Profits in socialism?

[AmericanSocialist]

Hello all, as you know I am quite new to socialism and I am trying to read as much as I can to educate myself. I wanted to know about profits in socialism. What I mean by this is companies making profits.

Obviously there would be public ownership and there should be a planned economy. The taxes should be flexible, flexible as in not etched in stone as the more revenue and profits brought in will be taxed accordingly. So the more profit made the more owed to the state. So is it correct to say that in a socialist society the profits made by companies will be taxed which means they owe the state, but they also keep a bit of the profits (the companies and the workers)? or am I getting this wrong?

thanks

[thälmann]

you wont have profits in socialism, because profit means exploitation. but there will be some kind of surplus, which is integrated in the economic planning, because you need money for the education, health etc. but the surplus will not be the motivation of production.

[AmericanSocialist]

I sort of understand, so what would we do to stimulate production from companies? In other words what is a big motivating factor?

[Catmatic Leftist]

If by profit you mean overproduction of goods for the sake of money in the capitalist's pocket, then no. In a socialist society, an economy will be run on the basis of "from each according to his ability, to each according to his need." We will only produce enough based on necessity, meaning we will only produce enough to benefit the proletariat.

[AmericanSocialist]

okay that makes great sense. Thanks now i understand.

[Jose Gracchus]

The "profit motive" as a basis for running a society and social production, is something apart from "oh, we ended the year with a surplus". This presupposes an early stage of socialist construction where commodity production and some amount of money circulation continues to be used.

[Victus Mortuum]

Profits are the money that the economic dictators extract from the product that the workers produce.

Assuming a minimal market socialism (a society of worker coops):

Profits will be abolished when workers control their product and their work democratically. All incoming money will be divided between worker's wages, maintaining the means of production in the workplace, and any expansion desired by the workers all decided democratically.

This is a great place to start in understanding Anarchism (I highly encourage reading this even if you aren't an anarchist, because there's a lot of general socialist theory in there):
http://www.infoshop.org/page/AnAnarchistFAQ

I haven't found any documents that are anywhere near as comprehensive as that for Marxism, but wikipedia might be a great place to start for it.

[robbo203]

you wont have profits in socialism, because profit means exploitation. but there will be some kind of surplus, which is integrated in the economic planning, because you need money for the education, health etc. but the surplus will not be the motivation of production.


If you have money you don-t - can't - have socialism. Money implies economic exchange implies private (including state) ownership of the means of production and therefore the absence of common ownership. Socialism means a moneyless wageless stateless community in which people give accroding to their abilities and take according to their needs. Socialism is just another word for communism. They mean the same thing

[Jose Gracchus]

If you have money you don-t - can't - have socialism. Money implies economic exchange implies private (including state) ownership of the means of production and therefore the absence of common ownership. Socialism means a moneyless wageless stateless community in which people give accroding to their abilities and take according to their needs. Socialism is just another word for communism. They mean the same thing

This is an argument from semantics. You declared a definition, and then declared victory by following the definition you provided.

Furthermore, there will have to be considerable transitions to a communist economic system, and there will likely always be some formalized means of exchange for goods and services, even after money is abolished. There must be a standardized means of correlating the different informational and data inputs to the economy from various positions, even if that is simple accounting for labor, raw materials, energy, environmental purposes as well as demanded or desired consumer goods. How would producers know what other people really want? Are you claiming even the at-will production of goods for society's benefit will be possible without formalized means of delivering information from the consumer side to producers?

[robbo203]

This is an argument from semantics. You declared a definition, and then declared victory by following the definition you provided.

Furthermore, there will have to be considerable transitions to a communist economic system, and there will likely always be some formalized means of exchange for goods and services, even after money is abolished. There must be a standardized means of correlating the different informational and data inputs to the economy from various positions, even if that is simple accounting for labor, raw materials, energy, environmental purposes as well as demanded or desired consumer goods. How would producers know what other people really want? Are you claiming even the at-will production of goods for society's benefit will be possible without formalized means of delivering information from the consumer side to producers?

