[OPE-L:2224] Re: socialism in a single moon?

[Gerald Levy <glevy@xxxxxxxxx>]

---------- Forwarded message ----------
Date: Wed, 19 Jan 2000 10:09:39 -0000
From: clyder <wpc@xxxxxxxxxxxxx>

 > Price flexibility led, in the case of the USSR (e.g. in the NEP) and in
> various E. European economies (e.g. Poland in the 70's and early 80's) to
> a change in the *terms of trade* between the working-class and the
> peasantry (or between the working class and firms that produce means of
> consumption as was the case in Hungary during the NEM in the late 60's
> and Yugoslavia in the 70's). I.e. without some time of state restraint on
> consumer prices, the living standard of workers can be reduced (witness,
> in more recent years, what happened in Russia when price controls were
> removed). So, I think that we have to recognize that "price flexibility"
> is not a class neutral policy.

It depends upon production relations. Certainly where agriculture remained
private, price flexibility redistributed income in favour of peasants. Where
agriculture is collectivised or in the form of state farms there is no
longer
the same class distinction, and no reason why the state should favour
the urban over the rural population.

There were two types of problems associated with prices, one was due
to the policy of selling agricultural products below their values, where
this
was pursued in an extreeme form as in Poland this led to the shops
selling out of meat etc as soon as it came in. It could be argued that
the real problem in Poland was the very primitive small scale agriculture
that existed after Gomulka reversed collectivisation. This meant that the
labour content of food was higher than it would be in most developed
industrial economies. My impression from traveling around Eastern
Europe in the 80s was that countries like Bulgaria and the GDR which
had fully collectivised agriculture did not have the visible food shortages
that Poland had. It is worth noting that Poland was not a formally a
socialist republic unlike the CSSR etc.

The second type of problem associated with prices, related not to relative
prices but to the aggregate price level relative to the money stocks in the
hands of the working population. This stemmed from the budget
deficit that several of the Eastern European states ran. This was a
condition for the chronic excess demand.

You raised the question of taxes lowering the standard of living. This is
to confuse the symbolic with the actual. The actual standard of living
was determined by the produtivity of labour and the proportion of
labour allocated to the consumer goods and social services sector
by the plan. Taxation does not alter this, its function in a socialist
economy
is solely to regulate the stocks of money held by the population.

To the extent that distinct classes with different sources of income
still exist, the tax policy may have class effects. If I understand things
properly in several of the eastern block countries income tax was
only paid by those who were private traders. The rest of the state
budget came from turnover taxes. I think that there are serious issues
to be addressed relating to the optimal form of taxes in communist
economies, but leaving that asside, it remains essential that mechanisms
exist to ensure that the issue of tokens for the purchase of consumer
goods ( be they labour tokens or Roubles) is in balance with the
production of such goods.