Can Socialism Survive Human Nature?

5 02 2008

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The single greatest image which captured the end of the Socialist State system of the 20th century was the sight of hundreds of thousands of Germans breaking down the Berlin Wall. The Berlin Wall had been built in 1961 to stop residents of Communist East Berlin crossing over to capitalist West Berlin. Despite the barbed wire, watch-towers, attack-dogs and gun-totting sentries a few thousand people “escaped” from East Berlin to the West over the three decades of this Wall’s existance, each successful escape producing a hero and each killing on the Wall producing a “martyr”. The Berlin Wall became a metaphor for imprisoning an entire population and it was a distressing fact that this was being done by a State which claimed to champion the ideals of Karl Marx.

This column has earlier spoken about the endemic lack of freedom in the socialist States of the 20th Century (4, April, 2007). In a sense, they had made a Faustian bargain with what Marx had called “the characterless monster of unfreedom” in their attempt to protect their revolution. It has not only been the socialist revolutions which ended up denying freedom to their people, but this has been the unhappy chronicle of almost all modern liberatory revolutions. As this column has recounted over the past three weeks, similar was the case with the revolution of Haiti too, which in 1804 achieved freedom from slavery and colonialism, but is today wracked by poverty, imperialist plunder and oppressive rulers.

Comparing the glorious history of Haiti and witnessing her dire present during my recent visit to that country, I would often wonder what was it in the structure of modern liberatory revolutions which invariably pushed them towards authoritarianism, cruelty and petty-mindedness. Why has it been the same story from Robespierre to Aristide? The answer to my questions came as a pleasant surprise in the weed overgrown compound of the ramshackle St. Michael’s hospital in the small town of Jacmel on Haiti’s southern coast.

Jacmel had played host to Simon Bolivar, the South American revolutionary who had liberated that continent from Spain’s colonial control, when he had to flee Venezuela in 1815. Today, the Bolivarian revolution of Venezuela is financing Cuban doctors working in Jacmel, as in other parts of Haiti. The eight Cuban doctors I met in the hospital in Jacmel showed me that all revolutions do not flounder. These Cuban doctors gave me a glimpse of what socialist wo/man is capable of and why socialism is the future to aspire for.

Cuba has the world’s most comprehensive and well developed medical system, according to the World Health Organisation. Cuba alone has over 71,000 doctors when the entire continent of Africa has about 50,000. Its public health statistics are better than the USA and most European countries and unlike elsewhere, medical services to its citizens are totally free. Cuban doctors are considered among the most competent in the world and are highly prized for their abilities. Four hundred and thirty nine of these doctors are in Haiti working in its hospitals and fanning out into the countryside providing vital healthcare – free of cost – to the Haitian poor. The socialist Government of Venezuela provides the money for the Cuban doctors to work in Haiti.

A British team of health investigators have recorded that in areas where the Cuban doctors work, infant mortality is below 30 per 1,000 whereas the typical figure for Haiti is above 80 per 1,000. Similarly, maternal mortality in areas where Cuban doctors work is half of the national figure of 526 per 10,000 births. This British team estimated that Cuban doctors had saved over 80,000 Haitian lives in the period from 1999, when they first came to Haiti, till 2003 when this study was conducted. Unlike the hundreds of other foreign aid workers, Cuban doctors live in houses like common Haitians without air conditioning, often without even proper electricity and water. In their area of operation, they go to each house in every village, talk to the residents and identify the health problems before working out public health action plans. Those who require specialised medical assistance are then provided that. The Cuban doctors also train the locals to be mid-wives, para-medics and public health workers. Apart from this, the Cuban doctors also bring with them agricultural and fish seeds to augment their hosts diets. I was told that sometimes the Cuban doctors also join their hosts in physical labour to improve public sanitation.

Haiti is a country which is teeming with UN, American and European aid workers and UN troops. It is easy for the Cuban doctors to simply take the bus to the USAID or UN compound, rather than to a poor Haitian rural community, and ask for asylum which would be gladly given. But in the past eight years there has not been a single Cuban doctor who has done this. Given their world renowned medical skills, the relative poverty of Cuba and the large amounts of money they can make as doctors in the USA, it is astounding that not one Cuban doctor has till date “escaped” in Haiti. Rather they continue their daily visits to the rural communities and their ten hour shifts in the town hospitals.

When I asked them why they would not just leave this ramshackle hospital and migrate to the USA or Europe where they would get huge salaries, they did not seem to understand my question. They were doctors who had come to attend to the health problems of people here, why should they go to Europe or America to earn money, they seemed to counter question me! In the middle of this conversation of incomprehension, it suddenly dawned on me that for these people sitting around me, money and material comforts are quite secondary, a trifling matter which I was unnecessarily going on about. They had their homes, they wore good clothes, had their rum and songs and passionate conversations, what else would they require to live the good life. It was almost as if they were questioning me why would they want more; why would they sell themselves for getting things they really did not require. It appeared to me then that they did not measure their capabilities according to the money it could earn them or the comforts it could provide, but rather they measured their capabilities according to what they could achieve through them.

There are a few moments in a person’s life when we realise that we are face to face with a life-altering truth. That afternoon in the compound of St. Michael’s Hospital in Jacmel was one such moment for me, where, in conversation with a bunch of Cuban doctors, I realised I was an alien with in-human ideologies of measuring human achievement with money. I realised i was among amidst a different type of human being who does not need barbed wires and gulags to sustain loyalty to socialism, a human being who does not measure her worth by the money she earns, a human being who is not on the escalator of endless material desire – that shameless myth of capitalism. I realised I was sitting among people who are socialist without having to wave red flags.

