The Most Recent Socialist Doctrines and the Problem of Economic Calculation   Leave a comment

This is part of a series on Ludwig von Mises 1920 essay “Economic Calculation in the Socialist Commonwealth”. I highly recommend that you read the full essay as I am just hitting the high points. Lela

 

Until socialists had some actual success in the world, they didn’t need to worry much about the problems of economic calculation without a price mechanism, so they didn’t. Really, what does it matter if your theory doesn’t work … until it becomes a reality.

In Mises’s era, socialist parties had obtained power in Russia, Hungary, Germany and Austria, which meant their theories now had to work in practice. So Marxist writers were beginning to actually look at the problems their theories walked hand-in-hand with. Mises had noted that they prefered to focus on drawing up programs for the path to socialism and not on addressing the problems of socialism itself.

Bauer leaves his readers completely ignorant of the fact that the nature of the banks is entirely changed in the process of nationalization and amalgamation into one central bank. Once the banks merge into a single bank, their essence is wholly transformed; they are then in a position to issue credit without any limitation. In this fashion the monetary system as we know it today disappears of itself. When in addition the single central bank is nationalized in a society, which is otherwise already completely socialized, market dealings disappear and all exchange transactions are abolished. At the same time the Bank ceases to be a bank, its specific functions are extinguished, for there is no longer any place for it in such a society. It may be that the name “Bank” is retained, that the Supreme Economic Council of the socialist community is called the Board of Directors of the Bank, and that they hold their meetings in a building formerly occupied by a bank. But it is no longer a bank, it fulfils none of those functions which a bank fulfils in an economic system resting on the private ownership of the means of production and the use of a general medium of exchange-money. It no longer distributes any credit, for a socialist society makes credit of necessity impossible. Bauer himself does not tell us what a bank is, but he begins his chapter on the nationalization of the banks with the sentence: “All disposable capital flows into a common pool in the banks.” As a Marxist must he not raise the question of what the banks’ activities will be after the abolition of capitalism?

Most other Marxist writers, even into the 21st century, don’t seem to realize that the bases of economic calculation are removed when you eliminate exchange and the price mechanism. That requires something be substituted in its place so as to avoid total chaos. There’s a fantasy belief that socialist institutions can easily replace those of a capitalist economy, but that has proven not to be the case. When the socialist markets in the USSR didn’t work, people turned to the black market. Mises was prescient in seeing that this would be the inevitable outcome.

Lenin’s ideas on the socialist economic system, to which he is striving to lead his people, are generally obscure.

Lenin trusted that the communes would be so efficient that they would provide a model for the rest of the country. Not too long after this, millions of people died in the Ukraine (the USSR’s bread basket) because the commune system didn’t work. In Lenin’s theories, every large agricultural and industrial concern was a member of the great commonwealth of labor. Those who are active in the commonwealth had the right of self-government. He said they exercised a profound influence on the direction of production and again on the distribution of the goods they were assigned for consumption. To Lenin, labor is the property of the whole society, and as its product belongs to society, society has a right to control product distribution.

How, we must now ask, is calculation in the economy carried on in a socialist commonwealth which is so organized? Lenin gives us a most inadequate answer by referring us back to statistics. We must bring statistics to the masses, make it popular, so that the active population will gradually learn by themselves to understand and realize how much and what kind of work must be done, how much and what kind of recreation should be taken, so that the comparison of the economy’s industrial results in the case of individual communes becomes the object of general interest and education.

Mises thought these “scanty allusions” to be a sign that Lenin didn’t understand statistics or monetary computation … that he might in fact be math deficient. You still couldn’t figure out how well the economy was doing or what a “fair” price was of any given product because there was no means of economic calculation within a socialist society.

Advertisements

What's Your Opinion?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Leo X. Robertson

News of my latest publications, events, and episodes of the Losing the Plot podcast!

Sherry Parnell

Author of "Let the Willows Weep"

Emerald Book Reviews

Book Reviews and Promotion Services

YA Chit Chat

The Ponderings of YA author J. Keller Ford

madchen863's Blog

Planet Earth: home of life

MIND MIX RADIO

Radio for the Awake and Aware

SHAKERS & MOVERS

Soweto isiPantsula Crew + Management

RedheadedBooklover

Just a redheaded woman who is obsessed with books

Mercedes Prunty Author

The Walking Mumbie

InsureZero Blog

All you need to know about Insurance

Creative Ideas for Starving Artists

Brain juice that revives and refreshes

Real Science

"Science is the belief in the ignorance of the experts" - Richard Feynman

Marsha Ingrao

Traveling & Blogging Near and Far

Victoria (V.E.) Schwab

"You can't get a cup of tea big enough or a book long enough to suit me." ~C.S. Lewis

Darlene Foster's Blog

dreamer of dreams, teller of tales

All About Writing and more

Advice, challenges, poetry and prose

Tapestry ~ Treasures

My life is but a weaving between the Lord and me!

Sue Vincent's Daily Echo

Echoes of Life, Love and Laughter

S.R. Mallery's AND HISTORY FOR ALL

Everything Historical And Much More...

%d bloggers like this: