Letter: Details of socialism (2007)

Letter to the Editors from the January 2007 issue of the Socialist Standard

Details of socialism

Dear Editors,

I am a 17-year old student who is a very keen proponent of the notion of socialism. I visited your web-site and thought you had very detailed and perceptive insights into what a socialist society might be like. I do not fully understand, however, some of the finer economic details in such a society, and was wondering if you could help explain:-

1) If production is solely for use rather than sale, how do industries pay for the cost of their capital. input costs etc? Perhaps I am bound by capitalist notions of value, but doesn’t the cost of what goes into running an enterprise have to be recouped at some stage?

2) How would a socialist society run without money? If firms produce simply for use, how do they pay for their costs?

3) What went wrong with the economic system of the USSR, where enterprises had to be kept afloat through state subsidies? Doesn’t this mean that these industries do not then contribute to the upkeep of other facilities such as hospitals, schools etc.

I know these questions are quite long, but I feel I need a firmer grasp on the finer economic details of socialism,

Brett Heino (by email)

Reply:
Socialism is a society based on the common ownership by the population as a whole of the means of production (land, industry, transport, etc). It will be a moneyless society because this means that what is produced is also commonly owned and so the question that arises is not that of selling it but how to distribute directly among those who already own it in common, i.e. the members of society.

Separate enterprises with their own accounts which they have to try to at least balance won’t exist, not just because money and what it reflects (capitalist economic value) won’t exist but because, all industry being commonly owned, wider considerations such as pleasant working conditions and not harming the environment, will be able to be taken into account. Individual productive units will of course have to keep records of the materials they use and try not to waste them, but these records will be kept in physical amounts (tonnes, kilowatt-hours, metres, labour time, etc) not money. Similarly, hospitals, schools, etc will be built and maintained out of the physical resources available to society. Calculation in socialism will be calculation in kind.

What about the USSR? Well, for a start it wasn’t socialist but a form of state capitalism, and capitalism does require, as you point out, proper accounting in money to be able to calculate the rate of profit. The rulers of state-capitalist Russia sought to maximise profit at the level of the whole economy but in the end found they were unable to do this without proper financial information from industries and enterprises to enable to judge where to invest most profitably. Their centralised form of state capitalism became inefficient (in capitalist terms) compared with the mixed private/state capitalism of the West and eventually it collapsed. But this represented the failure of centralised state-capitalism not of socialism, which has never been tried – Editors

GLC Election Manifesto (1970)

From the April 1970 issue of the Socialist Standard

The Socialist Party of Great Britain will again be contesting 14 seats in the Greater London Council Elections on April 9. The full number of candidates will be put forward in the following areas: Camden (3), Ealing (4), Haringey (3) and Lambeth (4)

The Real Issue

There is no need for the food we eat. or the clothes we wear, or the houses we live in, to be restricted by the size of our wage packets. There is no need for the output of factories and farms to be restricted by having to make a profit. The productive resources are sufficient to make it possible to abolish buying and selling and thus money and to go over to free distribution of the things people need.

The world's resources are not used to provide this plenty today because, being privately owned or taking the form of state and municipal capitalism, they are restricted by the limitations of production for sale at a profit. Modern industrial techniques cannot be used to serve human interests until the earth, and all that is in and on it, has become the common property of the whole of mankind.

It is this — capitalism and its restrictions or Socialism and its abundance — that we say is the issue in this, as in all elections, the Socialist Party of Great Britain is putting forward candidates here and in three other London boroughs in order to challenge the other parties, all of which (including Labour and the so-called Communists) stand for keeping class privilege and the profit motive. The Socialist Party alone stands for Socialism.

A World Society

Socialism will be a world community without frontiers. Based on the common ownership and democratic control of the means of production. Articles will be produced, not for sale or profit, but solely for people to use. Within this framework we can clear up once and for all the problems that are built-in to capitalism — the problems of housing, education, transport, health, pollution. racism and the others the orthodox parties and politicians are for ever promising to solve. We can create a world of plenty where, as free men and women, we can co-operate to produce an abundance of wealth to which we can have free access according to our needs.

We make no apology for raising the issue of World Socialism in this, a local election. What bodies like the Greater London Council can do is restricted by the workings of world capitalism. It is the economic rivalry between capitalist states (including state capitalist Russia and China) that determines how much national, and therefore local, governments spend on social reforms. It is partly because goods made in Britain have not sold so profitably on the world market that plans to build more houses and hospitals, to improve road and rail transport, and to reduce overcrowding in schools have had to be cut back in recent years.

Your Responsibility

The only barrier to the immediate establishment of Socialism is that most of you, for various reasons, would not accept that it is really practical and prefer to keep capitalism in being in the vain hope that it can be made to serve human interests.

Trying to reform capitalism in this way has proved time and again to be futile. Capitalism is a class society that can work only for those who live off rent, interest and profit. Capitalism simply cannot be made to work in the interest of the other class in society (there is no middle class), those who have to work for an employer in order to live — the working class properly called. It is to you. our fellow wage and salary workers, that this statement is addressed since it is you who in the end are responsible for the continuance of capitalism and its problems.