Nope I am not saying that at all. Of course production units need to be informed of the demand for goods expressed by consumers. In a moneyless socialist society this will be effected through a self regulating system of stock control using calculation in kind. In fact, such a system already exists and operates in parallel with a system of monetary accounting under capitalism. Visit your local supermarket and check it out for yourself. What those shelf fillers are acting upon is information about stock levels and replenishing stock where necessary. In due course this information is transmitted down the production chain to suppliers (and the suppliers of the suppliers and so on) in the form of orders for fresh stock.


What you apparently dont appreciate is the difference between this and economic exchange. It is ludicrouus to suggest this is just a question of semantics. Economic exchanges are about property rights, the right to dispose of the good in question. If I give you a certain sum of money for a particular good what that means is that you take possession of that sum of money while I relinquish ownership of it and conversely that I take possession of the good while you relinquish ownership of it. We are in effect exchanging property rights

Think logically. If the means of production were commonly owned there could be no question of you owning this commodity and me owning that if the means of producing them belonged to both of us. Socialism means the common ownership of the means of production. This precludes economic exchange and therefore money as a means to facilitate such exchange

[syndicat]

calculations using "in kind" calculations won't work because of the problem that different kinds of things are not commensurable.

An efficient economy requires the ability to measure the social opportunity costs of different products and techniques, and to compare them. Resources and labor used to produce X could be used to produce Y instead. Thus this presupposes a numeric scale of cost...and thus prices.

If the means of production are owned by the whole society but alloted to the workers to manage, then we need a way of calculating the benefits provided by their work, and the social opportunity costs of their products, to determine whether the resources could be better spent on something else.

But in a genuinely socialized system of production, the benefits do not accrue to the workers in the form of revenue, which they could then pocket as income. If they could take the benefit they produce in the form of a revenue stream from sale of products, then they can capture a surplus of benefit over costs.

Within a genuinely socialized mode of production, the surplus accrues to the society as a whole. This takes the form, for example, of free social services and other free goods, such as free health care and free education. In other words, where do the resources come from to provide the health clinics, free health care services, etc? They are alloted by the whole population out of some sort of participatory budgeting or participatory planning process that determines the budget for public goods. The workers who do this health care work are provided an income (an entitlement to acquire consumer goods) out of this surplus.

[Kotze]

When it comes to income some people get without working for it — aside from basic guarantees for those who can't work and some bits of free stuff inasmuch as technological progress and changes in attitude allow — one has to keep in mind this unfair income is not always based on active crooked behaviour, but it also happens just because of luck.

Workers who are willing to work longer and to do less pleasant work should be paid a premium and people should be protected against random occurences that are outside their control which implies fortunes due to random events have to be curbed, too. It is important that the system of laws and taxes distinguishes between these things as precisely as possible.

Some examples:

In today's world a company profits if another company in the same sector gets wiped out by an unforeseen natural desaster, is that fair? -I think not.

If I work in an assembly line of a product that doesn't sell well because of some fundamental design flaws, are these my fault? -No.

It is sometimes argued against a minimum wage that it is somehow inefficient, but why should a crappily managed company co-exist with another much more efficient company in the same sector, the crappily managed one only surviving because it pays a crap wage? -To hell with it.

When some state-paid infrastructure project is started near land a person owns, this can drastically improve that person's quality of life, directly or because that person can now demand higher payments from tenants. This is why I'm right here and now in favour of a land-value payment system, regular payments for holding land in a good location that push the selling price down to basically nothing if nothing is built on it. Even in a very different future economy I think one would have to do something similar to that — say that everybody does have a right to shelter, but that right can't be the same at the periphery of cities and the core, if you want to live in the center of action and commute less you have to be content with the tradeoff of a much smaller living space or pay extra.

As far as consumer items go, the new society can work very similarly to the old (aside from curbing monopoly price gouging and production being less focussed on crap-quality items for the many and extreme luxury for the few, because of the more equitable income distribution): Stuff is priced based on production cost, with lower price if demand is much lower than expected (to make room where stuff gets stored) or higher price if demand is much higher (to reduce queues and give the items to those who want them the most, this typical cappie argument for rationing by price makes much more sense now with the less extreme income spread). Cockshott & Cottrell (http://reality.gn.apc.org/) proposed items could have an additional info about their balanced price — the price that would correspond to production cost. So when the selling price is much below that consumers know it's a bargain and when it's much higher they can expect it to get cheaper soon, the consumer behaviour triggered by this could reduce annoying price fluctuations.

