Socialist economics

Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.
Socialist economics has been associated with different schools of economic thought. Marxian economics provided a foundation for socialism based on analysis of capitalism while neoclassical economics and evolutionary economics provided comprehensive models of socialism. During the 20th century, proposals and models for both socialist planned and market economies were based heavily on neoclassical economics or a synthesis of neoclassical economics with Marxian or institutional economics.
As a term, socialist economics may also be applied to the analysis of former and existing economic systems that were implemented in socialist states such as in the works of Hungarian economist János Kornai. 19th-century American individualist anarchist Benjamin Tucker, who connected the classical economics of Adam Smith and the Ricardian socialists as well as that of Pierre-Joseph Proudhon, Karl Marx and Josiah Warren to socialism, held that there were two schools of socialist thought, namely anarchist socialism and state socialism, maintaining that what they had in common was the labor theory of value. Socialists disagree about the degree to which social control or regulation of the economy is necessary; how far society should intervene and whether government, particularly existing government, is the correct vehicle for change are issues of disagreement. The goal of socialist economics is to neutralize capital, or in the case of market socialism to subject investment and capital to social planning.

History of socialist economic thought

and Friedrich Engels believed that hunter-gatherer societies and some primitive agricultural societies were communal, and called this primitive communism. Engels wrote about this at length in the book The Origin of the Family, Private Property and the State, which was based on the unpublished notes of Marx on the work of Lewis Henry Morgan.
Values of socialism have roots in pre-capitalist institutions such as the religious communes, reciprocal obligations and communal charity of medieval Europe, the development of its economic theory primarily reflects and responds to the monumental changes brought about by the dissolution of feudalism and the emergence of specifically capitalist social relations. As such it is commonly regarded as a movement belonging to the modern era. Many socialists have considered their advocacy as the preservation and extension of the radical humanist ideas expressed in Enlightenment doctrine such as Jean-Jacques Rousseau's Discourse on Inequality, Wilhelm von Humboldt's Limits of State Action, or Immanuel Kant's insistent defense of the French Revolution.
Capitalism appeared in mature form as a result of the problems raised when an industrial factory system requiring long-term investment and entailing corresponding risks was introduced into an internationalized commercial framework. Historically speaking, the most pressing needs of this new system were an assured supply of the elements of industry and these imperatives led to the commodification of these elements.
According to influential socialist economic historian Karl Polanyi's classic account, the forceful transformation of land, money and especially labour into commodities to be allocated by an autonomous market mechanism was an alien and inhuman rupture of the pre-existing social fabric. Marx had viewed the process in a similar light, referring to it as part of the process of "primitive accumulation" whereby enough initial capital is amassed to begin capitalist production. The dislocation that Polyani and others describe, triggered natural counter-movements in efforts to re-embed the economy in society. These counter-movements, that included, for example, the Luddite rebellions, are the incipient socialist movements. Over time such movements gave birth to or acquired an array of intellectual defenders who attempted to develop their ideas in theory.
As Polanyi noted, these counter-movements were mostly reactive and therefore not full-fledged socialist movements. Some demands went no further than a wish to mitigate the capitalist market's worst effects. Later, a full socialist program developed, arguing for systemic transformation. Its theorists believed that even if markets and private property could be tamed so as not to be excessively "exploitative", or crises could be effectively mitigated, capitalist social relations would remain significantly unjust and anti-democratic, suppressing universal human needs for fulfilling, empowering and creative work, diversity and solidarity.
Within this context, socialism has undergone four periods: the first in the 19th century was a period of utopian visions ; then occurred the rise of revolutionary socialist and communist movements in the 19th century as the primary opposition to the rise of corporations and industrialization ; the polarisation of socialism around the question of the Soviet Union and adoption of socialist or social democratic policies in response ; and the response of socialism in the neoliberal era. As socialism developed, so did the socialist system of economics.