Even though the politicians and their parties share the responsibility for keeping capitalism in being, it is no use your blaming their failures on dishonesty or incompetence since it is capitalism itself that sets the limits to what they can do. The national and local governments you elect have to work to a set of priorities which lay down, as we have shown, that profit must come before human need. We suggest you stand aside from the petty squabbles of rival leaders (which is about all conventional politics amount to) and realise that if this world is to be improved it can only be by the actions of ordinary people like yourselves. First, however, you must understand what Socialism means and how it can be established.

The Way to Socialism

When a majority of you are equipped with socialist understanding, you can use your votes to win control of political power so that class property rights can be ended and the means of production belong to the community as a whole.

Those of us who are convinced Socialists and have already joined The Socialist Party of Great Britain will naturally be voting for the Socialist candidates. If you agree with us. we invite you too to register your vote for Socialism. At the same time you would be protesting against capitalism and its parties. Also, since there is of course much more to establishing Socialism than just voting for it, please get in touch with us. We urgently need your help in convincing more and more of our fellow workers of the need to organise for World Socialism, the society of abundance.

#    #    #    #

We plan to distribute up to 80,000 copies of this address. If you want to help fold and hand out these please contact the secretary of the local branches: Westminster, Ealing, Haringey or South West London.

The Socialist candidates are:

CAMDEN: L. Cox. M. Davies. E. Grant.

EALING: W. Buchanan, P. George, W. Rose, D. Sawyer.

HARINGEY: A. Buick, J. Carter. A. Waite.

LAMBETH: J. Garnham, V. Phillips. M. Sansum, F. Simkins.

French “Communists” support wages system (1970)

From the April 1970 issue of the Socialist Standard

The 37th Congress of the French trade union centre, the General Confederation of Labour (CGT), voted last November to change its statutes. It threw out the phrase “abolition of the wages system” (disparition du salariat et da patronat) and substituted “socialisation of the means of production and exchange” (socialisation des moyens de production et d'échange).

Of course the paper aims of an organisation tell us very little about what it actually does, but they can tell us how its members and leaders think. The CGT is led by members of the French Communist Party. So it is particularly revealing that they should wish to remove a phrase which Marx described as revolutionary and specifically recommended trade unionists to adopt.

It is also a measure of the French Communist Party’s aim to reform rather than abolish capitalism that their trade union centre should adopt instead so meaningless a slogan as the "socialisation of the means of production and exchange". The means of production arc already socialised in the sense that they can only be operated by social, co-operative labour. This has already been done by capitalism; what Socialism will do is to end the class monopoly of these means, to establish social or common ownership as well. The CGTs new aim cannot mean this as the social ownership of the means of exchange (banks, etc) is a contradiction in terms. When the means of production arc socially owned, wealth will be produced purely and simply to satisfy human needs. Production for the market, or exchange, will disappear and along with this banks and other commercial and financial institutions.

Cooking the Books: Death of a Loan Shark (2018)

The Cooking the Books column from the October 2018 issue of the Socialist Standard

So Wonga, the notorious payday lender, has gone under. Very few will be shedding a tear. As a payday lender, its business model was to make small, short term unsecured (i.e. with no collateral) loans out of its own money. You could get a loan of £50 for a week if you wanted. Because there was no collateral, e.g. no house or car to repossess, and no serious credit checks, the risk of default and cost of recovering it was higher and so therefore was the rate of interest.

Since 2015, regulations have limited the maximum interest that payday companies can charge to 0.8 percent a day. That’s still quite steep – 80p per day on a loan of £100 for 30 days is about £24. Before that, companies like Wonga – and Wonga in particular – used to charge more than twice as much, with stiff penalty charges for not repaying on time.

One reason why companies like Wonga exist is that banks won’t touch poor people in need of short-term loans. But what is the difference between a moneylender and a bank? Some think that when a bank makes a loan it ‘creates’ money. The reasoning behind this is that, as the amount of the loan will be spent, when it is this adds to total spending. But why is this reasoning not applied to payday lenders or to other lenders such as credit card and car finance companies? Their loans also add to total spending.

One reason why loans by such financial institutions should not be regarded as creating new money is given in a short online article ‘Are credit cards a form of money? Credit cards and the money supply’. The author gives the example of him borrowing money from his girlfriend to buy a video game, and concludes:

‘[M]y debt to my girlfriend would not be considered money because she cannot use it as a form of money to make purchases and it is not trivial to find someone who is willing to pay her cash in exchange for the loan. The loan is a mechanism in which money will be transferred from me to my girlfriend, but the loan is not money itself. When I repay the loan I will pay her $50 which will be in the form of money. If we consider the loan as money and the payment of the loan as money we’re essentially counting the same transaction twice. The $50 my girlfriend pays the shopkeeper is money. The $50 I will pay my girlfriend tomorrow is money, but the obligation I hold between today and tomorrow is not money’.

This makes sense. The loan, i.e., the IOU to his girlfriend, is not money. What is money is what is used to pay for the video game and that was not ‘created’ but came from the girlfriend.

It’s the same with a credit card. The credit card company pays for what you purchase and you repay by the end of the month. In the case of a payday company, it lends you the money first until your next payday, and when you get paid you pay it back (with interest).

The difference between a bank and other lenders is that they are lending their own money whereas a bank is lending other people’s. This makes following what happens more complicated but the principle is the same. When the borrower buys something out of the bank’s loan, the bank pays for it, normally by a bank transfer to the seller’s bank, just as a credit company does. You pay the bank back later.

How, then, is a bank loan different? Good question.