How Socialism Can Organise Production Without Money

Part 1. Labour-Time Accounting Or Calculation In Kind?

In 1920 Ludwig von Mises published an article "Die Wirtschaftsrechnung im sozialistischen Gemeinwesen", which was translated into English in 1935 as "Economic Calculation in the Socialist Commonwealth" and published in Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism edited by Fron Hayek. His basic argument was that socialism would be impossible because, without money and prices fixed by the market, society would not be able to do economic calculations rationally. Or, as he put it, "where there is no free market there is no pricing mechanism; without a pricing mechanism, there is no economic calculation".

Von Mises defined socialism to mean any system in which the ownership of means of production by private individuals was entirely abolished. His definition thus covered total State capitalism as well as socialism. This makes some of his arguments, in so far as they were meant to be arguments against socialism, irrelevant, but in arguing against the possibility of a moneyless society he was also arguing against socialism.

Von Mises accepted that socialist society would be able to decide what it wanted but denied that it would be able to work out the most rational way of meeting those wants:

It will be evident, even in a socialist society, that 1,000 hectolitres of wine are better than 800, and it is not difficult to decide whether it desires 1,000 hectolitres of wine rather than 500 litres of oil. There is no need for any system of calculation to establish this fact: the deciding element is the will of the economic subjects involved. But once this decision has been taken, the real task of rational economic direction only commences, ie, economically, to place the means at the service of the end. That can only be done with some kind of economic calculation. The human mind cannot orientate itself properly among the bewildering mass of intermediate products and potentialities of production without such aid. It would simply stand perplexed before the problems of management and location. It is an illusion to imagine that in a socialist state calculation in natura can take the place of monetary calculation. Calculation in natura, in an economy without exchange, can embrace consumption-goods only; it completely fails when it comes to deal with goods of a higher order. And as soon as one gives up the concept of a freely established monetary price for goods of a higher order, rational production becomes impossible. Every step that takes us away from private ownership of the means of production and from the use of money also takes us away from rational economics.

He did not deny that "labour time" could theoretically provide an alternative unit of economic calculation, but argued that in practice it would be impossible to establish an accurate labour-time unit because of the difficulty of measuring the intensity and skill of different people's labour. The only possible unit of economic calculation, he concluded, was therefore money.

This was a powerful criticism which caught the Social Democratic and Bolshevik thinkers — both defenders of a total state capitalism rather than socialism, it is true — unprepared. There were three possible reactions to Von Mises's criticism:

1. To accept that money would have to continue to be the unit of economic
calculation in "socialism";
2. To argue that labour-time could be the unit of economic calculation "in an
economy where neither money nor exchange were present";
3. To argue that in socialism "calculation in natura [in kind] can take the place
of monetary calculation".

The Social Democrats, including the Bolsheviks (who were of course Social Democrat up until 1917), tended to have a technocratic conception of "socialism" which in practice, as we have already remarked, made them advocates of state capitalism rather than of socialism. As a result discussion on what should be the unit of calculation in socialism was largely a discussion of what should be the unit of calculation in state capitalism. This meant in fact that the outcome of the debate was predictable from the start: the partisans of retaining money, as Kautsky advocated in 1922, as "a measure of value for accounting purposes and for calculating exchange ratios" were bound to win since, in the long run, this was the only solution compatible with the operation of the capitalist system which they wanted to continue, even though in a statised form. The partisans of accounting in labour-time and those of accounting in real physical quantities were never more than marginal and by the end of the 1920s had disappeared both amongst the Social Democrat and amongst the Bolsheviks.

A LABOUR-TIME BLUEPRINT

Calculation in labour-time was defended by the Social Democratic writer, Otto Leichter, in his Die Wirtschaftsrechnung in der sozialistischen Gesellschaft ("Economic Calculation in Socialist Society") published in Vienna in 1923, in which he argued that this was perfectly feasible as it was already applied under capitalism by accountants to fix prices and by time-and-motion experts. Money, he argued, could therefore be abolished in socialism (= state capitalism), even for the distribution of consumer goods, which could be distributed directly to consumers in kind in amounts fixed by nutrition and other experts.

Otto Neurath (later prominent as a logical positivist philosopher) argued that even labour-time accounting would be unnecessary in socialism (state capitalism). In an "administrative economy" production plans could be drawn up and executed directly and solely in real physical quantities:
The theory of the socialist economy knows only a single economic agent — society —which without profit-and-loss accounting, without monetary circulation — whether metallic money as now or labour-money — and on the basis of an economic plan, organises production without using a unit of account and distributes the means of subsistence according to socialist principles. (O. Neurath, Wirtschaftsplan und Naturalrechnung, Berlin, 1925, p.84)

As the last part of this passage indicates, Neurath too argued that consumer goods could be directly allocated to people in kind.

An attempt to present an alternative to what they called the "State socialism" of both the Social Democrats and the Bolsheviks was made by a group of Dutch "Council Communists" in their Grundprinzipien kommunistcher Verteilung und Produktion ("Basic principles of communist distribution and production") published in Berlin, in German, in 1930. The "Council Communists" were a group which had supported the Russian Revolution, really believing it to be what, in its propaganda, it said it was, namely a soviet (the Russian word for "council") revolution. Within a few years, however, they realised their error and that Russia was heading rather for state capitalism. They called themselves "Council" Communists to distinguish themselves from "State Communists" such as Lenin, Trotsky and Stalin.

The Grundprinzipien outlined a plan for organising the production and distribution of wealth without money but on the basis of accounting in units of labour-time. They followed Otto Leichter here, but totally rejected the technocratic structure in which he had seen labour-time accounting replacing monetary calculation. In its place they proposed a federation of workers' councils.

But when this plan is stripped of its socialist terminology, it turns out to be a scheme for a sort of self-regulating exchange economy in which money as we know it today would be replaced as the currency by a "labour-money"; in other words, the money-prices-wages system would continue to exist but would be run by workers' councils and without exploitation. But to believe that an exchange economy could function in the interests of the workers if labour-money and labour-time accounting were to be used in place of the coins and notes and monetary calculation we know today is to completely misunderstand how capitalism works and to fall into the purest currency-crankism.

CALCULATION IN KIND: THE RIGHT ANSWER

In the end, then, it was Otto Neurath, with his view that socialist society could organise the production and distribution of wealth directly and solely in kind, who was on the right track. The only other personality in the Social Democratic and Bolshevik movements to take this view was Amadeo Bordiga, but not until the 1950s and in a quite different context to the so-called "economic calculation" controversy sparked off by Von Mises in 1920.

Bordiga had been the first leader of the Italian Communist Party but was eased out of this post in 1923 for his leftist views (which had already been denounced by Lenin in his famous pamphlet Leftwing Communism An Infantile Disorder) and was eventually expelled from the Party altogether in 1930. Although he himself dropped out of political activity till the fall of Mussolini in 1943, his particular brand of "leftwing communism" continued to be propagated by a group who came to be called "Bordigists". Bordiga did not begin to reflect seriously on the nature of socialism till he was faced with the problem of explaining, after the war, to his followers why Russia was state capitalist and neither socialist nor a "workers' state". Thus, after commenting that planning in Russia wasn't socialist because the plans there were drawn up in money terms as well as physical quantities and that in fact, just like in the capitalism analysed by Marx, these physical quantities had to be converted into money before the productive cycle could begin again, Bordiga went on:

If there is accumulation in socialism, it will take the form of an accumulation of objects, of materials useful to human needs, and these will have no need to appear alternatively as money, nor to undergo the application of a "moneymeter" allowing them to be measured and compared according to a "general equivalent". Thus these objects will no longer be commodities and will not longer be defined except by their quantitative physical magnitude and by their qualitative nature, what the economists, and Marx also, for explanatory purposes, express by the term use-value. (A. Bordiga, Structure economique et sociale de la Ftussie d'aujourd'hui, Paris, 1975, pp. 191-2.)

Elsewhere, he pointed out that:

In post-bourgeois society, therefore, it will not be a question of "measuring value by labour-time", as fools believe, but of finishing altogether with the measurement of value. (Quoted in J. Camette, Capital et Gemeinwesen, Paris, 1976, p.213.)

and,

The rational relationship between man and nature will be born from the moment when these accounts and these calculations concerning projects are no longer done in money but in physical and human magnitudes. (Quoted in J. Camette, Bordiga et la passion du communisme, Paris, 1975, p. 23.)

This is undoubtedly the correct position. Calculation in socialism can only be done directly in physical quantities without the need for any "general equivalent" or any general accounting unit, certainly not money but not labour-time either.

Basically, socialism does not need any general equivalent. Such a universal unit in which all goods can be expressed is only necessary in an exchange economy where all goods have to be reduced to some common denominator as a means of determining the proportions in which they exchange for one another.