Why is it that of the dozens of countries which professed Marxian socialism in the 20th century, only one – Cuba – remains socialist today while all others have either collapsed or become de-facto capitalist? The answer perhaps has largely to do with a simple, yet profound principle, which has been embedded into the very structure of the Cuban Communist Party thanks to the ideological battles won by Ernesto Che Guevara in the early years of the Cuban revolution against the onslaught of Soviet bureaucratisation. Next week this column travels to 1960s Cuba to discover what makes Cuba survive.

(to be continued)

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A slightly different version of this will be published in The Post on 6th February, 2008.

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48 responses

6 02 2008
janaki

reading your blog after a long time. this one was touching and reassuring.

8 02 2008
chon

http://www.inmotionmagazine.com/hcare/svg_cuba.html

Interesting! Adds to my fascination about the great Cuba

9 02 2008
Renegade Eye

Very interesting post.

The fall of the wall, was the death of Stalinism. It will be a footnote in history compared to the rise of revolutionary socialism.

Regards.

7 11 2008
A Thinker

I am a new reader to your blog but this story caught my attention and I felt inspired to write. This is a tremendous story about compassion and human sacrifice. It is heartening to know that there are still people in the world who care about their fellow humans above material possessions. It is also good to know that there is someone out there telling their story. We are often too caught up in our own lives and we forget just how good we have it.
That being said, what does that have to do with Socialism? It seems to me that the majority of the citizenry of Cuba (and Venezuela) still live in abject poverty. To quote, “…houses like common Haitians without air conditioning, often without even proper electricity and water.” This article is a testament to the compassion of the doctors and these doctors will ALWAYS have a steady stream of patients in these disease ridden, impoverished societies. Great! But, it would make me happier to hear that these doctors had less and less work because the poor were becoming healthy; that the infant mortality rate was 2% or 1% or less THROUGHOUT the country, not just where the government decides to dole out it’s token compassion for that day.
I have a hard time with the Socialist ideal because it espouses the idea that we (the “common” folk) simply cannot make it on our own. It criticizes us for being willing to succeed or fail and accept the consequences of our own actions. Honestly, socialists seem to fear the possibility that normal people may actually be able to control their own destiny. Sacrilege!
If you believe in compassion and self sacrifice, God bless you, and God bless the doctors in this story. But, for the state to MANDATE compassion is hypocrisy of the highest order. Instead of trying to make the poor temporarily more comfortable, how about we try making them not poor? Just an idea.

6 12 2008
I. Langalibalele

Sorry to chime in at this late date, but please correct some misconceptions. First, Haiti’s most oppressive ruler is the United States. The island has either been blockaded or occupied by the US since its 1804 liberation from France. If you don’t think so, just look at the record of US intervention. The rulers in Haiti sit at the US behest. Aristide isn’t in exile because of US democracy but American hypocrisy. Lay the blame squarely where it is at the feet of a US racist, bloodsucking foreign policy which comes out of the White House.

Second, socialism is a system which must necessarily have a global or international component to survive in modern society. The Cuban Revolution had Stalinism to thank for its weathering the storm of Yankee imperialism since 1960. Today, the Russians will need Cuba again as the US proves that it is an enemy of the Russian people by rearming Georgia and inducing Poland to place a NATO missile shield aimed at Moscow. Socialism will become a resurgent phenomenon but in a more democratic form than Stalin’s. That is because then the Soviet Union faced immense pressure on its western borders from the US, UK, Germany, Italy, Serbia and other reactionary states of the time. Hatred of Stalinist autocracy on these counts is irrational for Trots and anybody else who considers him/herself a revolutionary.

Stalin will always be a hero to the liberation movements of Mozambique, Guinea-Bisseau, Angola, Zimbabwe (despite the China connect), South Africa, Algeria, Nicaragua, Cuba, Vietnam and even Iran! Stalin is even a hero to the Chinese communists. He is a hero to all Russians who remember World War II and the defeat of Nazi Germany in the streets of Moscow.

Which is to say that socialism likely will not assume the form it did following the rise of Comintern. We can perhaps expect a more democratic state if there is a party apparatus strongly linked to the masses rather than to power. That is the role of the party. Plus today we have the influence of US bourgeois democracy to temper our ideas of power. I think there is more to discuss on this topic but we better address the critical questions of workers right now rather than speculating about how we hope the future is brighter.

22 01 2009
Prashanth Perumal

Cuba’s socialist medical system and the usual blah!! blah!! blah!!

An economic system without profit-loss calculation (due to the absence of a market) is bound to fail because there is simply no rational allocation of resources towards sectors of the economy where it is most urgently needed. Socialists all around the world continue to sleep in their own darkness without recognizing this very simple fact of economics.

Aniket, I just want to know, how will your much acclaimed humane socialist system decide what, how and why to produce without the market?

24 01 2009
zetkin

Prashanth Perumal seems steeped in the tradition of economics at the heart of which lies a belief that the market is the only rational allocator of resources. There is a strand of economics that even the great theorists in the World Bank and the defenders of high capitalism now go by, which goes under the title of ‘market failure’.

Prashanth Perumal also seems to believe there is no market in Cuba or elsewhere under socialism. May be honing some knowledge on Cuba’s economy and other erstwhile socialist economies would be useful.

Prashanth Perumal also has difficulty (in his rationality imbibed from the logic of capitalism) that only an economic system based on profits can succeed. That success is for a tiny minority of the wealthy and powerful.

Socialism is not about doing away with the market. It is about doing away with the property relations that make profits the steering force behind capitalist markets. Markets are much older than capitalism and the profit principle. There has been no socialist system which did not have a market.

Problem is that the blah blah blah of Cuba’s socialist medical system has proved to be far superior in providing universal healthcare as opposed to the condition of large sections of people in the US who have been priced out by ‘rational allocation of resources’ of the US healthcare market.

But then, for some people ignorance is bliss and belief is rationality.

25 01 2009
Prashanth Perumal

Okay, here comes Zetkin with an inherently contradictory claim: A so-called “market” that works without profits.

