By Hema Senanayake –
Sumanasiri Liyange in a recent article wrote to Colombo Telegraph tried to intimate that the 21st Century Socialism would be different from its old version. In regard to that he presented a list of five points or characteristics quoting from Bolivarian revolutionaries of Venezuela. No socialism or any other economic system would prevail if that system is not efficient than present capitalistic system. These Bolivarian revolutionaries know nothing about economic efficiency. That may be the reason the term “economic efficiency” is missing from the five point list. Let us have a quick look about the five characteristics which characteristics Sumanasiri takes seriously. I quote from Sumanasiri’s article on June 11th, 2015 to CT.
“1. Human development as the center and focus. Socialism is to be governed by the logic of humanism and solidarity and have as its aim the satisfaction of human needs, not profit;
2. Respect for nature, and opposition to consumerism. Our goal should not be to live “better” but to live “well”;
3. Socialism requires a new dialectic of production/ distribution/ consumption based on: (a) socialownership of the means of production, (b) social production organized by workers and (3) the satisfaction of communal needs;
4. A new concept of efficiency that both respects nature and seeks human development;
5. Rational use of available natural and human resources through a decentralized participatory planning process that has nothing do with the hyper centralized bureaucratic planning of the Soviet state. (A World to Build. pp. 57 and 83-84)” As Sumanasiri intimated the author of this book is Marta Harnecker, a Bolivarian revolutionary.
Please read the above quote carefully. Is there any single word about “economic efficiency?” – Nothing. The main weakness of the Soviet Union style socialism was not having “centralized bureaucratic planning” instead of having “decentralized participatory planning” or even lack of “social production organized by workers” or not having “human development as the center and focus.” The main weakness of Soviet system originated from its inability to comprehend the “market mechanism” as a tool of planning of the production and distribution. When you failed to comprehend it, you automatically fail to comprehend the necessity to ensure having the real cost of every produce. When you failed to do both you would fail to establish a currency that freely and flexibly penetrate into the each cell of produce so as to express its value. When these things fail economic efficiency fails. That was what happened in Soviet Union. Its system was not competitive with western capitalism. Didn’t any socialist see this crisis?
In fact Leon Trotsky saw it. So, he wrote, “Market and credit mechanism serve the cause of socialism better than capitalism” (Revolution Betrayed). He highly criticized the Soviet styled price regulations imposed by professors of Stalin regime.
He said, “The professors forgot to explain how you can estimate real costs if all prices express the will of a bureaucracy and not the amount of socially necessary labor expended. And as to prices, they will serve the cause of socialism better, the more honestly they express the real economic relations of the present day” (Revolution Betrayed). What does this mean? It means that the prices must not be determined according to the will of the bureaucracy, instead prices must be determined through the market mechanism. Why? It is because such price determination has something to do with economic efficiency.
Perhaps, some socialists, especially 21st century socialists of Bolivarian kind, might reject Trotsky’s views, saying that those are not Marxist views, but then they must turn to Karl Marx.
Marx said, “The actual sale of commodities for money tests the validity of the expectation that any particular labor expended is indeed social and necessary labor. It is only after sale the social and necessary character of the labor expended in producing a commodity is guaranteed. The commodity producer produces the commodity on a speculation that the market will validate the social and necessary character of that labor” (Marx’s Theory of Money in Historical Perspective, Duncan K. Foley, 2003).
So, both Karl Marx and Trotsky pointed out the requirement of validation of labor expended in producing something. The mechanism for such validation is the market exchange of produce. Such validation is only possible after the sale of a commodity. That is the real role of market mechanism – And that is why Trotsky said that market would serve the cause of socialism better than capitalism. If we accept market mechanism as a useful tool in ensuring economic efficiency then we have to admit the need of having a stable currency. Do the Bolivarian revolutionaries have a stable currency in Venezuela now? It is a question, perhaps Dr. Sumanasiri could answer better. But, I know what Trotsky said about the importance of having a stable currency for a country even though that establishing a stable currency is still an unresolved matter in present capitalist economic theory.