ECONOMIC CALCULATION AND CAPITALISM

Capitalism is in fact not just an exchange economy but an exchange economy where the aim of production is to make a profit. This too requires a general equivalent in order to be calculated and measured. Profit is the monetary expression of the difference between the exchange value of a product and the exchange value of the materials, energy and labour-power used to produce it, or what Marx called "surplus value". Similarly, the cost of production of a good is the exchange value of the other goods (including labour power) used up in its production, while its selling price is the monetary expression of its exchange value.

Since, as the classical economists and Marx showed, the exchange value of a product depends on the amount of socially-necessary labour incorporated in it from start to finish, the question arises of why calculations cannot be done directly in labour-time rather than in money. It is this reflexion that is behind all schemes for labour money and labour-time accounting.

The reason why it is not possible to use labour-time as a general equivalent in place of money is that the exchange-value of a product does not depend on the actual amount of labour incorporated in that product in the course of its production from start to finish but on the amount of socially-necessary labour incorporated in it, which is by no means the same (otherwise an inefficient worker would, because he took more time, produce more value than an efficient worker, but this is not the case).

While the actual amount of labour spent on producing a good could theoretically be measured, what labour is socially-necessary is a social average — taking into account average techniques, average productivity, average intensity of labour, etc — that can only be established through the social process that is the operation of the market whose price changes reflect the changes which are continuously taking place in the various factors we have just mentioned which determine the average. In other words, it is an average that can only be established after a good has been produced.

This is why Von Mises was right to say that — under capitalism of course — the only possible unit of economic calculation is money not labour-time, but this point had already been made by Marx when he discussed, and dismissed, various schemes for labour-money in 1859 in his A Critique of Political Economy.

NO EXCHANGE VALUE TO MEASURE IN SOCIALISM

If calculation in labour-time is impossible under capitalism, it is simply unnecessary in socialism since socialism will have no place for the concept of "exchange value" of which both money and labour-time are proposed as units of measurement. In socialism goods will not be produced for sale, they will not be commodities and so will not have any exchange value or price. They will simply be useful things capable of satisfying some human need, or as Bordiga put it "materials useful to human needs", use-values. While capitalism is only interested in the exchange value of goods — capitalism is in fact an economic mechanism geared to the accumulation of more and more exchange value — socialism will only be interested in their use-value. Socialism will be a society entirely geared, in the field of wealth-production, to turning out the specific useful things which people have indicated they want to live and enjoy life.

Under these circumstances calculations concerning the production and distribution of wealth will of course still be necessary, but these can be done exclusively in units to measure specific amounts and kinds of different goods — units such as kilos, litres, square metres, watts, even hours. There will be no need for any general equivalent by which to measure and compare all goods. In other words, calculation in socialism will not be economic but technical. In socialism calculations will be done directly in physical quantities of real things, in use-values, without any general unit of calculation. Needs will be communicated to productive units as requests for specific useful things, while productive units will communicate their requirements to their suppliers as requests for other useful things.

Adam Buick. World Socialist Nr.2 Winter 1984

Do We Need the Market?

Dear Editors,

Thank you for publishing the thoughtful and fair-minded review of my book, From Marx to Mises, in the June 1993 issue of the Socialist Standard. Within the space permitted, I will here reply only to Robin Cox's most important point: his approach to the economic calculation problem.

Decision makers in any industrial system using advanced technology are faced with choices involving comparisons of specific quantities of different factors. These comparisons can never be made in kind.

If you can get the same result with one gallon of oil as you can get with two gallons of oil, it is preferable to use one gallon of oil and save the second gallon for other uses. That purely technical calculation can be done in kind. But faced with a choice where one gallon of oil can be saved by using more of some other resource, no decision can be made in kind. Is the saving of one gallon of oil greater or less than the increased use of some quantity of an other resource (say, five minutes of maintenance labor, or a few days' shorter life of a machine through increased wear and tear, or one ounce of some mineral employed in a chemical reaction)? If such comparisons have to be made, then we need to be able to reduce different factors to common units of cost.

Your review seems to imply that no such comparisons would any longer have to be made under socialism. In From Marx to Mises I give several examples, and many more can be found in the economic literature, or simply by consulting one's own knowledge of economic history or of places where one has worked. If we really do not need to make such comparisons, then the whole Misesian case collapses, and your remarks about stock control are unnecessary. But I maintain that such comparisons have to be made day by day in any unit of industrial production, no matter what the social institutions.

Robin Cox asks us to suppose that the demand for good X increases, and that the current output of resource A is "insufficient to meet this increased demand". He says that "the sensible solution would be to search for some more abundant resource (B) that could substitute for A. At the same time the falling stock of A would constrain the multifarious users of A to economise on it".

I have three comments:

1. Most commonly, every one of the types of resources used in producing X would be simultaneously used in the production of thousands of other things (let us collectively call theseY). So if the output of X is increased, that of Y must be reduced. The current output of A could itself be increased (as well as being withdrawn from production of Y), but any increase in output of A would involve costs (reductions in output elsewhere). Typically, output of A should be increased somewhat, as well as reducing output of Y. Both these developments reduce output of some goods.

2. In the market, people will automatically switch to using more substitutes for A, but the exact degree of this substitution will be different in all the different lines of production which use A. This can be left to the judgement of the people in those different lines of production because there is a public and objective specification of how scarce A is: the price of A. Robin Cox's statement that searching for B, a substitute for A, is "the sensible solution" over simplifies the problem. Aside from the fact that reallocation of resources has to occur immediately, while this "searching" is still going on, such searching occurs all the time, with respect to all factors, and B, like A, will most likely be a factor used in producing many other goods, with a consequent reduction in output of those other goods if more of B is used to make X. The only practicable way to tell how "abundant" B is, by comparison with A, is to look at their relative prices. And B is almost certainly not a perfect substitute for A, so it will still be up to thousands of separate, local decision-makers to determine whether any technical superiority of A is outweighed, in each particular case, by the comparative cheapness of B. This again requires prices (or some other cost indexes) of A and B.

3. Robin Cox states that the falling stocks of A would constrain users of A to economize on A. Are all users simply told that total stocks of A have gone down, and relied upon to reduce their use of it? The stocks might have fallen for many different reasons, so the users all have to act on their theories as to the reasons for the fall; the users have to estimate by precisely how much to cut their rate of use, bearing in mind that such adjustments are always costly (is the use of A to be cut so much, for instance, that any machine which continuously requires inputs of A should be immediately junked?). How does each user of some quantity of A, out of, say, fifty thousand users, knowing that each of the other 49,999 users are making a similar decision, which perhaps ought to be different in every case, determine his response to the news that stocks of A have fallen by ten per cent? If all the users reduce their use of A by the amount they judge best, there is no guarantee that the outcome is the appropriate total reduction in use. Again, a price for A can do things which news about its total stock cannot do. We cannot do without some general unit of cost, to compare the costs of aggregates of different factors, and we do not know of any feasible unit other than prices denominated in money.

DAVID RAMSAY STEELE, Chicago.

Reply

You may not be able to conceive of production without money and prices, but we can. The definitive answer to your supposed "economic calculation problem" is a (largely) self-regulating system of stock control in which calculations are made in kind rather than in terms of a common unit like money. A self-regulating system of stock control will permit producers in a socialist society (workplace councils, industry councils etc) to ascertain more or less immediately the availability of stocks of any particular item throughout the system; the communications technology to enable this to happen is already in place. Given this, your assertion that the "only practicable way to tell how 'abundant' B is, by comparison with A, is to look at the relative prices" is absurd.

'Abundance' is a relationship between supply and demand, where the former exceeds the latter. In socialism a buffer of surplus stock for any particular item, whether a consumer or a producer good, can be produced, to allow for future fluctuations in the demand for that item, and to provide an adequate response time for any necessary adjustments.

Achieving 'abundance' can be understood as the maintenance of an adequate buffer of stock in the light of extrapolated trends in demand. The relative abundance or scarcity of a good would be indicated by how easy or difficult it was to maintain such an adequate buffer stock in the face of a demand trend (upward, static, downward). It will thus be possible to choose how to combine different factors for production, and whether to use one rather than another, on the basis of their relative abundance/scarcity. By following the rule of using the minimum necessary amounts of the least abundant factors it will be possible to ensure their efficient allocation. Money as a "general unit of cost" would not come into it.

In further asserting that "if the output of X is increased, output of Y must be reduced" you are begging the question at issue, which is precisely whether or not resources are and always will be scarce. It is to assume that society's resources are fully streiihed and that there are no reserves to draw upon. But given the productivity of modem technology and the elimination of capitalist waste, there are likely to be substantial untapped reserves. In addition, socialist society can, as just explained, deliberately plan to produce surpluses of various items just to meet the eventuality you have in mind.