The thing is markets can NEVER work without profits. No, it is not because of any moral claim that men won’t work without profits or anything, rather it’s something logical imbibed in the working of the market system.

Profits are the ONLY way to know which sector of the economy needs the most immediate allocation (or diversion) of resources. If there are huge profits made by firms in a particular sector of the economy, then other firms will move into that particular sector of the economy. If firms in the same sector records losses, then firms will pull out of the sector and move into other sectors which offer better returns.

You just saw now how profits and losses (what I called `profit-loss calculation’) serve as a means of information.

25 01 2009
Prashanth Perumal

And Zetkin, the US healthcare system is by no means completely privatized, it is socialized with HUGE government regulations which cost 21.8 billion US dollars while the benefits account only to 4 billion US dollars.

This inefficiency is because of the absence of a free unregulated market. If this inefficiency were to be done away with, 15% of the American population which is uninsured would be easily covered!

Oh, but market is a devil! Well, the devil can survive only until it serves its’ customers. Profits say that your services are valued, losses say you are doing a bad job and you’ll be kicked out.

25 01 2009
zetkin

so now you have said it…prashanth perumal…you want a completely deregulated ‘free market’…long live hayek, reagan, thatcher, bush even as they are withering away in something called a ‘melt down’…you might have said that right at the start. would have saved some time for an immensely exploited worker in this capitalist work-ethic dominated world.

profits in a capitalist market don’t say that your services are valued, profits simply say that you are exploiting your workers well and justifying it through the bullshit of a ‘rational allocation’. if you are able to realize your profits you are managing to hold the equilibrium of screwing your fellow capitalists well and in turn being screwed by them. when you can’t hold anymore, you do a ‘satyam’.

and markets existed before capitalism and the profit principle under capitalism that underlined capitalist market relations…don’t add the neocon twist to what is being said…read some hayek and adam smith and william petty since marx might give you a fatal allergy.

25 01 2009
Prashanth Perumal

Zetkin, I didn’t expect such an irrational answer from you. You just have to tell me how a market will work without profits and losses serving as economic signals. How will your economic system send across the signal that rice is available in abundance more than people really want (and they’ve started wasting it) or that wheat is scarce in the economy? Don’t say you’ll measure the length of crowds outside ration shops.

It was exactly this problem Soviet planners had in knowing how much to produce and allocate.

With regards to the global meltdown, it is NOT the result of a free market. Free market doesn’t have governments tampering the natural market interest rates of the economy (as was in the case with the United States), nor do banks in a free market lend more money than what they have in their vaults (as was/is with the case of the fractional reserve banking all around the world).

Governments artificially held the interest rates low by flooding banks with paper money which led banks to lend out cheap credit. This contributed to the artificial housing boom which had to go bust when savers are allowed to re-establish their time-preference values (that is, provided the government doesn’t flow in more paper money to keep the interest rates low and prevent businesses from blowing down).

The entire mess is because of government’s intervention with the market, not because of “greedy” bankers.

25 01 2009
zetkin

you don’t really get it, do you?

a capitalist market will never work without profits as one (not the only one) of the signals because the underlying property relation makes it a pre-given, but abundance/scarcity = profit/loss is where you have it wrong because you are hung on visualising a market based on capitalist principles (which is why go back to adam smith).

the problem soviet planners faced was not one of lack of profits as a signal, but three main issues:

1. intensive technological progress in keeping with social needs after the extensive transformation of production was achieved.

2. a low level of what is called ‘prior accumulation’.

3. and coming to your point about length of queues as signals etc, an allocation process through iteration through an extensive system of information matrices (you can do some leg work to know if you don’t know – it requires reading a few books as opposed to spouting very banal punchlines like ‘profits signal prices’ which is wrong even by hayek’s theory or adam smith’s).

since you are hung on only the third as all ‘socialist calculation debate’ junkies do inspired by von mises, the soviet union actually did the pricing very ‘efficiently’ for a pretty long time using the socialist pricing principle based on approximating the labour and surplus labour embodied in a commodity and using tatonnement to correct for departures from this value. the information system was as good as any ‘capitalist market-economy’ principles and only as prone to ‘system failures’ as the ‘capitalist market-economy’ which even today has not been able to solve that elementary problem of ‘information asymmetry’.

as for what you have said on the present crisis, so it is the ‘independent central bank’ which the neocons were so proud about which did ‘em in? that is very amusing!

but you have finally said it: the ‘free market’ is an idyllic myth. it is all about big states and big corporations. destroy them.

you do it your way for your utopia: the ‘free market’

we will do it our way for ours: socialism.

that is called class struggle.

25 01 2009
Prashanth Perumal

“since you are hung on only the third as all ’socialist calculation debate’ junkies do inspired by von mises”

Oh ya mr. smartass, this junkie is yet to get you on the entire calculation debate: how would your socialist economy price capital goods? There is no scope for pricing capital goods since the state is the ONLY seller, selling unto itself!! You could do it through utility analysis, but that shows no scope to indicate consumers’ real preference, nor would it make the planner ‘responsible’ in allocating resources. There is no moral hazard on the planner’s part to prevent wastage of resources.

“it requires reading a few books as opposed to spouting very banal punchlines like ‘profits signal prices’ which is wrong even by hayek’s theory or adam smith’s”

Yeah mr. “brilliant”, profits don’t signal prices, they signal diversion of resources towards the most important need. And no, Smith isn’t sensible when he tried to mess up things with the labor theory of value.

“based on approximating the labour and surplus labour embodied in a commodity”

Come on, there is no objective basis to value goods. Any valuation is subjective(!) and that’s the only way to know what the CONSUMERS prefer, not the fancies of the planner.

“using tatonnement to correct for departures from this value.”

