By Hema Senanayake –  

Hema Senanayake

“There is no place for dogmas in science. The scientist is free to ask any question, to doubt any assertion, to seek for evidence, to correct any error. Where science has been used in the past to erect a new dogmatism, that dogmatism has found itself incompatible with the progress of science; and in the end, the dogma has yielded or science and freedom have perished together.” – J. Robert Oppenheimer

It is clear that dogmatism and scientific thinking cannot coexist. In this context, it might be necessary and important to investigate whether the JVP’s Policy Frame Work is truly scientific. If it is not scientific, then you know where it belongs.

JVP accurately identify one thing. On page 27 of the policy document it says: “Economic prosperity and social justice are two essential components to usher in a righteous society.” Let us agree on this statement. However, I intend to focus only on the component of “economic prosperity.” How do they propose to achieve economic prosperity? The answer to this question has been explained under the chapter titled “A Modernized and Industrialized Country” (pp. 12 to 25, English version of the policy doc.)

The first paragraph of this chapter begins as follows:

“Human lives must be simple and easy in a new Socialist State. Hence, consuming goods and services and issues related to the law should all be simple and carried out in a manner that would prevent the unwanted wastage of time and energy. This could be done by getting together as required the simple and advanced management methods, administrative methods adopted by various developed nations around the world.”

Look at the last sentence of the above quote carefully. What does it say? It implies that there are developed nations around the world and those nations have adopted advanced management and administrative methods which methods would be used by the JVP to achieve in a new Socialist State. But the problem is that all the developed nations are capitalist countries and none of them are socialist states. Even though the so called developed nations, having all “advanced management methods”, collapsed economically in 2008 triggering what is now known as “The Great Recession of 2008.” Hence, the JVP’s above assertion is silly and novice in regard to economic governance. Plainly, it is dogmatism. My objective here is not to ridicule the JVP, instead I intend to show them that they need to master on this subject of economics further because as they clearly identify that “economic prosperity” is one of the two components needed in order to “usher a righteous society.”

A few weeks before the Western and Sothern Provincial Council elections, the JVP had published its “Vision and Policy Frame Work” as a booklet of 46 pages.  Since I write analyses on economic and economic policy issues, a friend of mine asked my observations in regard to the economic policies set out in the book. I felt that I must wait until the provincial elections were over.

I hope, JVP has published its vision and policies of governance with an objective to venture into a broader discussion with people about its policies. Therefore, an intellectual discussion about their policies should not be ignored. But I will focus only on certain aspects of economic policies.

JVP wants to establish a New Socialist State. Any type of State will fail, if it cannot guarantee two things economically. Firstly, the State must guarantee the economic efficiency in producing goods and services; secondly, the State must guarantee the distribution of distributable output for the optimum wellbeing of its citizens. Therefore, by this definition, North Korea is a failed State and Venezuela is failing fast if some prudent policy measures are not put in place.

In fact, capitalism is prone to periodic failures but recovers. The dogmatism persisted in capitalist economic theory and practice has shattered during the global economic crisis of 2008. 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 agreed: “That’s precisely the reason I was shocked because I’d been going for 40 years or so with considerable evidence that it was working exceptionally well.” He further said “I have found a flaw.”

The arrogance of the admittance of failure it seems arose from the belief that even though such crises are “normal functioning events” in capitalist system, there is no other viable alternative. Therefore, the JVP must first understand in view of the above admittance of Greenspan that there are no pool proof “Advanced Management and Administrative Methods” in economic governance in developed countries.

However, Greenspan’s view itself a dogmatist view that needs to be defeated intellectually to facilitate the emergence of new economic science, through which, new reforms could only be grounded upon and be implemented. This is a high-end philosophical task. But the JVP ignores it and decided to rely on imaginary “advance management methods” existed in advanced countries to steer the economy in their new Socialist State. Wrong!

Sometimes, I feel that Karl Marx still stay ahead of capitalist economists in regard to the construction of efficient economy. Because, he knew well that if socialists can’t establish an efficient economic system than the capitalist system, the socialist system cannot prevail. Therefore, Marx accurately identified an essential feature in establishing an efficient economy. He intimates that in an efficient economic system, the use of social resources in producing goods and services must be efficient. This is plain truth; and no capitalist economist including Von Misses would reject this notion. If it is so, can we imagine that Marx did not prescribe a mechanism to ensure the use of social resources efficiently in producing goods and services? In fact he did but I have reasons to guess that so called socialists are not aware of it; hence let me quote Marx first and my explanation will follow.

“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 that 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 labor.” (“Marx’s Theory of Money in Historical Perspective”, Duncan K. Foley, 2003)

We use labor in producing a commodity. Also, we can use the same amount of labor in producing a useless commodity too. If labor is used to produce a useful commodity that helps to increase the wellbeing of citizens, then the use of labor is considered useful and efficient. So, how do we determine whether the use of labor is efficient and useful? As pointed out in the above quote Karl Marx answered as follows:

“It is only after sale that the social and necessary character of the labor expended in producing a commodity is guaranteed.” What does this mean? This means that the sale is a necessary feature in ensuring or guaranteeing an efficient economic system. In other words the use of “market mechanism” is an essential element in establishing an efficient economic system.

So, what the socialists did in almost all the Socialists States? They virtually eliminated the “market mechanism” which is the best planning tool ever evolved by human being in establishing an efficient economic system. Soviet Russia virtually eliminated the market mechanism by introducing directed price system. But, one intelligent man who knew Marx’s prescription of the use of social resources efficiently denounced such anti-socialist measures of the economic professors of Stalin.

He wrote: 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” (Leon Trotsky, The Revolution Betrayed).

Therefore it is very clear that a New Socialist State of JVP must not eliminate the “market mechanism” instead it must guarantee the efficient functioning of market mechanism itself in order to achieve continuing economic prosperity.

Once we accept the use of market mechanism, immediately we need to resolve the issue of MONEY because without money there is no market. The need of a good currency in socialist system was clearly explained by Trotsky.

He says; “A successful socialist construction is unthinkable without including in the planned system the direct personal interest of the producer and consumer … which in its turn may reveal itself fruitfully only if it has in its service the customary reliable and flexible instrument, money. The raising of the productivity of labor and bettering of the quality of its products is quite unattainable without an accurate measure freely penetrating into all the cells of industry- that is, without a stable unit of currency.”

Accordingly, the JVP must ensure the maintenance of an efficient monetary system, unlike in Venezuela or in Cuba. Also, in general, capitalism is relatively doing a very poor job in maintaining a good monetary system even with all its sophistication. It is a separate discussion and hence I ignore it in this article.

However, when we have a system to express the value of almost all goods in one single unit of measure (i.e. money) and when we accept the market order of production as the main system, by these two measures, we quickly resolve the major problem of macroeconomic planning of production because the market mechanism flexibly determines the quantity, quality and variety of almost all products and services under demand-and-supply basis. Even the most sophisticated central planners can never do this more efficiently than market mechanism.

Perhaps, now one might argue that the Mattala Airport does not validate the socially necessary labor and resources expended on it. If it is so, it is clearly an economic inefficiency.

However, so far we have briefly discussed as to how we can establish an efficient economic system. I hope the JVP will initiate a discussion about it among its members. We have yet to discuss the socialist distribution of distributable output which is totally different from capitalist system. Let us discuss it in the next article.