalist , non-Leninist 3rd Internationalist , non- Trotskyite 4th Internationalist , viable alternative to Capitalism , that has been presented ( with not much success , granted ) by a formally structured yet non-leader political party for over a 1oo years .

    In Parecon webpages Paul Mattick and Anton Pannekoek feature as influences yet it should be remembered that when they were being ostracised by the orthodox left and the libertarian left , it was this small world socialist movement that were still offering them an outlet to express their views when they had little opportunity to do so .

    I hope you have considered my contributions to the Parecon debate as comradely criticism that brings forward a very different socialist case from the debates that Albert has previously had with the supposed representatives of Marxism i.e. the SWP (or ISO) and I hope that you further your investigations into the real socialist demand for free access and the end to wage slavery .

  18. Eric Patton said on June 15th, 2007 at 9:18am #

    If you’re going to criticize the model without quoting from its description, you’re wasting my time.

  19. ajohnstone said on August 3rd, 2007 at 12:56pm #

    The allocation response I am going to have to deal with in a separate article. – eric

    How is it coming along ?

  20. Eric Patton said on August 3rd, 2007 at 7:40pm #

    It’s not. What’s the point? If you really want to know, ask Albert.

  21. ajohnstone said on August 4th, 2007 at 12:06pm #

    I thought the point was that i endeavoured to answer your assertion made at the very start of your article that in my view, – one the problems with participatory economics (parecon) is that it “continues with prices and wages and money, instead of abolishing them all.”
    – and that in your opinion – This view of wages, prices, and money is flawed, however. It is impossible to have an economy which excludes these things. –
    I proceeded to lay out the counter argument that it was NOT impossible , but that , on the contrary , such a society offered by free-access Socialists was indeed very feasible and that it was in fact more desirable than the alternative you present with the Parecon model .

    Oh , well , it is your choice to close the debate , nevertheless , and so be it .

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