Why don’t you say “we used the market”? Auctioning goods to find out equilibrium price is exactly the pricing mechanism, and when bidding happens profits/losses are recorded. Now what’s the talk of no profits/losses .i.e., no profit-loss calculation? (in fact your pricing system won’t come this far, since it’s going to get stuck in rationally allocating even the capital goods).

25 01 2009
Prashanth Perumal

“so it is the ‘independent central bank’ which the neocons were so proud about which did ‘em in? that is very amusing!”

Yes, governments caused the crisis by interfering with the market interest rates!

Dude, you seriously have to stop this stupid tone of yours. If you have a proper answer, you are welcome. But if you are going to mess up your crap (comments) with some more personal comments like “junkie” etc. you seriously have to learn manners. Personal comments are really offensive to anonymous people who don’t care a shithole about typing out answers to some wanker over the net.

25 01 2009
Prashanth Perumal

Zetkin, coming back I haven’t even started with pointing out to the enormous number of equations you’d require even if you are to use the Walrasian method of tantonnement — and still you’ll find yourself lagging behind the millions of equations which express the preferences of the consumer in a capitalist economy.

Apart from that is the lack of incentives to produce goods with better efficiency.

And the lack of measures to punish/reward the respective parties based on the quality of their work — the capitalist economy on the other hand is unforgiving on you if you aren’t able to match up with the best.

And the centralization of economic power which often leads to tyranny. If I go out of favor with the local planner, then I’m doomed for life while in a free market economy I always have an alternative plan.

25 01 2009
virasi

“a low level of what is called ‘prior accumulation’.”

Exactly! That’s one reason you have to allow for the evil devil ‘capital accumulation’. Only that leads to new innovations by incentivising bright entrepreneurs. Asking for the ‘redistribution of profits’ (that’s a layman’s guide to understanding your jargon “approximating the labour and surplus labour embodied in a commodity and using tatonnement to correct for departures from this value”), in other words, selling the product just to cover the production costs is very naive! Any idiot could do it – the same old incentives problem.

“an allocation process through iteration through an extensive system of information matrices”

The same old socialist BULLSHIT to prove their economic system on paper. Sell it in the real world and it is sure to be disposed as utter waste.

“you can do some leg work to know if you don’t know – it requires reading a few books as opposed to spouting very banal punchlines like ‘profits signal prices’ which is wrong even by hayek’s theory or adam smith’s”

Lol @ Zetkin. Dude, you stop professing your superior bookish knowledge and jargon over here. What Prashanth says is completely sound and logical and economically very valid.

25 01 2009
Prashanth Perumal

Thanks Virasi for your support! :)

The thing is Zetkin’s ideas are forced by his prejudice, without any rational basis. Add to that, I haven’t even started with the bigger picture of time-preference values of consumers at different points of time, and the most important role played by the natural market interest rates in deciding the pace of capital goods construction. The problem in today’s world is that the government is simply printing out excess money and keeping interest rates artificially low thereby effectively nullifying the real time-preference of consumers. So the entrepreneurs are investing on something which is not viable in the long run because consumers seriously did not ask for it. That’s what we call malinvestments.

Then we’ll have to encounter with even more of Marxian myths like over-production. The other fact is Marxists in India have offered typical Keynesian solutions like increasing fiscal spending and lowering interest rates, which exactly was the cause of the crisis. And more fun in offer when zetkin tries to decry the ‘independent central bank’ which is nowhere near free-market ideals.

By the way, are you a fellow Austrian? :D

25 01 2009
zetkin

@virasi:
1. ‘redistribution of profits’ = ‘labour embodies etc….!’ (very innovative but wrong…)…and your jargon is profit, mine is surplus value…if you are entitled to yours, i am entitled to mine…how about some ‘freedom of speech’ that we are supposed to be entitled to under capitalism?

2. incentivising by introducing capital accumulation…that will unleash all the brightness and the innovation…i guess we have seen that in most countries of the world – prior accumulation has existed in most parts of the world where capitalism dominates….fantastic…i guess the british lost their innovative capacity after 70 years, the americans in 50 years, the germans in 30 years the japanese in 20 years and the south koreans in 10 years because they became ‘socialist’ and stopped accumulation.

2. the ‘socialist bullshit’ pricing mechanism through iteration is actually practised in the ‘real world’ in Cuba and China in the sectors that have not been ‘opened’ up, but i guess they don’t exist in your ‘real world’, ! and i guess for you Soviet Union when it existed was outside the ‘real world’ of that time. well, to give you an example closer to your real world, the Nordic countries also used similar pricing techniques for their public services. it is not exactly a textbook thing. but then i suspect you have not seen a text book on this either.

3. What Prashanth says is completely sound and logical and economically very valid!! LOL! Did not see the QED or is it only ‘i am right and my mate is right….i am right and my mate is right…..’ad infinitum.

4. ‘bookish knowledge’ – you mean your knowledge about the superiority of capitalism has been all ‘learning by doing’…you never read any stuff ever…amazing….what a hero!!!

@Prashanth

you seem to have now shifted from your original pitch and very hurt about tone. sorry, i speak the way i speak. if you can call socialists ‘bullshit’, i can use ‘junkie’ for people who spout hayek.

good to see you have admitted that you are confused and find this ‘crap’ and Adam smith has to be wrong for you to be right. well prove that Adam smith is wrong. it is crap to just assert it.

‘why don’t you say we used the market’ – well, unfortunately i live in a backward citadel of capitalism, never got the chance.

‘your process would not come this far…’ – well no point saying the same thing, it worked pretty well as i pointed out before. your hypothesizing won’t change it. more on this below. and you seem to be totally lost – can’t deal with any concept outside capitalist framework…why bother with this comment frenzy then with a socialist?

