Trying to Get a Clearer Understanding of Socialism

So after I sent a previous e-mail about a professor's experiement with averaged grading across all students I got to thinking. Since that exercise was really an exercise in communism rather than socialism I was trying to define what socialism really is and what the arguments are for it (know your enemy and you will be better equipped to defeat him). There is no question that socialism is a gateway to communism and a very steep slippery slope, but the key distinction is that socialism is public ownership of production, not personal assets and property. While the arguments for socialism are still inherently class-warfare rhetoric based around that four-letter-word FAIR (rich-versus-poor, privileged-versus-underprivileged, haves-versus-have-nots), it is important to know exactly what we're up against.

In my searching I found this article written by Albert Einstein published in the first issue of the Monthly Review in 1949 that is probably one of the most well-structured arguments for socialism that I have come across: http://www.monthlyreview.org/598einstein.php I recommend reading the whole thing (it's very fascinating), but if you don't have time I would say you could skip down to the paragraph that starts with, "I have now reached the point where I may indicate briefly what to me constitutes the essence of the crisis of our time."

As with most socialists he has a fear of "unbridled capitalism" but he is so naive in parts of his argument that it's almost laughable. The greatest irony is that he goes into depth about the parts of the human condition that we cannot change, but then essentially asks that we change them as a part of our commitment to society. He also asks a few questions at the end of the article which--in my mind--debunk much of what he said previously: "The achievement of socialism requires the solution of some extremely difficult socio-political problems: how is it possible, in view of the far-reaching centralization of political and economic power, to prevent bureaucracy from becoming all-powerful and overweening? How can the rights of the individual be protected and therewith a democratic counterweight to the power of bureaucracy be assured?" To his credit, he acknowledges that these problems must be solved before socialism can go into effect, but I would say it makes socialism nearly, if not completely, impossible. But maybe it's just me.

There are a few key things in the article that I would like to make arguments against though (again I recommend you read the whole thing so you can get the context):

Article: "Insofar as the labor contract is “free,” what the worker receives is determined not by the real value of the goods he produces, but by his minimum needs and by the capitalists' requirements for labor power in relation to the number of workers competing for jobs. It is important to understand that even in theory the payment of the worker is not determined by the value of his product."
My Response: The value of the product produced by the worker is irrelevant. What is relevant is the skill required to make said product. Skilled labor is inherently worth more than unskilled labor at a number of levels. Look me in the eye and tell me that someone who smelts gold bars should be paid more than someone who smelts steel just because gold is worth more than steel. They require the same level of skill to produce, thus the wages should be comparable. On top of it, the value of the product is, in most cases, tied to its complexity and difficulty to produce, so in that sense workers are already compensated for the value of the product in a capitalist system.

Article: "Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of smaller ones."
My Response: Part of this is no doubt a function of the fact that this article was written in 1949, but there are a few arguments here. It sounds to me like he's essentially pining the loss of small businesses because of larger super-businesses. Beyond the fact that we have anti-trust laws to prevent monopolies and price-fixing, this is the anti-Walmart argument. Everyone loves to hate Walmart because it's a huge business that crushes small ones, but the truth is that while Walmart is brutal to other businesses on pricing and margins, they benefit the consumer with consistently lower prices. We love to hate super-businesses but they are ultimately good for us as consumers.

Article: "Production is carried on for profit, not for use. There is no provision that all those able and willing to work will always be in a position to find employment; an “army of unemployed” almost always exists."
My Response: Ah, supply and demand. It's such a basic principal, but socialists seem to misunderstand it. Specifically, they don't understand two things: 1) production that has no use creates no profit and 2) you cannot manufacture demand by increasing supply. If something is not in demand, it is simply not in demand and people will not buy it no matter how much you make. Capitalism self-corrects for products that have no use by punishing businesses who cannot make a profit producing them. As far as the unemployment point, supply and demand applies here too. There will nearly always be a surplus of able-bodied (and able-minded) workers because society simply does not need every member of society to work in order to be successful. It's a lofty ideal for everyone to have a job, and yes it would be nice, but it's just not realistic.