With regard to human resources in particular, even today under capitalism tens of millions of people are unemployed. Though of course in socialism no one will be "employed" as such, the average workload for individuals is likely to be much less (thus resulting in a sizeable reservoir of labour) and the opportunities for individuals to move flexibly from one kind of work to another much greater. This will make much less likely the occurrence of the bottlenecks you foresee in the produc¬tion of any particular good following an unexpected increase in demand for it.
But scarcity is not simply a function of supply; it is also a function of demand. It is in this area that the anarcho-capitalist critique of socialism, based on its premise of infinite demand, is particularly weak and unrealistic. For it takes little, if any, account of the effect of the social environment on the likely structure and size of demand in socialism.

In a system of capitalist competition, there is a built-in tendency to stimulate demand to a maximum extent. Firms, for example, need to persuade customers to buy their products or they go out of business. They would not otherwise spend the vast amounts they do spend on advertising those products. At the same time, there is in capitalist society a tendency for individuals to seek to validate their sense of worth through the accumulation of possessions. This is not surprising for if, as Marx contended, the prevailing ideas of society are those of its ruling class then we can understand why, when the wealth of that class so preoccupies the minds of its members, such a notion of status should be so deep-rooted. It is this which helps to underpin the myth of infinite demand. In socialism, status based upon the material wealth at one's command, would be a meaningless concept. Why take more than you need when you can freely take what you need? In socialism the only way in which individuals can command the esteem of others is through their contribution to society, and the more the movement for socialism grows the more will it subvert the prevailing capitalist ethos, in general, and its anachronistic notion of status, in particular. Nor do we accept your premise that prices arise out of conditions of scarcity. They arise out of conditions of private property. So even if genuine shortages occur in the conditions of common ownership that will exist in socialism - it is likely that some shortages (e.g. decent housing) will persist (if only as a receding problem) into the early stages of socialism - this will not undermine the new society by leading to the re-emergence of money and prices.

For socialism to be established, there are two fundamental preconditions that must be met. Firstly, the productive potential of society must have been developed to the point where, generally speaking, we can produce enough for all. This is not now a problem as we have long since reached this point. However, this does require that we appreciate what is meant by "enough" and that we do not project on to socialism the insatiable consumerism of capitalism.

Secondly, the establishment of socialism presupposes the existence of a mass socialist movement and a profound change in social outlook. It is simply not reasonable to suppose that the desire for socialism on such a large scale, and the conscious understanding of what it entails on the part of all concerned, would not influence the way people behaved in socialism and towards each other. Would they want to jeopardise the new society they had helped create? Of course not.

One must therefore assume that whatever shortages may persist can be tackled by some system of direct rationing and will be borne with forbearance - even, one might say, with a sense of altruistic restraint. For whatever the problems that socialism may have to contend with, and there will still be many, if the alternative has to be the re-instatement of capitalism then there would not be a real alternative
Editors.

Socialist Standard April 1994

Beyond Capitalism

In 1968 an article written by a member of the Socialist Party, entitled "Smash Cash", appeared in the magazine OZ. Some years later the author of that article, David Ramsay Steele, was converted to the free market ideas of Ludwig von Mises which he expounds in a book just published, From Marx to Mises: Post Capitalist Society and the challange of Economic Calculation.

Mises (1881-1973) was an Austrian economist whose disciples included Hayek and Lionel Robbins. Early this century, against a background of ascendant Bolshevism, he developed what Steele calls "the most powerful objection that has been made to Marxian socialism". In the 1920s and 1930s, in the wake of the collapse of the Bolshevik experiment of "war communism" (1918-1921), Mises's ideas were widely discussed but from the 1940s began to fade as the fad for Keynesian interventionism grew. But for the failure of, and recent retreat from, Keynesianism itself, Mises might have remained an obscure nonentity. However, the "new groundswell of anti-socialist pro-market opinion" that emerged in the 1980s has prompted a reappraisal of the man — particularly since the collapse of the Soviet empire.

So what is the Misesian objection to socialism? Some of the evidence presented can be summarily dismissed. For example, Steele refers to the failure of "war communism" under the Bolsheviks but the pre¬conditions for socialist revolution did not exist in Russia at the time. The means of production were insufficiently developed to permit a socialist system to function, (even assuming you could have "socialism in one country"). Nor was there the necessary level of popular support to bring it about. Reference to the fatuous claims of "Bolshevik leaders" that they were "abolishing commodity production and money" is irrelevant; you cannot impose socialism on an unwilling (and still largely peasant) population, unaware of what it entails.
Such specious evidence aside, there remains the theoretical argument that there is something in the nature of socialism that makes it inherently untenable. This has two basic components which, though linked, can be separately analysed.

Central Planning

Steele points out that planning as such is by no means incompatible with the market. Within the market there are numerous plans but the interconnections between them are unplanned or "anarchic". The proposal to go beyond planning the parts of production to planning the whole of it, thus requiring a "single vast plan" dispensing with the numerous plans of the market, is what has generally been called "central planning", (though "total planning" might convey the meaning better).

But could a total planning of worldwide production be achieved? Production today is integrated through a complex division of labour. The production of even a simple item is inextricably bound up with the production of numerous other items. When we consider that these in turn require inputs of various sorts for their production, we have an inkling of just how difficult it would be to centrally plan in advance output in every conceivable line of production.

Theoretically, this could be done by constructing a vast "input-output" table. But, for logistical reasons, the best this could achieve is a drastically simplified picture of the input-output linkages that make up a production system; at best the number of items it could handle would probably amount to a few hundred. While each might represent a broad category of goods lumped together for convenience, in reality there are hundreds of thousands of different goods so that any decision made on the basis of such crude aggregated data is likely to result in gross misallocation of resources.

But the problem would not end there for once the Plan has been formulated, assuming it could be, it would require considerable coercion to implement it: how else would it be possible to ensure that targets specified by it were met? This would put it at odds with the democratic nature of a socialist society. Democratic participation would be precluded since this requires informed decision-making whereas no individual can possibly absorb or utilize more than a tiny fraction of the information to operate the whole production system. Inevitably, the power to make decisions would gravitate into the hands of a central administration (or re-emergent state).

According to Steele, "central planning" lies at the very heart of the Marxist vision. Whether Marx and Engels did themselves support Steele's concept of central planning is unclear. Some of their remarks suggest strongly that they did; others suggest the opposite, as Steele himself concedes (p. 316). This ambiguity is well captured by the phrase "anarchy of production". Steele interprets this as pejorative reference to the fact that the total pattern of production is unplanned but it could equally allude to the ungovernable laws of a capitalist economy which manifest themselves through the trade cycle.

A recession occurs not simply because there is unbalanced growth between different sectors of the economy (which might imply the need for centralized planning) but because of the knock-on consequences of such growth within the context of a market economy: an economy-wide contraction of production because the monetary flows are interrupted. As Marx pointed out, it is because of "the very connection between the mutual claims and obligations, between purchases and sales", that disproportionate growth leads to recession (Theories of Surplus Value, Chapter 11, 4c). Once you remove the market you break that connection, then any overproduction of some good no longer has a knock-on effect on the rest of production and can be remedied simply by consciously adjusting output to the level required. In this sense "conscious social control" replaces the "anarchy of (market) production".

Steele tells us that Marx set much store by the supposed tendency towards centralization in capitalism — and thus, following Steele's logic, a steady diminution in capitalist anarchy — since it would lead to the "breakdown of the rationale of capitalist production according to the law of value" (p. 72). Yet, curiously, we find Engels in Socialism: Utopian and Scientific saying the exact opposite, that "anarchy" in capitalism grows to a "greater and greater height". This is hardly consistent with Steele's understanding of "anarchy of production" though it does square with the view that capitalist crises get progressively worse.

Perhaps Marx and Engels were at times inconsistent or muddled on this question. But why should it concern us? We are not dogmatists; if they were advocates of central planning in the sense of total planning, we would dissociate ourselves from this aspect of Marxism, and for the best of reasons: a centrally-planned economy is neither feasible nor compatible with the nature of socialism.

What really matters is not what Marx and Engels may have said, but what a rejection of central planning entails. In a model of socialism in which total production is not centrally planned there would be, as in capitalism (and in Steele's sense of the word) an "anarchic" or spontaneously ordered system of production. But there the similarities would end.

Local production

Steele does acknowledge the existence of models that reject both central planning and the market, one being Kropotkin's "anarchocommunism". According to this, "groups of producers (would) govern themselves and federate for occasional common purposes" (p. 217). Such groups would effectively organize production on self-sufficient lines but, in Steele's view, the imposition of local autarky would precipitate a "violent reduction in living standards" (p. 322); it would entail the disintegration of the spatial division of labour and the comparative advantages of regional specialization. Whatever the merits or otherwise of this argument, we do not have to accept that the only alternative to central planning in socialism is localized autarky. In fact the Socialist Party has long argued that socialist production would be carried on at several levels — local, regional and global — though Steele implies incorrectly that this is a relatively recent development and that until the 1980s the Party supported central planning (p. 417).