1. thousands of equations !!! just as a buyer or a seller does not actually calculate their marginal propensity to consume or their marginal costs to work out their buy/sell decision under capitalism, the iteration does not require actual working of equations. the information system exists in the social realm – it is just a different social realm. what the ‘market’ does under capitalism, the ‘planner’ does under socialism but it is the social relations which are different and so the information matrix is different. so profits are not needed as a signal. if you still don’t get it, you will never get it.

2. incentives existed in the soviet union and china and cuba, but better incentive structures could have been designed and need to be thought of (cuba has an interesting system of incentives which is diametrically opposite to the soviet union’s). however, incentives under capitalism have interestingly had very similar problems and often failed in sustaining innovation over a period of time which is why Schumpeter believed that capitalism would stagnate and decline (Raghuram Rajan of the IMF who is a great ideologue of capitalism and ‘hates’ socialism has studied this). so the inherent superiority of capitalist incentive structures is not a given.

3. ‘centralization of economic power leads to tyranny’ – this is a valid point but once again the capitalist market is even more centralizing in terms of economic and political power. why could not all the people ending up with those mortgages get out? why could not the banks get out? why could not the mortgage companies get out? where was their ‘alternative plan’?

democratic planning processes and institutions have to be built. that is the task of socialists. but, the failures of past socialist experiences in itself does not prove the inherent superiority of capitalism – that is just triumphalism. the socialist economies have had their successes and failures, one has to see both if one is interested in ‘rational’ enquiry. the soviet union suffered from labour shortage which was a problem of success, not failure – it had reached ‘full employment’ in the real sense, everyone who could work was employed. there is no historical record of any other economy ever being able to do that.

25 01 2009
zetkin

natural market interest, time-preference values of consumers….knew the jargon will all come…but dear austrian you are messing up your stuff and starting to sing out of tune….supply is supposed to create its own demand according to your gurus…so the time-preference thing should work itself out over time in capitalism irrespective of government intervention unless like Keynes you believe ‘in the long run we are all dead’….climb another tree of knowledge…

and the austrians in austria did not really appreciate the austrian view after they were introduced to it, so one is told by the austrians.

so from socialism now it is marxists in India….nice shifting of terrain of this is….and fear of being confronted by that ‘myth’ called ‘over production’. poor traumatized soul! you should never have got into this in the first place. you have not been able to address a single question posed to you so far. capitalism has better advocates, leave it to them.

“Zetkin’s ideas are forced by his prejudice”….LOL….the assumptions of the ‘rational allocator’. feminists do have a point.

25 01 2009
Prashanth Perumal

“good to see you have admitted that you are confused and find this ‘crap’ and Adam smith has to be wrong for you to be right. well prove that Adam smith is wrong. it is crap to just assert it.”

What made you say that I’m confused?! The labor theory of value is imbibed with value-effort fallacy and it has not been able to explain the water-diamonds paradox either, which the subjective theory of value has been able to explain! Marx just copied Smith.

“if you can call socialists ‘bullshit’, i can use ‘junkie’ for people who spout hayek.”

Sorry about that, we shall have a civilized debate!

“the information system exists in the social realm – it is just a different social realm.”

Don’t consumers’ preferences change? There simply can’t be a constant social realm.

“incentives under capitalism have interestingly had very similar problems and often failed in sustaining innovation over a period of time which is why Schumpeter believed that capitalism would stagnate and decline”

That’s a highly dishonest claim! An individual has the motivation to perform because his rewards, if he manages to satisfy demands, is very high. What Schumpeter said about innovation was the disadvantage incurred when there aren’t large enough firms with returns high enough to fund innovation research. Again, capitalist countries have always been more innovative because of better competition and freedom.

26 01 2009
zetkin

The labor theory of value is imbibed with value-effort fallacy and it has not been able to explain the water-diamonds paradox either, which the subjective theory of value has been able to explain! Marx just copied Smith.

this was only ‘solved’ by separating the thing in itself (in this case value) through its contradictory opposite, its appearance (that is separating essence from appearance) through vulgar economics (ahistorical concepts like abundance/scarcity – completely doing away with the social). marx on the other hand had a different explanation in ‘fetishism’ that would not require such separation and on the contrary explained why such separation is needed under capitalism. now that water has become a commodity, the water-diamond paradox isn’t such a big paradox. and marx did not copy smith. please don’t make such infantile statements. if you have read both in the original, you would not have said this. and there is a huge amount of prior knowledge on this from both marxists and anti-marxists,

Don’t consumers’ preferences change? There simply can’t be a constant social realm.

yes they do, what i said does not preclude that. in fact, that is the basis of the test of the information matrix….can it change to capture changes?

That’s a highly dishonest claim! An individual has the motivation to perform because his rewards, if he manages to satisfy demands, is very high. What Schumpeter said about innovation was the disadvantage incurred when there aren’t large enough firms with returns high enough to fund innovation research.

‘Dishonest’! After smartass, bullshitter, now i am dishonest as well! aren’t you supposed to be the ‘rational’ being?

Ok, on a more serious note, the problem with your paradigm is that it only has a space for individual performance based on homoeconomicus, but innovation in capitalism by its very social character has been within firms and highly dependent on the state; increasingly as the process unfolds, centralization of capital takes place and giant monopolies are created. Which is why the ‘why do firms exist’ question became so central to economics since the 1930s starting from Coase and carrots (incentives) and sticks (control and discipline mechanisms) were equally important. Now, Schumpeter, who was no socialist was precisely pointing to this – that once you have gigantic monopolies, innovation is ruled out as the ‘competition paradigm’ breaks down and incentive structures don’t work anymore.