Fluctuation in demand should NOT directly translate to higher or lower budgets going to those who work in the production units in question. They do not receive anything directly for that. They get judged and an order how much to produce is made, and this is informed by the consumption info (btw. with an electronic payment system under planning you can easily track information about the composition of the consumer group of any item, like if many are in a high-income group that would suggest the item is not particularly important, also info about age and sex can be collected like that), but for reasons such as the examples given above it is not automatically fair to base income on sales. (Besides, even if somebody has a hypothetical rare talent of being 100x more productive than others, it's still kinda pointless to pay that person much more than average. Motivation by income bonus only works within certain bounds.)

When not a small R&D team is judged, but the analysis is made on the level of sectors comprising several thousand workers each, the likeliness that there are many particularly hard-working people in one sector and not the other is vanishingly small. On that level, income distribution should be allocated according to how many hours of work are done in each sector. At a lower level, workers themselves decide about which tasks should be more or less paid (within legal min and max levels) out of that income allocation budget.

Who does the planning at the highest levels? It is important that even or rather especially these people don't receive a particularly high income, otherwise they will lead very different lives from most and develop very different interests; each of them only does it for a limited amount of time, and these deciding organs should be heavily augmented if not dominated by sortition (with statisticians and engineers and nutritionists and other experts giving advice, but not making the final decisions), so that no new bourgeoisie or aristocracy develops. Incremental changes in the budget allocation to the broadest categories as well as the min and max income could be voted on directly by the population.

[robbo203]

calculations using "in kind" calculations won't work because of the problem that different kinds of things are not commensurable.

An efficient economy requires the ability to measure the social opportunity costs of different products and techniques, and to compare them. Resources and labor used to produce X could be used to produce Y instead. Thus this presupposes a numeric scale of cost...and thus prices.

If the means of production are owned by the whole society but alloted to the workers to manage, then we need a way of calculating the benefits provided by their work, and the social opportunity costs of their products, to determine whether the resources could be better spent on something else..

This is called the economic calculation argument most famously, or infamously, advanced by Ludwig von Mises, the right-wing, pro-capitalist Austrian economist. Im actually quite amazed to discover that you subscribe to it. All of the arguments you raise and more besides have more or less been completely demolished including the point you make about commensurability - an imperative that arises from the exigencies of market exchange rather than the efficient allocation of factor inputs as such.

Instead of presenting some long winded unfocussed treatise on the shortcomings of the ECA might I present you with one or two links to look at and perhaps then we can have a discussion on the specifics



http://non-market-calculation.wikispaces.com/The+basic+argument+of+the+ECA


http://www.cvoice.org/cv3cox.htm

[AmericanSocialist]

So if I understand someone doesn't necessarily have to be motivated for extra production if the production already being made is in accordance with the needs of society? So all this bullshit from the capitalist is just that capitalism? Because what need is there for someone to bust their ass extra if the needs are being met.

[syndicat]

This is called the economic calculation argument most famously, or infamously, advanced by Ludwig von Mises, the right-wing, pro-capitalist Austrian economist. Im actually quite amazed to discover that you subscribe to it. All of the arguments you raise and more besides have more or less been completely demolished including the point you make about commensurability - an imperative that arises from the exigencies of market exchange rather than the efficient allocation of factor inputs as such.


you're wrong. you mistakenly assume the only way to obtain prices is through markets. thus you assume that I was arguing for markets whereas I was not. the "economic calculation argument" you refer to was used by Hayek and von Mises to argue that only markets could be efficient.

their argument is mistaken. in fact markets are incapable of being efficient.

but an effective economy does need to be able to measure social opportunity costs and consumer preference rankings, both individual and collective. your proposed moneyless economy can't do that.