There may of course be a tendency to produce more things locally in socialism than at present. But given that there will remain a considerable degree of interaction between communities (however defined) in the form of material flows, on what basis will these interactions occur? To suggest that only the market can integrate worldwide production and that "inter-regional movements of goods" cannot be "regulated without trade or prices" is mistaken; it is to fail to distinguish between market-exchange and what anthropologists call "generalized reciprocity" under which goods are transferred between and within communities on the basis of giving and receiving rather than buying and selling.

Generalized reciprocity is a mode of transaction in which neither the value of what is given is calculated (it has no price) nor the time of its "repayment" specified. It thus denotes a kind of social obligation — that we do not simply take from society without giving back something in return — as summed up in the social rule "from each according to their ability to each according
to their needs". In this sense, socialism can be characterized as a system of generalized reciprocity.

Economic calculation

Since total planning is an unworkable proposition, it would suffice to show that it was essential to socialism to prove that socialism itself could not work. Steele does not exactly pursue this line of argument; he seems to regard the matter as secondary to his main argument that, in the absence of market prices, economic inefficiency will result, leading to a significant decline in output. This is the so-called "economic calculation argument".

According to this argument scarcity is an unavoidable fact of life; it "applies to any goods where the decision to use a unit of that good entails giving up some other potential use". In other words, whatever one decides to do has an "opportunity cost" — that is the opportunity to do something else which one thereby forgoes; economics is concerned with the "allocation of scarce resources"; the most efficient allocation is one that uses up the least resources in the production of any item and thus leaves the most resources over for other uses, so mimimizing the opportunity costs of producing that item.

Steele provides a hypothetical examples of a "widget" which can be produced by three methods (p. 6): Method A (5 lbs of rubber and 5 lbs of wood), Method B (5 lbs of rubber and 4 lbs of wood) and method C (4 lbs of rubber and 5 lbs of wood). Clearly, B and C are more efficient in terms of resource use than A but how do we know whether B is better than C or vice versa?

According to the economic calculation argument, this requires being able to compare different factors of production, like rubber and wood, and that means reducing them to a common unit. By adding up the total costs involved (expenditure) and the benefits gained (income) in terms of this common unit, we can determine which particular method is most economically efficient by the magnitude of net profit it yields. Of course, there may not be any net profit, in which case it would be uneconomic to produce widgets; the value of resources used up in making them would exceed the value of the widgets themselves and there would be less resources left over for other uses.

According to Steele, such calculations are made possible by virtue of the existence of money; socialism would rapidly regress into chaotic inefficiency unless it can replace money with some alternative that enables society to continue to make such calculations. However, he does concede that capitalist entrepreneurs who make these calculations may often get their sums wrong; given the "anarchic" nature of capitalist production they must rely on shrewd estimates. But what matters is that there is some "objective test of the accuracy of (these) estimates" which profit and loss provides by rewarding those whose estimates are correct and weeding out those whose estimates are incorrect.

Thus, the market process is "self-correcting" while socialism supposedly lacks such a mechanism and has no way of discovering least-cost factor combinations since it has no common unit by which to make cost comparisons. One proposal to get round this problem is that of labour-time accounting with labour time serving as a common unit of cost. But this is beset with numerous difficulties, not the least of which is how do you weight different kinds of labour.

Stock control

There is, however, another proposal which Steele considers which, in fact, turns out to be the definitive answer to the economic calculation argument — namely "calculation in kind". By definition, this assumes that you do not need a common unit of calculation as such a need exists "only where there is commodity exchange". Steele concedes that "some calculations, even within the market, can be done in kind" (p. 86), but believes the scope for this is limited. He also contends that it fails to address, the "fundamental question of how to compare the costs of alternative aggregates of factors" (p. 123), but this only assumes what it needs to prove: that such comparisons are necessary.

Given that socialism will still need to concern itself with the efficient allocation of resources (among other things), how will this be achieved through calculation in kind? The answer rests crucially upon a recognition that production in socialism cannot be totally planned in advance. Steele stumbles over parts of that answer but the long shadow of central planning that pervades his book prevents him from seeing it. This problem is compounded by the fact that the major proponent of calculation in kind to whom he refers, Otto Neurath, was himself an advocate of central planning.

Decentralized production entails a self-regulating system of stock control. Stocks of goods held at distribution points would be monitored, their rate of depletion providing vital information about the future demand for such goods, information which will be conveyed to the units producing these goods. The units would in turn draw upon the relevant factors of production and the depletion of these would activate yet other production units further back along the production chain. There would thus be a marked degree of automacity in the way the system operated.
The maintenance of surplus stocks, as Marx pointed out, would provide a buffer against unforeseen fluctuations in demand (Capital Vol.2) but it would also be relevant to the task of efficient allocation. This is so because of the inverse relationship between the supply of any good and the need to economize or use less of it: the scarcer a good the greater the need for economization.

An analogy might help here. According to the 19th century agricultural chemist, Justus von Liebig, there is a "law of the minimum" whereby plant growth is limited by the availability of whatever nutrient is scarcest — usually fixed nitrogen. Some working principle analogous to the "law of the minimum" would apply to the allocation of factor inputs in socialism.

Suppose that the demand for a good X as registered through the system of stock control rose permanetly but that the production of resource A was insufficient to meet this increased demand. In the face of an already committed pattern of factor allocation, the sensible solution would be to search for some more abundant resource B that could substitute for A. At the same time the falling stocks of A would constrain the multifarious users of A to economize on it.

This feedback permits a continual process of discrimination in the use of resources according to their comparative availability. In short, it proves precisely the kind of self-correcting mechanism which Steele claims is the exclusive property of a market system.

Market tyranny

With this claim rebutted, most of what remains of the theoretical argument against socialism falls away. For example, Steele contends that much of the economic activities carried on in capitalism, which socialists regard as wasteful, is in fact "productive". But this is to be expected: if you cannot accept the possibility of an alternative to the market then anything that is functional to the operation of a market economy must, by definition, be "productive". Conversely, once that possibility is accepted the appalling, ever-mounting burden of capitalist waste becomes glaringly evident.

Capitalism, with its obsessive preoccupation with reducing costs is, in many respects the very antithesis of efficient production. We do not refer here only to its obvious structural costs; there is also the important category of externalized costs to which Steele makes barely a passing mention. These arise out of the competitive pressure on capitalist enterprises to pass on — or "externalize" — some of their costs, the repercussions of which, as many documented cases of environmental disasters testify, far exceed any savings that might have been achieved for the sake of profit.

Despite its basic anti-socialist position, this is a book that is both highly informative and lucidly written; it has much to recommend it. But perhaps, ironically, its most enduring value will be as powerful stimulus to fresh thinking about the kind of society we want, a society free of the tyranny of the market.

ROBIN COX. Socialist Standard June 1993

further reading
The "Economic Calculation" Controversy: unravelling of a myth by Robin Cox
Socialism and Calculation (.pdf)
Socialism as a Practical Alternative (SPGB pamphlet 1994 - .pdf)
Online book by (late SPGB member) Pieter Lawrence

The Great Crash of 1929

FIFTY YEARS AGO, on Tuesday 29 October, the boom in the price of stocks and shares on the New York stock exchange came to an abrupt end in what has gone down in history as the Great Crash.

Stocks and shares are titles to ownership of part of a business. They entitle their owners to a percentage of the profits of that business in the form of dividends or, in the case of certain kinds of shares, fixed interest payments. In theory the price of a share refects the value of the firm's assets. In practice it fluctuates with the firm's profit-making record and expected profits. It is this latter that introduces an element of gambling into shareholding, since the firm can never know in advance whether or not it will in actual fact make the hoped for profits. If it doesn't then the price of its shares will fall and the shareholders will suffer a loss. If it does then the price of its shares will increase and the shareholder will receive a capital gain as well as a dividend.

A stock exchange boom is essentially a period of speculation for capital gains in rising share prices. It need have nothing whatsoever to do with the profit-making record or prospects of the firms whose shares are traded. It is enough that there is a sustained excess of buyers over sellers on the stock market. With prices continually rising, capital gains can be made simply by buying shares one day and selling them the next. A telephone call is ail the effort required.

Until October 1929 there was such a boom on the New York stock exchange. Share prices were rising, and everybody expected them to go on rising. Stories of people 'getting rich quick' from buying and selling shares encouraged others to try their luck. Actually, as long as the boom continued it was not a question of luck at all but a matter of having money. If you didn't have ready cash, you could borrow the money to buy the shares. Certainly you needed some collateral, but there were cases of shares already bought on loans — and even of the shares to be bought by that loan - being accepted as collateral.

The trouble with a speculative boom of this sort is that it cannot go on for ever. Sooner or later the excess of buyers over sellers must disappear. Everybody knows this, but investors can't resist the temptation to make easy money.