Again, capitalist countries have always been more innovative because of better competition and freedom.

that is a highly contestable claim, england’s innovation could not have happened without colonialism – a system that was founded on unfreedom and destruction of competition both actual and potential, south korea could only be competitive in the capitalist market through a totalitarian state-led structure, germany’s innovation when it could not succeed in its colonial ventures ended in fascism, and if the USA is the epitome of freedom and competition (forget the larger history since the decimation of the native americans till vietnam and after, the last eight years was an affront to any notion of ‘freem/moxy’ (in Bush parlance)), then there is no point even wasting time on it.

this is my last post here on this thread. time to go back to the demands of capitalist work regime. for the leisure and pleasure of such delightful exchange, will wait till the revolution.

26 01 2009
Prashanth Perumal

Dude, you are only trying to discredit other things with all philosophical jargon rather than being able to justify your claim. There is simply nothing ahistorical about scarcity or abundance, nor is there anything logical with fetishism supposed by Marx. It is funny to hear your claim “water-diamond paradox is not that big”. LOL, it isn’t even a question of big or small. Just like you asked me to ‘disprove’ Smith, why don’t you ‘prove’ value (based on labor)? That must be a nice contest.

Giant monopolies are created because of government intervention. Any laissez faire proponent would say it straight in your face, “let the incompetent firm go break, don’t bail ‘em out”. It is only socialist governments that fuel the crisis in the economy by interfering with the economy and bailing out firms that have been mislead to malinvestments because of government’s intereference with market signals.

With respect to colonialism and exploitation, neither are laissez faire economists in favor of violating property rights of others.

26 01 2009
Prashanth Perumal

Getting into unfinished business, you’ve ignored answering the pricing of capital goods in a socialist economy with a single producer where the transfer of capital goods is between the state and itself .i.e., an internal transfer. You have to answer this, else your economic model will possess no rational allocation of resources leading to large wastage of resources.

The labor theory of value has been abandoned by neo-Marxists saying “well, there’s not much of a difference between marginal valuation and Marxist labor based valuation of goods”, like how you uttered something really funny about the size of the water-diamond paradox. :P

26 01 2009
Prashanth Perumal

“knew the jargon will all come…”

Jargon? Austrian economics is the easiest to comprehend, and pure logic.

“but dear austrian you are messing up your stuff and starting to sing out of tune….supply is supposed to create its own demand according to your gurus…so the time-preference thing should work itself out over time in capitalism irrespective of government intervention unless like Keynes you believe ‘in the long run we are all dead’”

Exactly! The market corrects by itself. But the correction can be delayed by government intervention which will make the bust even more painful.

“so from socialism now it is marxists in India….nice shifting of terrain of this is….”

Lol, I’ve just pointed out the further complications involved with government intervention. But as I told you, your system won’t be able to even kickstart the allocaion process, since there is no bidding process to 1) determine the prices of capital goods, 2) thereby you are effectively cutting out the preference of consumers, making them subservient to the planner.

“and fear of being confronted by that ‘myth’ called ‘over production’. poor traumatized soul! you should never have got into this in the first place. you have not been able to address a single question posed to you so far. capitalism has better advocates, leave it to them.”

Lol, your office works on public holidays, like republic day? That’s one more myth to sneak out of the thread uh?

26 01 2009
virasi

“if you are entitled to yours, i am entitled to mine…”

You are definitely entitled to your own complete nonsense like labor theory of value which sounds illogical to even my lil doggy.

“incentivising by introducing capital accumulation…that will unleash all the brightness and the innovation…”

Definitely! Research projects need huge capital investment.

“i guess we have seen that in most countries of the world”

One more stupid claim. Speak logic, no imperialist rants nor Marxist jargon.

“2. the ’socialist bullshit’ pricing mechanism through iteration is actually practised in the ‘real world’ in Cuba and China in the sectors that have not been ‘opened’ up,”

Lol, does that account for the greatness of increased privatization in Cuba in the last decade? Cuba would have disintegrated had it not been for Soviet help. Don’t even speak of such sham, in the name of Cuban ‘economics’.

“but i guess they don’t exist in your ‘real world’,”

There is no indicator like profits/losses in your system which will have to two drawbacks: 1) it won’t be able to prevent wastage of resources since you aren’t calculating profit or loss involved in your economic transactions, which will eventually lead to mass wastage of resources, 2) it wn’t be able to divert resources towards sectors of the economy where the resources are needed immediately, since there is no scope for profits in your system.

“Did not see the QED or is it only ‘i am right and my mate is right….i am right and my mate is right…..’ad infinitum.”

haha! You always seem to be wrong even in your delusional best! :P

“you never read any stuff ever…amazing….what a hero!!!”

What a shame!! I despise people who believe in LTV considering me as their hero. They are delusional as always, much worse than my lil doggy who shits at people who still profess value-effort fallacy. :P

26 01 2009
virasi

“why could not all the people ending up with those mortgages get out? why could not the banks get out? why could not the mortgage companies get out? where was their ‘alternative plan’?”

haha, height of naivete and madness! People are responsible for their own acts. Mortgage companies can’t get out because they have the responsibility to pay-back for their frivolity. Guess what, it’s your socialist government which still bails out such incompetents (who inturn were made so through government policies like tampering interest rates), not any capitalist. Any laissez faire proponent would advocate to leave the market unto itself, to clear the incompetent and fraudulent.

Talking of their alternative plan, let the CEOs wash cars and pay back debts.

26 01 2009
zetkin

Lol, your office works on public holidays, like republic day?

assumption of the rational allocator again…not everyone works in an office in india.

@virasi

enjoy exchange with doggy.

@prashanth

you are repeating the same stuff. to your last ‘unfinished business’ (everything you do i guess is a ‘business’)

Getting into unfinished business, you’ve ignored answering the pricing of capital goods in a socialist economy with a single producer where the transfer of capital goods is between the state and itself .i.e., an internal transfer.

Shows how muddled you are. Wonder how one can be so proud of one’s delusions! Firms also have internal transfer or what is called non-price transfer, this is part of any system whether under capitalism or under socialism. Only for Hayekians, this is a problem because it does not fit their models based on homoeconomicus.