[AmericanSocialist]

Thanks victus for the link im checking it out now

[Rusty Shackleford]

So if I understand someone doesn't necessarily have to be motivated for extra production if the production already being made is in accordance with the needs of society? So all this bullshit from the capitalist is just that capitalism? Because what need is there for someone to bust their ass extra if the needs are being met.

the profit motive is done away with in socialist society. the profit motive caters to individualism and private ownership of the means of production, and private accumulation of vast quantities of capital.

Historically, the profit motive was necessary as capitalism is a necessary precondition for socialism, but, as all systems, they become less and less progressive over a period of time.

In a socialist economic system, the means of production are collectivized and operate under direction of the state economic bureaus(macroeconomic adjustment and planning) in conjunction with unions(workers democratic input and direct control) or completely collectivized and independent(federation of unions or something like that).

and the whole drive is to meet needs. not produce for productions sake, or to control more money privately.

the surplus that is produced is either more equitably divided, or democratically allocated to other purposes. companies in the capitalist sense wont exist.

[AmericanSocialist]

beautiful, this is much more greater than the capitalist system of exploitation. There needs to be no greed if the needs are met. Ofcourse greed will always exist, but in terms of production as you said it will be based on state control. So if I understand correctly the people ie. the working class is the ones whom control the state is this correct?

[Rusty Shackleford]

beautiful, this is much more greater than the capitalist system of exploitation. There needs to be no greed if the needs are met. Ofcourse greed will always exist, but in terms of production as you said it will be based on state control. So if I understand correctly the people ie. the working class is the ones whom control the state is this correct?
that point is a source of contention between leninists and basically everyone else on the left.

im trying to give a few different examples. one where there is a socialist state, and one where the socialist state doesnt exist. this is all theory. the only one ever practiced in great detail was the leninist theory though.

the axiom of socialist production is basically this: "from each according to ability, to each according to need"

[Veg_Athei_Socialist]

but an effective economy does need to be able to measure social opportunity costs and consumer preference rankings, both individual and collective. your proposed moneyless economy can't do that.
So you don't see a gift-economy as possible? I'm still learning so it would be nice if you could explain this.:)

[Rusty Shackleford]

a gift economy is only possible when the productive forces of society are able to provide for all and be sustainable as well.

immediately after capitalism? no.

and about barter economics.
barter trade led to the rise of the money commodity as the universal exchange equivalent of any good to be exchanged. its simply a process of streamlining trade.

[syndicat]

So you don't see a gift-economy as possible? I'm still learning so it would be nice if you could explain this.

as near as i can figure the idea of a "gift economy" is a huge extrapolation from some practices of small tribal societies. but a tribe is like an extended family where everyone knows everyone, knows how much they really contribute, knows what their needs are, etc. in small communities where everyone knows everyone and depends on each other there is a lot of immediate social pressure to be responsible.

It's not plausible to extrapolate from that to a modern urban civilization of tens of millions of people who don't know each other, with tens of thousands of products being produced and distributed over hundreds and thousands of miles.

what we can do is eliminate deprivation. that is, we can implement solidarity through the provision of basic needs like education and health care and perhaps some other things the community decides to provide collectively.

but individuals in a complex contemporary society have a very diverse set of wants and tastes. to provide a motivation for social solidarity and being responsible, people who are able bodied can be required to work and provided consumption entitlement at an equal hourly rate. this gives individuals and households an area of personal self-management over their own cosumption, which they can take in any particular array of things they want.

[William Howe]

The "profit" you should gain is the joy of knowing you're helping others, the feeling of union, friendship, and support for and with your fellow man.

[robbo203]

you're wrong. you mistakenly assume the only way to obtain prices is through markets. thus you assume that I was arguing for markets whereas I was not. the "economic calculation argument" you refer to was used by Hayek and von Mises to argue that only markets could be efficient.

their argument is mistaken. in fact markets are incapable of being efficient.

but an effective economy does need to be able to measure social opportunity costs and consumer preference rankings, both individual and collective. your proposed moneyless economy can't do that.

Well its all very well to make ex cathedra statements like my "proposed moneyless economy can't do that" but you havent actually examined this propostion yet, have you? I suggest you follow up the links I gave and come back with more serious criticism than this. The question of opportunity costs, you may be surprised to learn, has been more than adequately dealt with.