The Great Crash was followed by a severe industrial depression, summarised by J.K. Galbraith in his very readable book on the subject:

After the Great Crash came the Great Depression which lasted, with varying severity, for ten years. In 1933, Gross National Product (total production of the economy) was nearly a third less than in 1929. Not until 1937 did the physical volume of production recover to the levels of 1929, and then it promptly slipped back again. Until 1941 the dollar value of production remained below 1929. Between 1930 and 1940 only once, in 1937, did the average number unemployed during the year drop below eight million. In 1933 nearly thirteen million were out of work, or about one in every four in the labour force. In 1938 one person in five was still out of work. (The Great Crash 1929, Pelican, p. 186.)

One school of thought, the monetarists, sees the Great Crash and Great Depression as the outcome of government interference in the 'natural' workings of capitalism. According to them, the stock exchange boom and its inevitable crash were caused by the monetary policy pursued by the US government and central bank (the Federal Reserve Board). What gives monetarist explanations of this crisis, and of crises in general, a semblance of plausibility, is the fact that monetary bungling can aggravate a crisis. And there is no doubt that in the years up to 1929 the Federal Reserve Board, in pursuing a cheap money policy with easy credit and low interest rates, did encourage the stock exchange boom, and so helped make the crash all the greater when it came. A stricter monetary policy might have cut short the boom at a much earlier stage and thus prevented so great a crash, even if not a minor one, but the question is: would it also have avoided the Great Depression?

Here the answer must be no. For a slowing down on economic activity was evident in the summer of 1929, some months before the Crash (a knowledge of this must have been a factor in bringing the stock exchange boom to an end). This downturn was particularly evident in the consumer goods sector, where the firms concerned had overestimated demand and were finding themselves lumbered with excessive stocks. In other words, the depression was going to happen anyway, whether or not there had been the stock exchange boom and crash. More fundamental economic factors were at work than speculations on the stock market or the monetary bungling of the Federal Reserve Board.

An attempt to identify these fundamental economic factors using the categories of Marxian economics has been made by Sydney H. Coontz in Productive Labour and Effective Demand (1965) and by Ernest Mandel.

A depression is the result of an unbalanced growth of one sector of the economy having expanded too fast for the other sectors. Simplifying matters, the economy can be divided into two main sectors, the one producing means of production (sometimes called 'capital soods" or, more accurately, 'producer goods'), and the other producing consumer goods. The conditions for steady, balanced growth under capitalism can then be stated to be:

The purchase of consumer goods by all the workers and capitalists engaged in producing capital goods must be equivalent to the purchases of capital goods by the capitalists engaged in producing consumer goods (including in both categories the purchases needed to expand production). The constant reproduction of these conditions of equilibrium thus requires a proportional development of the two sectors of production. The periodical occurrence of crises is to be explained only by a periodical break in this proportionality or, in other words, by an uneven development of these two sectors. (Mandel. Marxist Economy Theory, Vol I , p.349.)

What happened in America in the 1920s was that the producer goods sector expanded too fast for the consumer goods sector. Production and productivity increased while wages and prices remained comparatively stable. Wages did in fact rise, but the main benefits of the increase in productivity went to the capitalists in the form of increased profits. Most of these additional profits were reinvested in production (though some found their way to the New York stock exchange). It was this that led, according to figures quoted by Galbraith, to the rapid expansion of the producer goods sector as compared with the consumer goods sector:

During the twenties, the production of capital goods increased at an average annual rate of 6.4 per cent; non¬durable consumers' goods, a category which includes such objects of mass consumption as food and clothing, increased at a rate of only 2.8 per cent. (pp. 192-3)

An expansion of the producer goods sector at a faster rate than the consumer goods sector is not in itself a situation of disproportionate development. Indeed, it has been precisely the historical role of capitalism to build up and develop the means of production at the expense of consumption. But so-called 'production for production's sake' cannot in practice continue indefinitely, since it demands either a sustained series of new inventions and innovations or a continually expanding market for consumer goods.

The relatively full employment in America in the 1920s — unemployment was officially only 0.9 per cent in 1929 - did mean that the market for consumer goods expanded, but the falling share of wages and salaries in National Income meant that this was not going to continue. The expansion of the producer goods sector levelled off, further retracting the market for consumer goods since its workers now had less to spend. Expressed in terms of the formula for balanced growth stated above, the purchase of consumer goods by the workers (and capitalists) in the producer goods sector had come to be less than the purchase of producer goods by the capitalists in the consumer goods sector. In other words, an overcapacity had developed in the consumer goods sector, which expressed itself in an overproduction of consumer goods and the build-up of stocks. As Coontz puts it (using the language of academic economics):

. . . stagnation in the capital goods industry, the displacement of labour in this sector, meant that worker and entrepreneurial consumption expenditures failed to rise pari passu with investment in the consumer sector. It was this disproportionality that generated the Great Depression, (p. 154)

The Great Depression — which occurred all over the world and not just in America - was not an accident, but simply capitalism working in a normal way. It exposed capitalism for the irrational, anti-socia! system that it is. While millions were unemployed and reduced to bare subsistence levels, food was destroyed because it could not be sold profitably. It was in the 1930s that the Roosevelt administration introduced the notorious policy of paying farmers not to grow food, a policy accurately described by a later President, Kennedy, as 'planned underproduction'. Even in times of boom and prosperity capitalism underproduces, but in times of depression this is even more flagrant.

The Depression eventually came to an end — with the war and preparations for war.

ALB. Socialist Standard October 1979

Historical materialism

The last century has witnessed immense developments in the technology of production. Modern machines can do much of the arduous work which once had to be done by humans; computers can make calcula¬tions and pass on information in a fraction of the time it took one hundred years ago; industry can be liberated from the dirty, dangerous, time-wasting methods which accompanied its emergence. The "impossible" has been achieved; the productive ingenuity of modern society has defied the imaginations of even the most advanced scientists at the time of Marx's death.

But there is a contradiction: although technologically we are in the Space Age — the age of science and rationality - socially, our society is still entrenched within the rut of the capitalist system. The way we organise wealth production and distribution is in conflict with our ability to produce enough for everyone. This contradiction is not a modern phenomenon; it is the driving force of all history. For Marx, contradiction is the generator of change - it is out of the antagonism between the way things are and the way things could be that new situations arise.

Non-Marxist historians see social phenomena in terms of design or accident. They regard the study of history as an empirical investigation, and see their role as simply to tell the story of the past without any need to explain the interconnections and classes and forces which occur and reoccur throughout the historical narrative. Such historians often tell us what happened in the past, but they are without an answer when it comes to why social events happened. The "design" historians try to explain the "why", but they do so in an idealist, metaphysical manner; they seek non-material causes for material changes. The theocratic historians, who dominated the study of the past for hundreds of years, were quite clear about why phenomena occur: it was because God wills them to. This divine determination was not only supposed to relate to natural phenomena, such as earthquakes, smallpox epidemics and cancer, but also to social events, such as wars, famines and poverty. If such a myth were true, we should have to seriously consider whether the "all-loving father" should be reported to the NSPCC. Other idealists, such as the German philosopher of history, Hegel, argued that historical change was a process of the gradual enactment of a Universal Idea. Marx spent volumes demonstrating the absurdity of this metaphysical nonsense; in The German Ideology, for example, Marx mocked the Hegelian idealists who conceived their role as freeing people from their false perception of the world, as if the problems of material existence were the result of an error on the part of human consciousness. Imitating the Hegelians, Marx wrote:

Let us liberate them from the chimeras, the ideas, dogmas, imaginary beings under the yoke of which they are pining away. Let us revolt against the rule of thoughts. Let us teach men, says one, to exchange these imaginations for thoughts which correspond to the essence of man; says the second, to take up a critical attitude to them; says the third, to knock them out of their heads; and existing reality will collapse.

Marx turned Hegel on his head. This does not mean that Marx was an expert at martial arts, but that the Marxist approach to history employs a methodology which is reverse to that of Hegel: the latter asserted the primacy of ideas, in the manner of Descartes ("I think, therefore I am"); Marx asserted the primacy of matter: "I am, therefore I think". This is how Marx put it:

Consciousness can never be anything else than conscious existence, and the existence of men in their actual life-process. If in all ideology men and their circumstances appear upside down as in a camera obscura. this phenomenon arises just as much from their historical life-process as the inversion of objects on the retina does from their physical life-process

In direct contrast to German philosophy which descends from heaven to earth, here we ascend from earth to heaven. That is to say we do not set out from what men say, imagine, conceive, in order to arrive at men in the flesh. We set out from real, active men, and on the basis of their real-life process we demonstrate the development of the ideological reflexes and echoes of this life-process. The phantoms formed in the human brain are also, necessarily, sublimates of their material life-process, which is empirically verifiable and bound to material premises. Morality, religion, metaphysics, all the rest of ideology and their corresponding forms of consciousness, thus no longer retain the semblance of independence. They have no history, no development; but men, developing their material production and material intercourse, alter, along with their real existence, their thinking and the products of their thinking. Life is not determined by consciousness, but consciousness by life.