26 01 2009
Prashanth Perumal

“Firms also have internal transfer or what is called non-price transfer, this is part of any system whether under capitalism or under socialism. Only for Hayekians, this is a problem because it does not fit their models based on homoeconomicus.”

Lol, don’t underestimate Austrians so easy. The fact is internal transfers are accounted (via profit-loss calculation) by firms in a capitalist economy which simply doesn’t happen in a socialist economy. Firms in a market economy which do not play by the rule of profit-loss will go break, but in a Socialist economy where the State is the ONLY producer there is simply no scope for such a kind of calculation, apart from the lack of moral hazard to play by the rules of profit-loss calculation.

This question has remained unanswered for almost a decade now. Oskar Lange, a Marxist economist, was able to answer a part of the debate by using walrasian tatonnement to allow for allocation of consumer goods. But he was never able to answer the capital goods part of the debate, which remains unanswered till date.

26 01 2009
Prashanth Perumal

small correction: the question remains unanswered for almost a century now.

27 01 2009
virasi

Judging by zetkin’s constant ignorance, I suspect if he really understands the importance of profit-loss calculation?!

The thing is without such a calculation your economic system will lead to huge wastage of resources, apart from not being able to know if you are employing the most economic method in producing a commodity. The thing with Marxists who profess that Capitalism wastes resources is that they don’t even understand there is no better way to efficient usage of resources than the profit-loss calculation.

If you still don’t get it, start with measuring the relative importance of various commodities by converting the value of each to a common denominator. May be Austrian economics could help you: http://www.mises.org

Good night!:)

27 01 2009
zetkin

others will judge on relative levels of ignorance, stupidity and what not. but it is really sad to see that repetition is all that the self-proclaimed austrians have been offering after the first posts. very innovative.

other than the lack of moral hazard to play by the rules of profit-loss calculation

so we finally have a back-handed statement that the ‘moral hazard’ problem has a greater chance of being solved in the absence of profits! the preliminary case for socialism has been made by our Hayekian friend.

27 01 2009
Aniket Alam

I had thought of responding to Prashanth’s first comment but was on the other side of the digital divide for the past three days and now It is difficult to come into this discussion when it has tapered off.

One small clarification about Zetkin, its not HE, its SHE. Yes women do think and contest with men too! at least you could have looked up wiki… http://en.wikipedia.org/wiki/Clara_Zetkin

Finally Prashanth, while its good to hold an opinion, it even better to NOT shoot of the first bright idea you get. If you are seriously going to critique Marx (and all my support to you in that) do yourself the favour of reading the bloke. Right now you sound very textbookish and ignorant. You are doing a dis-favour to yourself…

27 01 2009
Prashanth Perumal

Aniket, please try understanding the importance of profit-loss calculation in an economy. Without such a calculation method you simply won’t know whether you are making the best economic usage of the resources that are available to you (and on earth). And since you also do away with the normal market process of bidding for capital goods, you are effectively cutting out consumers’ preferences, that is apart from not being able to ascertain if the combination of resources you are using to produce a commodity is the best way possible, economically.

zetkin, I don’t intend to answer any of your rants (yeah people who have basic economic sense of the importance of profit-loss accounting will decide who makes sense) unless you show me: 1) how economic usage of goods is possible without profit-loss calculation, 2) how the most effective method of production of a commodity is possible when the state is the only producer of goods.

28 01 2009
Prashanth Perumal

Let me brief a little more on the perils of the absence of a profit-loss calculation system in a socialist economy.

In a capitalist economy the capital goods are diverted towards entrepreneurs who bid the highest money value. This means two things: The highest bidder, lets say a shoe maker, is ready to pay more than bidders from other industries (remember the same capital good has many other uses) because there is greater demand for the capital good to be used in producing shoes which his customers prefer rather than using it to make other consumer goods, lets say leather belts and purses. This is how the market rations-out capital goods towards different sectors of the economy. The firms have to make sure the price they pay for the capital goods and other ingredients of production is lesser than the price they get for the final product. That’s when he manages a profit, if the opposite happens he is in loss and he will have to stop production to lower his losses.

There are reasons why the same thing cannot happen in a socialist economy: Since the state is the only producer (and owner) of the capital goods, and there are no bidders for the capital goods, there is first of all no price attached to capital goods. The planner could just look at the prices that the consumers are ready to pay for the final products and divert capital resources towards the sector where it is demanded the most (looking into the prices). So there won’t be a problem in diverting the resources towards sectors which require it most immediately. But the problem is although allocation happens, it cannot be said if rational allocation of resources has happened because of the absense of a profit-loss calculation system. Since the capital goods price has not been ascertained through a bidding process (since the only bidder is the state), there is no way you can determine what is the cost of the capital good, hence there is no scope for the calculation of profit or loss of a particular allocation.

The function of economy is not just allocation of resources towards the proper quarters but also to appraise if the allocation is efficient, that is, rational. Profits mean you have done good to the society by creating more wealth than what you used to create the same; losses mean the opposite – you put in a lot to produce something of lesser value and caused a net loss of wealth to the society. So the basic problem is WASTAGE OF RESOURCES.

28 01 2009
Prashanth Perumal

Remember price is nothing but the value of the commodity which underpins your paper currency.

In initial centuries right after the barter system things like goats, cattle etc. were used to underpin your currency, later gold and silver which are relatively scarce came in to underpin your currency.

Lets say you invested 2 rupees and earned 1 rupee in return, it means you used 2 goats to produce 1 goat (assuming the exchange value is 1 rupee = 1 goat). The same is true with the economy.

P.S. The fact that nowadays the paper money you use has no intrinsic value, since it’s not necessarily underpinned by gold — which is again a fraud committed by governments — is a different issue.

28 01 2009
Prashanth Perumal

Even better and simpler example: suppose you use 2 liters of milk to produce a packet of custard.