Socialist political economy before Marx

A key early socialist theorist of political economy was Pierre-Joseph Proudhon. He was the most well-known of nineteenth century mutualist theorists and the first thinker to refer to himself as an anarchist. Others were: Technocrats like Henri de Saint-Simon, agrarian radicals like Thomas Spence, William Ogilvie and William Cobbett; anti-capitalists like Thomas Hodgskin; communitarian and utopian socialists like Robert Owen, William Thompson and Charles Fourier; anti-market socialists like John Gray and John Francis Bray; the Christian mutualist William Batchelder Greene; as well as the theorists of the Chartist movement and early proponents of syndicalism.
The first advocates of socialism promoted social leveling in order to create a meritocratic or technocratic society based upon individual talent. Count Henri de Saint-Simon was the first individual to coin the term "socialism". Saint-Simon was fascinated by the enormous potential of science and technology, which led him to advocate a socialist society that would eliminate the disorderly aspects of capitalism and which would be based upon equal opportunities. Saint-Simon advocated a society in which people were ranked according to their capacities and rewarded according to their work. This was accompanied by a desire to implement a rationally organized economy based on planning and geared towards large-scale scientific and material progress, which embodied a desire for a semi-planned economy.
Other early socialist thinkers were influenced by the classical economists. The Ricardian socialists, such as Thomas Hodgskin and Charles Hall, were based on the work of David Ricardo and reasoned that the equilibrium value of commodities approximated producer prices when those commodities were in elastic supply, and that these producer prices corresponded to the embodied labor. The Ricardian socialists viewed profit, interest and rent as deductions from this exchange-value.

Karl Marx and ''Das Kapital''

's approach, which Friedrich Engels would call "scientific socialism", would stand as the branching point in economic theory. In one direction went those who rejected the capitalist system as fundamentally anti-social, arguing that it could never be harnessed to effectively realize the fullest development of human potentialities wherein "the free development of each is the condition for the free development of all".
Marx's Das Kapital is an incomplete work of economic theory; he had planned four volumes but completed two and left his collaborator Engels to complete the third. In many ways, the work is modelled on Smith's Wealth of Nations, seeking to be a comprehensive logical description of production, consumption, and finance in relation to morality and the state. The work of philosophy, anthropology, sociology, and economics includes the following topics:

Law of value: capitalist production is the production of "an immense multitude of commodities" or generalised commodity production. A commodity has two essential qualities firstly, they are useful, they satisfy some human want, "the nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference" and secondly they are sold on a market or exchanged. Critically the exchange value of a commodity "is independent of the amount of labour required to appropriate its useful qualities". However, rather depends on the amount of socially necessary labour required to produce it. All commodities are sold at their value, so the origin of the capitalist profit is not in cheating or theft, but in the fact that the cost of reproduction of labour power, or the worker's wage, is less than the value created during their time at work, enabling the capitalists to yield a surplus value or profit on their investments.
Historical property relations: historical capitalism represents a process of momentous social upheaval where rural masses were separated from the land and ownership of the means of production by force, deprivation, and legal manipulation, creating an urban proletariat based on the institution of wage-labour. Moreover, capitalist property relations aggravated the artificial separation between city and country, which is a key factor in accounting for the metabolic rift between human beings in capitalism and their natural environment, which is at the root of our current ecological dilemmas.
Commodity fetishism: Marx adapted previous value-theory to show that in capitalism phenomena involved with the price system constitute a powerful ideology that obscures the underlying social relations of capitalist society. "Commodity fetishism" refers to this distortion of appearance. The underlying social reality is one of economic exploitation.
Economic exploitation: workers are the fundamental creative source of new value. Property relations affording the right of usufruct and despotic control of the workplace to capitalists are the devices by which the surplus value created by workers is appropriated by the capitalists.
Capital accumulation: inherent to capitalism is the incessant drive to accumulate as a response to the competitive forces acting upon all capitalists. In such a context the accumulated wealth which is the source of the capitalist's social power derives itself from being able to repeat the circuit of money→commodity→money, where the capitalist receives an increment or "surplus value" higher than their initial investment, as rapidly and efficiently as possible. Moreover, this driving imperative leads capitalism to its expansion on a worldwide scale.
Crises: Marx identified natural and historically specific barriers to accumulation that were interrelated and interpenetrated one another in times of crises. Different types of crises, such as realization crises and overproduction crises, are expressions of capitalism's inability to constructively overcome such barriers. Moreover, the upshot of crises is increased centralization, the expropriation of the many capitalists by the few.
Centralization: the interacting forces of competition, endemic crises, intensive and extensive expansion of the scale of production, and a growing interdependency with the state apparatus, all promote a strong developmental tendency towards the centralization of capital.
Material development: as a result of its constant drive to optimize profitability by increasing the productivity of labour, typically by revolutionizing technology and production techniques, capitalism develops so as to progressively reduce the objective need for work, suggesting the potential for a new era of creative forms of work and expanded scope for leisure.
Socialization and the pre-conditions for social revolution: by socializing the labour process, concentrating workers into urban settings in large-scale production processes and linking them in a worldwide market, the agents of a potential revolutionary change are created. Thus Marx felt that in the course of its development capitalism was at the same time developing the preconditions for its own negation. However, although the objective conditions for change are generated by the capitalist system itself, the subjective conditions for social revolution can only come about through the apprehension of the objective circumstances by the agents themselves and the transformation of such understanding into an effective revolutionary program.