The material environment determines our ideas; we are the creatures of historical circumstance. So, according to Marxism, social change is neither accidental nor designed, but determined by material conditions. When we refer to Marxism as historial materialism we are stating that Marxism takes into account four crucial factors: 1. That matter and energy are independent of control by the human mind or supernatural forces; 2. That all ideas, actions and social phenomena are derivative from matter; 3. That a specific cause, or combination of causes, will always have the same effect; 4. That no accident can exist without causation in material terms, even if knowledge is insufficient to provide a material explanation. These principles are not exclusive to Marxist social science: they are the essential principles of post-Cartesian science.

In explaining why social change occurs historical materialists are concerned with cause and effect. What is the causation of social motion, if it is not pure accident or the will of God or the unfolding of the Universal Idea? In the passage from The German Ideology quoted above, Marx suggests that it is the process of "men, developing their material production and material intercourse" who make history. Why do humans exist socially? Because it is only by existing in relation to one another that we can survive. What must we do to survive? Produce and distribute what we need to survive. So. it follows, that the most important aspect of social organisation — the first characteristic which we must look at when examining a society — is the way in which production and distribution of wealth is organised. Idealists may turn their noses up at such a way of looking at history; they would prefer to examine ideas, which are ultimately only the reflection of economic conditions, rather than the eonomic structure (what Marx called "the mode of production") itself. Idealist historians far prefer to waste their (and our) time debating the matrimonial affairs of Henry VIII than explaining the growth of mercantile capitalism in mid-sixteenth century Europe.

When Marxists look at history our first question is, What was the social system? A system is simply a network of relationships to the means of wealth production and distribution. For many thousands of years — indeed, most of human history — the system was a primitive form of communism: the means of living were owned in common. With the advent of private property (a process which is well described in Engels' classic work The Origin of the Family, Private Property and the State) came a new social phenomenon: Class. Ever since then these wretched divisions between human being and human being have been with us. The history of property society is the history of class struggle.

The class struggle is not a game invented by Marxists in order to bother the capitalist class. The class war is an inevitable consequence of the division of society between those who own and control and those who do not. The political conflicts of recent history (or post-property society) can be explained in terms of an unceasing war between minorities who possess the means of life and minorities who want to. The English Civil War was such a struggle; so was the French Revolution; often, the subject class has been recruited to support one minority class against another. Non-Marxist historians like to explain such phenomena in terms of individual characters ("Great Men") or supernatural designs. As recently as the 1970s there were a number of reputable Israeli historians who claimed that the victory of the Israeli army over the Arabs was due to the will of god; and in Iran today the Islamic priests are sending off their armies in the war against Iraq with the blessing of Allah — a blessing which is also given by the Iraqi Moslem priests to their cannon fodder. Admittedly, there are fewer people now than there were a century ago who still believe that history is manipulated by an ever-caring string-puller in the sky. But even the most professedly "radical" of social thinkers still apply the "Great Man" theory to history; for example, there are Trotskyist historians of the Russian Revolution and its outcome who argue that if only Trotsky, and not Stalin, had succeeded Lenin. Russia might have been a "socialist country" today. Then there are the Leftist observers of recent economic history who, instead of examining the inherent economic tendencies of world capitalism, make silly condemnations of "Thatcher's Britain" and "Heseltine's attack on the working class". The Marxist analysis of history shows that it is not individuals who govern the system, but the system which governs individuals.

But if the system governs individuals — if ideas reflect the material environment — if we think as we do because we are as we are, then is it not the case that, far from being a revolutionary theory, Marxism is a profoundly conservative doctrine? Like any revolutionary outlook, Marxism can be perverted into a theory which justifies doing nothing because there is nothing you can do. It is now necessary to show that Marx's conception of history was not only about explaining the past, but provided a revolutionary theory for creating the future. Unlike all other conceptions of history Marxism does not stop at the present.

Let us return to the present, which was the point at which we started: in terms of the productive forces there is a current potentiality to satisy human needs; in terms of the social relations there is mass deprivation of human needs under the capitalist system because use values must come second to exchange values — profits are more important than needs. This, we may say, is the fundamental contradiction of our present stage of history: we could produce for use, but we persist in producing for profit. How did Marx explain this contradiction?

In the social production of their life, men enter into definite relations that are indispensable and independent of their will, relations of production which respond to a definite stage of development of their material productive forces. The sum total of these relations of production constitutes the economic structure of society, the real foundation, on which rises a legal, and political superstructure and to which correspond defi¬nite forms of social consciousness. The mode of production of material life conditions the social, political and intellectual life process in general. It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness. At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production. . . From forms of development of the productive forces these relations turn into their fetters. Then begins an epoch of social revolution. (Marx, Preface to The Critique of Political Economy, 1859)

In the above passage can be seen the crucial weaving together of Marx's theory of history and his theory of revolution. The purpose of present-day Marxists is to apply it to the great social contradiction of the present. "At a certain stage" the forces of production conflict with the relations of production. We are right in the middle of such a stage now. What, then, is the key to the social revolution?

If Marxism was a theory of economic determinism, as most of its critics have suggested, there would be no need to do anything about the social revolution except wait for it. To be sure, there are plenty of so-called Marxists whose ideas of social revolution involve no more than anticipating the imminent collapse of capitalism or looking forward to some far-off day when socialism will "come", like an unexpected gift. However, Marxism without activity is not real Marxism, but a useless dogma — and we know from Marx himself (whose favourite motto was De omnibus dubitandum; Doubt everything) that the role of revolutionaries is not to endlessly survey the world as it is, but to actively change it.

All previous revolutions have changed the world in the interest of a class. The capitalist revolutions in Europe, for example, displaced the old monarchies and aristocracies, with their hereditary privileges and assumptions of divine right, and replaced them with rule of capitalists who obtained their right to live in idleness from the new Holy Trinity of rent, interest and profit. The next revolution will be no different from the others. The class which will expropriate the expropriators will not be another minority ruling class. The working class is a majority class and its role is not to climb from the position of the oppressed to that of the oppressor, but to enact the abolition of classes and oppression. Like all previous revolutionary classes, the working class must conquer the powers of government and the armed forces. But, again unlike previous revolutionary classes, the workers, being a majority, can assert revolutionary power by democratic means.

If workers are to make a social revolution we must make it consciously; history is made by those who are aware of the material conditions which they are in and the real possibilities for immediate revolutionary change. Class ignorance produces dreamers and poets at best, and do-nothings at worst, but never meaningful social change. The need for class consciousness does not mean that ideas make history, but that, because we can only develop within the material conditions that surround us, it is better to have a realistic consciousness of what can be done than an idealistic dream of what is impossible.

Socialism — a world without money or wages or states — is often attacked as being an idealistic dream of the impossible. Even a majority of those on the so-called revolutionary Left regard Marx's conception of socialism as a Utopian fantasy which is not to be realised for at least five hundred years (this was Lenin's view). An understanding of historical materialism shows that, although socialism may be as alien to the people of capitalism as capitalism was to the people of feudalism, there is nothing impossible about human society taking a step forward, out of the contradiction of capitalism and into the new system based on production for use. Indeed, the really unhistorical dreamers are the ones, of both the Right and Left, who want to retain the present system, but hope to eradicate its inevitable chracteristics. It is the gang of confused reformists, who want to preserve the cause while wishing its effects away, who stand as political obstacles to the onward march of history. We Marxists have a history lesson to teach them; what is will not always be, and today's proposals are tomorrow's reality.
S COLEMAN

Socialist Standard March 1983

Marx: a critical view

Although Karl Marx lived and died in the nineteenth century, he probably ranks as the most influential political thinker of the twentieth. To me his influence has been almost entirely evil, and I find it hard to think of any redeeming features. I regard him, with Sigmund Freud (whose work does not concern us here) as a philosophical scourge of the twentieth century.

As a prophet, Marx was false, and his predictions have gone unfulfilled. This would not matter very much if the failure of life and history to fulfil his predictions had deprived him of his actual or potential following; but it is one of the curious features of Marxism that its most abysmal prophetic record tends to be blamed upon the failings of individuals or the vagaries of circumstances instead of being attributed to the author of the prophecies.

Above all, however, the fact that Marxism lies at the root of some of the worst totalist tyrannies of our times — from the Soviet autocracy to the genocidal Pol Pot regime in Kampuchea — strengthens the indictment. It is not a defence to assert that Marx himself would not have approved of such horrors, if only because the assertion is by its nature unprovable. The point is that the seeds of totalism are inherent in the Marxian philosophy. with its millenarian assumptions and its confident assertion of absolute truth.

Determinism and Praxis

As with all absolutist philosophies. Marxism abounds in contradictions. There is, for instance, an inherent contradiction between Marx's determinist view of history as the product of contending economic relationships in which men are involved in a manner "independent of their will" (Critique of Political Economy, 1859), on the one hand; and on the other hand, the notion of "Praxis", which calls upon the philosophers to cease contenting themselves with merely interpreting the world, the point being "to change it" (eleventh of the Theses on Feuerbach, 1845).