Trotsky said, “Successful socialist construction is unthinkable without including in the planned system the direct personal interest of the producer and consumer … which in turns may reveal itself fruitfully only if it has in its service the customary, reliable and flexible instrument, the money. The raising of productivity of labor and bettering of the quality of its products is quiet unattainable without an accurate measure freely penetrate into all the cells of industry – that is, without a stable unit of currency” (revolution Betrayed).
In the above quote, Trotsky discusses about the question of economic efficiency. He talks about increasing productivity and this is efficiency; he talks about the increase of quality of products and this is about efficiency in increasing quality, and he concludes that without a stable currency that could measure the relative value of products there will be no viable socialism. Now, do the socialists of 21st century know how to establish a stable currency? I do not think so because this is a subject even Karl Marx got wrong. His mistake was documented by Edgar Hardcastle in an article titled “Can Banks Create Credit?” (1971, www.Marxist.org).
In defending Marx in the said scholarly article, Edgar admitted that Marx did not believe that commercial banks can literally create money. It was wrong and a mistake. Without understanding the modern system of capitalist money in correct perspective I do not think that any 21st Century socialist party could establish a better system or a better stable currency. Capitalists admit that their system has a flaw. For example the former U.S. Federal Reserve chairman Allan Greenspan made a shocking but arrogant admittance of this fact.
At a congressional hearing held in October 2008 in the midst of economic recession he was asked: “You found that your view of the world, your ideology, was not right, it was not working?” Greenspan replied, “That’s precisely the reason I was shocked because I’d been going for 40 years or so with considerable evidence that it working exceptionally well, and I have found a flaw” In other words Allan Greenspan admits that present capitalist monetary system has a flaw.
On the contrary, 21st Century socialists want to have a better economy by simply being environmental friendly, being opposed to consumerism or by having “decentralized participatory planning process.” They do not talk or discuss as to how they are going to remove the “flaw in the capitalist monetary system” which was admitted by Allan Greenspan. Can socialism be built by using an erroneous monetary system? Trotsky said that such a possibility is unthinkable.
Amazingly, capitalists want monetary reforms to have a better system. For an example, in March this year, Iceland Prime Minister originated a document to enquire whether the Iceland can establish a banking system known as Full Reserve Banking in order to prevent monetary disturbances of similar magnitude that took place in 2008. Socialists are totally out of this discussion. They think that all problems of capitalism are originating from market mechanism, ownerships of means of production and unequal distribution.
As it is happening now, it is true that the distribution of consumable output is related or linked to the ownership of means production through which “exploitation” becomes possible. However exploitation does not mean that the expansion of productive capital and owned it by capitalist elite. In the final analysis effective exploitation means that you allocate more consumable output for yourself; to do it you must own the means of production or the government or both.
But, in a well-functioning democracy the distribution of consumable output can be done fairly without any significant relation to the ownership of means of production. Capitalist elite know that this is technically and economically possible by adjusting three economic variables namely, wage structure, taxation and consumer credit. But they say if you do delink the distribution from the ownership of means of production completely or to a greater degree, then you can’t ensure the economic efficiency. If socialists can prove that this argument is wrong then they can win.
In fact the separation of the distribution of consumable output from the ownership of means of production must be a goal in socialism, no matter whether factories and banks are owned by private individuals or corporations or workers or trade unions or corporatives or the government, because there is no guarantee that production organized by workers would abstain from exploitation if they own the means of production. Instead what Trotsky suggested was that it is important to separate the distribution from the ownership of factories; further he said that in order to do that the tool of taxation is quiet sufficient. Even Noble Prize winning capitalist economist Professor Joseph Stiglitz admits this point.
After the Great Financial Crash of 2008, he says, “For total American consumption to be restored on a sustainable basis, there would have to be a large redistribution of income …” (Free Fall, 2010). But his idea is not conclusive. Still capitalists want to increase economic efficiency of their system while 21st Century socialists abstain fully in discussing the efficiency factor. As far as I know socialism means to uphold the most competitive democracy under a most efficient economic system in which distribution is delinked from the ownership of means of production.