Article: "Since unemployed and poorly paid workers do not provide a profitable market, the production of consumers' goods is restricted, and great hardship is the consequence."
My Argument: For every unemployed and poorly paid person who is not purchasing things in the market, you have an astronomically wealthy person who is purchasing large quantities of goods. While that may seem like specious reasoning to some, the economic contributions of the ultra-wealthy people will so far overwhelm that of what those workers would contribute (purely from an economic perspective) if they had money, that arguing for their lost contribution is not a good argument. I do not reject the idea that it would be great if everyone had a job. In fact, it would be great if there were so many jobs that we didn't have enough people to fill them, but the simple truth of today's world is this: when you create a job that the market does not create itself, it is most often an unnecessary government job that is funded by taxpayer dollars. The dollars used to pay for these jobs sap taxpayers and negate the benefit of having create the job in the first place (this is largely my opinion).

Article: "A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child."
My Response: This one statement gets to the heart of the socialist argument and reveals the potentially communist tendencies of such a society. Since this one seems so critical, I'm going to disect the sentence.

1) "A planned economy" is sort of a funny idea. Who exactly is the guru who plans this economy? Who are the architects who figure out demand and produce exactly the right amount of goods? Does that mean we're producing x amount of a product for each American? Would we appoint a special task force or legislative committee to work this out? The Department of the Economy? What if I have been more successful than someone else and I want to buy x+y amount of the product? Do I have to buy someone else's allotment or am I not allowed to have more than x? Or am I not allowed to be more successful than someone else? Most importantly, has anyone ever seen a government--at any point in history--that would be capable of planning and successfully executing anything on that scale?

2) The phrase, "which adjusts production to the needs of the community" alone is sort of a quandry for socialists. The truth that they don't want to believe is that capitalism does exactly that. It inherently adjusts supply to meet demand. In his statement too, what if the needs of the community adjust downwards? As demand falls, then so must production (and then people lose their jobs because you can't afford to pay them) or you keep those people on and have a pile of goods that nobody wants. In order to believe in this argument you have to believe that total demand for goods and total demand for production of goods will always be a zero sum.

3) "...would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child." This ideal either assumes a demand for labor consistent with the population of able-bodied workers at all times or assumes that you have to divide labor among the people even if there isn't enough work to go around (verging on communism). What's better, 20 million full-time workers doing 40-hour work weeks and doing well or 40 million workers doing 20-hour work weeks and barely getting by? Your opinion may differ from mine, but I take 20 million workers who are doing well over 40 million workers who are barely getting by. Beyond that, this also assumes that unemployment is a chronic state, which (at least in this country) is not the case for all of the unemployed.

Article: "A planned economy as such may be accompanied by the complete enslavement of the individual."
My Response: On this one point we agree. This preceeds his questions about how we solve the socio-economic issues that would prevent this, but as I read it (and maybe I am too cynical) he has essentially said it is not possible. The potential for success of the individual (and those close to them) in this country is unparalleled in the rest of the world and it's what has led this country to be at the forefront over the past centuries. Capitalism is what enables the American Dream, innovation, and a drive for success. It is that unbridled possibility for success that allows people to rise from being line workers to executives in a single lifetime. Are there selfish people? Sure. Are there greedy people? Sure. Are there stupid and incompetent people? Definitely. These people exist in any system and will ultimately have an impact on any economic variation. The greedy and selfish will always find a way and the stupid and incompetent people will always be bad at their jobs, regardless of the system in which they participate.


Well, while much of this was opinion I hope it helped us think a little more about socialism and what it's all about. As a closing comment there was a book that stated very elegantly why capitalism is the best system (I would have to look to see which book it was): "Capitalism is the only system built around the way people are instead of the way they should be."