One other point - you say you are not arguing for markets but singularly fail to explain how the price information which you claim is so indispensable to the measurement of opportunity costs is to be derived except through functioning markets

[syndicat]

One other point - you say you are not arguing for markets but singularly fail to explain how the price information which you claim is so indispensable to the measurement of opportunity costs is to be derived except through functioning markets

i explain this in the thread on central planning. it involves the existence of a worker organization to which all plans are sent. that is, worker organizations make their own plans for what they propose to produce, households, community assemblies/councils, regional federations make their own plans for what they want produced. from the total set of plans the projected supply and projected demand can be calculated. the planning system would have a rule such as this: "If projected demand now exceeds projected supply by N percent more than before, raise the projected price by N percent." once the total projected supply and total projected demand is calculated, the changes in prices will fall out from the rule. It doesn't have anything to do with markets.

[ExUnoDisceOmnes]

I sort of understand, so what would we do to stimulate production from companies? In other words what is a big motivating factor?

Intrinsic motivation:
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[robbo203]

i explain this in the thread on central planning. it involves the existence of a worker organization to which all plans are sent. that is, worker organizations make their own plans for what they propose to produce, households, community assemblies/councils, regional federations make their own plans for what they want produced. from the total set of plans the projected supply and projected demand can be calculated. the planning system would have a rule such as this: "If projected demand now exceeds projected supply by N percent more than before, raise the projected price by N percent." once the total projected supply and total projected demand is calculated, the changes in prices will fall out from the rule. It doesn't have anything to do with markets.

I am trying to understand how your proposal would work but am not making much headway. Are you say that the planning process would commence with the formulation of numerous individual plans at the local and then become aggregated to arrive at a total apriori target for each of the millions upon millions of different kinds of inputs that a modern industrial economy relies upon? I dont want to put words in your mouth but if this is what you are seriously proposing then forget it. Its stands absolutely no chance of ever getting off the ground. The interdependency of inputs and outputs means that even the slightest deviations from this giant matrix plan would have repercussions that would throw the whole thing out of sync and compel continuous recalculation. It would be a bureaucratic nightmare of epic proportions.

And I still dont understand where "prices" fit into the picture. Are you advocating a system of "shadow pricing" along the lines of Lange? Because if so this has serious consequences for your claim about the absence of markets

[syndicat]

I am trying to understand how your proposal would work but am not making much headway. Are you say that the planning process would commence with the formulation of numerous individual plans at the local and then become aggregated to arrive at a total apriori target for each of the millions upon millions of different kinds of inputs that a modern industrial economy relies upon?

no. there is no single plan. there are all the various plans that workplaces formulate for what they propose to produce, households, communities, regions for what they will request. from this the workers organization attached to the national federation aggregates projected supply and projected demand, and applies the agreed upon pricing rule, and then publishes the results. that's all. they don't issue orders or quotas. they only publish the aggregate data and the consequences in terms of the pricing rule.

all the local worker organizations, households, communities, regional federations, etc will then need to modify their plans to stay in budget, if prices change.

the arrangements of inputs and outputs are arranged directly between the groups who will use them. for example, a factory making buses orders sheet steel for bodies from a steel plant. as prices change this will lead the worker group there to change their plans in various ways. but the price of the sheet steel isn't a market price. the steel plant workers organization doesn't capture revenue from this transaction, and this is not the basis of the income of the steel plant workers. the steel plant workers are collectively accorded a pool of consumption entitlement based on projected hours that would be worked, in their plan, with everyone in the society getting the same per hour consumption entitlement. so they are paid by the society, not a "company".

the prices of the outputs that are transferred to users/consumers are a numeric measure of benefit provided and costs of inputs (including environmental or external costs) are calculated also. this gives a ratio of benefit per unit of cost.

there would be a rule that each worker organization needs to approximate within some range of allowance to the social average of benefit per unit of cost. if they fall too far below, then there will need to be special reasons why their organization shouldn't be disbanded and resources transferred to other worker groups. this rule is needed to ensure that the economy is operating efficiently, that is, that resources are allocated where they will most satisfy the desires/needs as expressed by the population in their requests for goods and services. the means of production are not owned by the workers in some workplace but by the society.