The contradiction emerges with still greater clarity in respect of Marx's uncompromising forecast that capitalism will collapse under the weight of its own contradictions, to be succeeded by socialism.

For if socialism is inevitable, because determined by scientific laws independent of men's will, then there is no need for the expectant to do anything but await its coming. Marx, however, expected his followers to do everything they could to make the prophecies come true, to hasten the breakdown of capitalism and the advent of revolution.

This expectation, in line with the idea of "Praxis", has been responsible for more revolutionary violence and avoidable suffering than any other idea of Karl Marx's. In fact, capitalism has nowhere collapsed spontaneously, even when subjected to great strains and stresses. Even in Russia, it was not "capitalism" (which had been flourishing under the Tsars) that collapsed, but the Tsarist system. Lenin abolished capitalism by decree after his little gang of followers had ousted the liberal/democratic Provisional government of Alexander Kerensky.

Since 1917, the story has been repeated dozens of times: never a spontaneous collapse, always the outcome of force. This is as true of Stalin's East European empire, as of Mao Tse-tung's victory in China, or the conquest of South Vietnam in 1975. or the imposition of communism in South Yemen. Ethiopia and Afghanistan. It was Lenin who developed effective techniques for violent revolution: but the violence, and all that ensued, was inherent in Marx's Praxis.

False Prophecies

One of the most demonstrably untrue of Marx's predictions was the coming "absolute pauperisation of the workers". I shall not attempt here to refute Karl Marx's strictly economic theories, which others better qualified than I have done repeatedly. However. Marx fell into the trap of extrapolating from the present and drawing conclusions which later events proved to have been quite unfounded. He argued in Capital that competition would drive capitalists to accumulate capital, which would become concentrated in monopolistic cartels and trusts. Labour-saving devices and machines would create unemployment by reducing the need for hired hands. But this also would reduce capitalist profits, obliging the capitalists to intensify their exploitation of the workers, whom unemployment forced to work on progressively more disadvantageous terms. Faced with "pauperisation", the masses, in their misery, would be forced to unite and overthrow the system.

The best short answer to this prophecy of workers' doom is the visual one made available to Khrushchev on his visit to the United States in 1959, when he was shown the parked cars of the car workers in Detroit, which, it is said, came as a shock to him.

By whatever measuring rod, it is a fact that not only has there been no inexorable pauperisation of the workers under capitalism, but on the contrary that their living standards have risen consistently. Moreover, the living standards of the workers in the United States and in any West European country are far higher than they are in the Soviet Union after 65 years of Marxist-based socialism. Something has gone wrong somewhere.

Another expectation — an expectation, perhaps, rather than a prophecy — that went awry was the belief that the revolution would start in an advanced capitalist State. Marx had Britain in mind. In fact, it took place in Russia, one of the more backward countries in Europe, in industrial terms.

The Class Struggle

Perhaps the most pernicious of Marx's doctrines is the class struggle. Starkly expressed in The Communist Manifesto of 1848, of which Friedrich Engels was the co-author, it trades upon envy and is a permanent incitement to violence and conflict.

Ultimately the doctrine sanctifies the so-called "dictatorship of the proletariat", in other words the autocracy of the single ruling party in the name of the working class. Translated into international terms, it becomes "the international class struggle"; in other words, what the Soviet rulers call "peaceful co-existence" and those at the receiving end term "the cold war". As the final Resolution of the Conference of 81 Communist Parties of November 1960 put it, peaceful co-existence "implies the intensification of the international class struggle".

The duty to support "national liberation movements", as sanctified by the doctrine of the class struggle is enshrined in the current (1977) Constitution of the USSR.

The Dialectic

In theory, Marxism is a materialistic set of doctrines and dogmas, denying the existence of a God and seeking materialist solutions to the world's problems by the correct application of the "scientific" laws of history, as discovered by Karl Marx. Yet, the Hegelian dialectic of "thesis, antithesis and synthesis", upon which the Marxist hypothesis rests is pure mysticism.

Borrowing from Hegel (who in turn had borrowed from Plato) Marx arbitrarily decided that feudalism was the thesis, changing by degrees until it was replaced by capitalism, its antithesis. Capitalism was in turn destined to develop increasing contradictions until in the end it yielded to the "synthesis" of socialism. Once socialism has been reached, contradictions are eliminated, this being the Marxian version of Hegel's Absolute.

This, however, is a totally unscientific approach to the study of history. Why, for instance, start with feudalism? Why not with imperial Rome, or Chinese despotism, or the Egyptian theocratic State? Capitalism, moreover, did not spring whole into the world as the "antithesis" or "negation" of feudalism, but as the outcome of a complex process that included the violent disproof of the divine right of kings, the decadence of Rome and the emergence of the Puritan ethic, new inventions, the spirit of inquiry of the Renaissance, and so forth.

Nor has "socialism", in practice, proved in any sense a synthesis or an Absolute. While socialism was being imposed upon the Soviet peoples at the cost of millions of lives and total loss of liberty, capitalism was weathering the great crisis of the Depression, finding its self-correcting mechanisms and raising living standards in contradiction of all Marx's expectations.

Life itself, to borrow Khrushchev's favourite phrase, is the disproof of Karl Marx's philosophy.
Why then, do tens of thousands still flock to the banner of a discredited prophet? The answer, I believe, must lie in the continued need for religion, in the widest sense, in an age of scientific scepticism. Marx, to the uncritical, offers certainty. It matters little, to the millenarian mind, that his prophecies lie in ruins or that his doctrine has produced monstrous tyrannies wherever it has been applied. It is not the doctrine that is wrong: the fault lies with the character defects of the tyrants that have followed Lenin's example: with Stalin, with Mao. There is a search for other Gods: although Fidel Castro's failure is as complete as that of any other Marxist-Leninist, attempts are made to cling to the myth of his relative purity.

Just give us a chance, say the Marxist fundamentalists, and we shall succeed where others have failed. For the sake of humanity, it is devoutly to be hoped that they will be denied the opportunity to try.
Brian Crozier

Reply: Marxism Defended
The statement that Marx "probably ranks as the most influential political thinker of the twentieth century" and that this has been "almost entirely evil" is based on an alleged impact of Marxism on aspects of the present world which is asserted, but in no way substantiated. That "Marxism lies at the root of some of the worst totalist tyrannies of our time" is an oft-repeated attack on the ideas of Marx, but one which Brian Crozier makes not the slightest effort to prove. Indeed, there are many tyrannous regimes in the world; not all of them make any claim to be "Marxist", and it is notable that anti-Marxists are usually conspicuously silent about the tyrannous dictatorships in Chile, El Salvador, Paraguay. Pakistan, South Africa and Turkey. But what of the totalitarian dictatorships in Russia, Eastern Europe, China, Albania and Cuba? The dictators in these countries pay lip service to some perverse notion called Marxist-Leninism — just as other tyrants pay lip service to Christianity or Islam — but it is not because of this ideological lip service that "the Soviet autocracy and the genocidal Pol Pot regime in Kampuchea" behave tyrannously. These countries are state capitalist and the oppression which characterises them is not the result of Karl Marx's analysis of capitalism, but of their need to exploit their workers in accordance with the needs of the very capitalist system which Marxism opposes. Far from being examples of something other than capitalism, the state capitalist dictatorships are extra stains on the social system which its supporters, like Brian Crozier, aim to whitewash. Mr. Crozier is right that Marx would not have approved of the horrors of the regimes which pay lip service to him — but it would be with more than hindsight that Marx and Engels could now state that state capitalism is not socialism. As Engels wrote in Socialism: Utopian and Scientific:

The modern State, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it pro¬ceeds to the taking over of the productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage workers — proletarians. The capitalist relation is not done away with. It is rather brought to a head. (Our emphasis.)

On the basis of that — and other similar statements by Marx and Engels — how can anyone claim that Marxism supports centralised, state ownership and control of capital? It would be true to accuse Leninism of such an aim, but Mr. Crozier mistakenly states that Marxism, as opposed to Leninism, "lies at the root" of the state capitalist regimes.

Marxism, unlike the Idealist philosophies which speak of absolute truths, is notable for its historical relativism. Marx was not a socialist because socialism is an absolutist Utopia to be striven for, but because the next stage in social history is a necessary solution to the contradictions of the present. Far from basing his thinking on absolute certainty, Marx's very wise motto was "Doubt Everything".