In order to calculate if it’s a loss or profit you have to convert the quantities used and produced to a common denominator (to know its’ exchange value): 2 liters milk equals 2 goats; 1 packet custard equals 1.5 goats. Hence the net result is a loss. You have to stop producing to save your society from further losing its’ wealth.

The common fallacy people are imbibed with is, larger the quantity of stuff produced, more the wealth. That’s so naive because real wealth is calculated based only on the exchange value .i.e., if someone finds it worth trading with what you’ve created with your labor, not merely on the basis of pure quantity produced. This further shows valuation is purely SUBJECTIVE. I might like custard and value it at 1.5 goats, but you might dislike it and value it at zero (or even negative). It doesn’t really matter a bit whether your workers spent 10 hours or even their lifetime’s labor to produce it.

28 01 2009
Prashanth Perumal

That’s it Aniket, my contribution to your blog end here. Cheers!

30 01 2009
virusi

This is virasi back virusi.

Adding to what Prashanth has said, the uneconomic irrational usage of available resources will actually bring to a standstill even those stuffs that have been produced already.

For example, if a capital good is used both in petroleum refining and also in manufacturing tractors to plough the fields, in a socialist economy the planner will look into the prices of tractors and petrol and decide in a vague sense as to which sector (tractor manufacturing or petrol refining) requires the most immediate allocation of the capital good. But he won’t know HOW MUCH exactly to allocate since you don’t have a monetary valuation of capital goods (as an objective scale) to appraise the subjective choices of the consumers. Hence what happens is there is a very high chance of an irrational allocation of the capital good.

This could result in disaster, your farms will contain all new painted tractors in excess with not enough petrol to run them and plough your fields. This was exactly what happened in the USSR because of the absense of monetary valuation (what Prashanth calls “profit-loss calculation”) of production goods.

30 01 2009
virusi

And Aniket, if you think zetkin is the ideal woman who competes with men, I have nothing to say but, find better competitors. She is not even impressive by standards of women I know (as my closest friends) who have better points against the free market.

13 03 2009
Prashanth Perumal

“the soviet union suffered from labour shortage which was a problem of success, not failurethe soviet union suffered from labour shortage which was a problem of success, not failure”

extremely naive! And she thinks this is an achievement. Lol!

Ever heard of price controls causing labor shortages? That’s what USSR was suffering from. The planners set arbitrary prices (not free market price since the only employer was the state) to labor as well. Since there was nothing called “profit or loss” in a socialist centrally planned economy, labor could be employed for any arbitrary price. And why wouldn’t such an economy “achieve” full employment?

In a free market economy with no price controls labor prices are set by the market and the intake of labor happens only until it is profitable. That doesn’t mean unemployment would be very common, because with no price controls laborers will be forced to offer their service at lower prices. There would be nothing other than voluntary and temporary frictional unemployment.

So the point is, achieving full employment in an economy, which can’t calculate or where wages are nothing but what the planner wants to give, is not an achievement at all. It’s all about wasting resources bluntly.

2 08 2009
Rishabh

To Zetkin,

‘an allocation process through iteration through an extensive system of information matrices’

And where would that information(which ideally should express consumer preference) come from? Just to go fast, the price system does the job in a Capitalist economy.

‘the soviet union actually did the pricing very ‘efficiently’ for a pretty long time using the socialist pricing principle based on approximating the labour and surplus labour embodied in a commodity and using tatonnement to correct for departures from this value.’

That sounds so much of an arbitrary sticking up numbers to tags! seriously, prices exist to express consumer preference, no?

The Walrasian equilibrium is a limited static model, which can calculate so well, given that you provide it information on consumer preference, production function, available stock of relevant resources, technological capabilities etc. And who gives us all this ‘given’?

3 08 2009
Rishabh

“this was only ’solved’ by separating the thing in itself (in this case value) through its contradictory opposite, its appearance (that is separating essence from appearance) through vulgar economics (ahistorical concepts like abundance/scarcity – completely doing away with the social)”

Please enlighten us of the need to use ‘the social’ to solve the paradox. I never knew people could be so collectivism-fetish. Please read up something on subjectivism before repeating fallacies of the Classical era.

10 02 2010
Katie

“I have a hard time with the Socialist ideal because it espouses the idea that we (the “common” folk) simply cannot make it on our own. It criticizes us for being willing to succeed or fail and accept the consequences of our own actions. Honestly, socialists seem to fear the possibility that normal people may actually be able to control their own destiny.”

Socialists believe in a workers democracy, that means the common folk taking control… I am a member of the Socialist Party of the UK and I can tell you all the members are common folk. The whole point is giving the workers control of the wealth they create and thus control of their destinys.

14 06 2010
Prashanth Perumal

“so we finally have a back-handed statement that the ‘moral hazard’ problem has a greater chance of being solved in the absence of profits! the preliminary case for socialism has been made by our Hayekian friend.”

Do you ever get an easy argument? The lack of a system which doesn’t have it’s players go by the rules of economic calculation is what provides the moral hazard (read: bailouts and bullshit which give a second chance to bad players). Saying the absence of profits removes moral hazard is pure stupidity, it just gives a free hand to the bureaucracy. And how do you control the bureaucracy? Letting people like Aniket scribble around?

6 10 2012
gallura.nl

Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point.

You obviously know what youre talking about, why waste your intelligence on
just posting videos to your blog when you could be giving us
something informative to read?

24 04 2014
cort.as

だからTwitterだってばmixiじゃなくて
バカは失明すればいいと思う 化粧の一部みたいなもんですっぴんじゃないのはズルい!って思わないし 今まではそんなになかったのに最近になってやたらと異物混入のスレが上がるな
朝飯食ってないから食い物みたらやばいわ 職場の後輩が黒眼を大きく見せるカラコンしてる

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