Determinism and Praxis

"Marxism", we are informed, "abounds in contradictions". Incorrect — Marxism explains social contradictions, between social existence and material, historical potentiality. To examine and solve contradictions is not be contradictory; in other words, contradiction is the object of the Marxist study. Brian Crozier's suggestion that there is an "inherent contradiction" between determinism and consciousness does not show that Marx was illogical, but that Marx's dialectical materialist understanding enabled him to see that history cannot be explained either entirely in terms of fixed determinism or entirely in terms of human will. Would Mr. Crozier not agree that certain social relations involve humans "independent of their will" (those imposed by the social environment into which we are born and conditioned) and others can be brought about by human beings consciously creating them? All that Marx was saying is that there is a massive contradiction between what is and what could be; only conscious human action can resolve that contradiction.

But let us get down to the crux of our critic's confused attack. Would it be fair of us to suggest that he has attacked the social analyses made by Marx without reading them? He tells us that he will not refute "Marx's strictly economic theories, which others better qualified than I have done repeatedly". We are entitled to expect Mr. Crozier to tell us who these great experts are who have refuted Marxist political economy — where are their detailed refutations of Capital to be found; in what way have they demonstrated that Marx was wrong about value and profits and wages and inflation and unemployment and trade cycles? If they have managed to "refute" the economic thinker whom Mr. Crozier regards as the most influential of this century, where are they hiding with their words of capitalist wisdom? According to Brian Crozier, Marx predicted that "capitalism will collapse under the weight of its own contradictions, to be succeeded by socialism". We have searched the collected volumes of Marx for this alleged prediction, but like the critics who have refuted Marxist economics, it is nowhere to be found. Marx did not forecast the collapse of capitalism. A Socialist Party pamphlet published in February 1932 pointed out that

Workers who have accepted the wrong and lazy idea of collapse have neglected many activities that are absolutely essential. They have taken up the fatalistic attitude of waiting tor the system to end itself. But the system is not so obliging!

The collapse theory, when advanced by people calling themselves Marxists, is based on the illusion that there are no counter-tendencies to the falling rate of profit. In dealing with the nature of crises Marx points out that these will not cause the collapse of capitalism. In his Theories of Surplus Value Marx categorically states that "Permanent crises do not exist" (p. 497). If. as Mr. Crozier mistakenly states, Marxists believed that capitalism will collapse and socialism is inevitable, "there would be no need for the expectant to do anything but await its coming". But unlike those who are waiting for the Messiah to come down to earth (and presumably be crucified by the Daily Telegraph readers who applaud Mr. Crozier's articles about the need to preserve the status quo) Marxists are not in the business of waiting for the revolution to make itself.

Brian Crozier talks about the "revolutionary violence and avoidable suffering" of recent history as if it somehow demonstrates that Marx was mistaken about something. But the violent changes to which Mr. Crozier refers were consequences of the rise of capitalism in backward countries. For 1917 in Russia read 1798 in France; Engels predicted that a Russian Revolution would be a repeat of 1798. The Bolshevik revolution did not see the destruction of capitalism in Russia, but the beginning of state capitalism.

False Prophecies

We are told that "one of the most demonstrably untrue of Marx's predictions was the coming 'absolute pauperisation' of the workers". Let us put Marx's theory into context; in Wage Labour and Capital he wrote that

A house may be large or small, as long as the surrounding houses are equally small it satisfies all the demands for a dwelling. But let a palace arise beside the little house, and it shrinks from a little house to a hut. The little house shows now that its owner has only very slight or no demands to make; and however high it may shoot up in the course of civilisation, if the neighbouring palace grows an equal or even greater extent, the occupant of the relatively small house will feel more and more uncomfortable. dissatisfied and cramped within its four walls.

In the same pamphlet Marx pointed out that improvement in the worker's material existence "does not remove the antagonism between his interests and . . . the interests of the capitalists". Higher wages do not alter this: "In proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse" (Capital Vol. I, Chap. XXV, p. 645). The fact is that, compared with the potential which now exists for meeting human needs, we are living in a society which faces not only the same social problems as existed fifty and a hundred years ago (starvation, bad housing, poor hospital facilities, unemployment, deprivation), but new, more awful ones: chemical pollution, racism, the nuclear threat, state secrecy using computers, numerous conventional wars using new weapons of mass killing, widespread street crime. The lot of the workers has grown worse. Similarly, Marx's prediction that capital would become increasingly concentrated in fewer and fewer hands has come true.

Poverty has led to widespread working class discontent, but not yet to a working class which is conscious of the need for socialism. The tinny motor cars which Mr. Crozier cites as evidence of working class affluence, like the mortgages and mock-Tudor front doore w hich some workers acquire, may have shocked Khrushchev, but they do not hide the essential poverty of the class which produces all the wealth of society but who, in general, can only afford to consume the second-rate trash. Poverty is not the absence of a Ford Fiesta or a Sony Hi Fi, but is the social alienation of the wealth producing class from the means of wealth production and distribution. If Mr. Crozier is sure that such poverty is "demonstrably untrue" he could tell us how the 80 per cent of the British population who own between them less of the accumulated wealth than the richest 1 per cent are "demonstrably" affluent?

Incidentally, Brian Crozier is quite incorrect when he states that Marx has been proved wrong in his "belief that the revolution would start in an advanced capitalist state". There has yet to be a socialist revolution, so Marx can hardly have been proved right or wrong.

The Class Struggle

"Perhaps the most pernicious of Marx's doctrines", we are told, "is the class struggle." We are informed that the theory of the class struggle is based on envy and incites violence and conflict. Anyone would think that violence and conflict would be absent from capitalist society unless wicked Marxists invented class division! The opposite is the case: it is the existence of a society in which there are classes which produce social antagonism, often violent. It is impossible to have a society in which the privileged minority monoplises the means of living and the wealth producers are reduced to wage slavery without serious and ceaseless conflict. The Murder Squad do not commit the murders they investigate; Marxists do not invent the class struggle which we experience. Envy will be eradicated by abolishing poverty. If Brian Crozier is as opposed to class conflict as he claims — and as Marxists are — why does he oppose the only political movement in existence which aims to establish a classless society?

It is absurd to suggest that Marxism "sanctifies" the autocracy "of a single ruling party in the name of the working class". Marx's whole political outlook was a reflection of his view that "the emancipation of the working class must be the work of the working class themselves". The Socialist Party of Great Britain, which shares the view of Marx, has never once condoned or ceased to expose parties which rule in the name of the workers. Marxists stand for worldwide democracy — the ownership and control of the earth and everything in it and on it by its inhabitants. That has nothing to do with dictatorship, either of the party or the board room.

Brian Crozier's reference to Russian foreign policy has nothing to do with Marx or Marxism. The rivalry between NATO — representing western capitalism — and the Warsaw Pact — representing eastern capitalism — is a product of the market system which Marx opposed and Crozier accepts.

The Dialectic

Like most critics of Marxism, Brian Crozier is baffled by the theory of historical materialism. It is anything but a dogma. Materialists do deny the existence of god, just as we deny the existence of fairies, pink elephants and other invisible and supernatural creations of human fantasy.

Marx's philosophical writings, far from being based on Hegel's "pure mysticism", rejected Hegelian metaphysics. Again, it is utterly mistaken of Mr. Crozier to suggest that Marx's analysis of historical development started with feudalism. In his Preface to the Critique of Political Economy Marx refers to "Asiatic, Ancient, feudal and modern capitalist modes of production".
Engels' great work, Origin of the Family, Private Property and the State, can hardly be said to consider history to start with feudalism. "Capitalism . . . did not spring whole into the world" writes Brian Crozier. Of course not; neither did feudalism or the ideas of Marx or even Brian Crozier himself— all things evolve. Capitalism, as a network of social relationships, did replace feudalism as a social order; one does not have to take the word of Marx or the Socialist Party on this — virtually all reputable historians will verify it. In saying that socialism will replace capitalism Marxists are not predicting an absolute synthesis — whatever that would be — but a movement in social evolution. Socialism will not be a static, absolute society; it will develop in line with material needs and possibilities.

Conclusion

Why do workers become Marxists? Brian Crozier suggests that tens of thousands flock to the banner of Marxism because it is a new, secular religion offering dogmatic certainty about the world. Perhaps some workers do seek dogmatic certainty in Marxism, but in so doing they are not Marxists. Many workers claim to be flocking to Marxism, but are, in fact, rushing enthusiastically towards ideological platforms which, knowingly or otherwise, perpetuate the capitalist social order. Similarly, many so-called critics of Marx and modern Marxists are not criticising anything but a bogus caricature of the socialist case. The failure of millions of workers to become Marxists has much to do with the fact that it does not provide dogmatic certainty and god-like leadership. The strong conditioning towards working class passivity has made the politics of revolutionary conscious action seem unattractive and frightening for many workers. At the moment the majority of workers are willing to leave the historical driving seat to those, like Brian Crozier and his fellow apologists for capitalism, whom they foolishly think will know what is best for society. For the sake of the working class, let us hope that many workers will study Mr. Crozier's manifestation of his political wisdom and draw from it the obvious lesson that the case against Marxism is unproven — and probably unprovable.
S COLEMAN

Socialist Standard March 1983