October 30, 2014

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Thursday, October 30, 2014

People over profit: The Socialist alternative

Editor’s note: This is part one of a three-part series by Mike Tudoreanu.

My regular columns over the past month have, in a way, been part of a single long-running argument. Two weeks ago in my previous column, I argued that the workers are the real wealth creators. I explained that the working class (including both physical and intellectual laborers) is the true engine of the economy, and people who do not work are not producing wealth. Such people include all those who get their income from profits, interest or rent.

Flickr/Sterneck

In another earlier column, I pointed out that the rich did not earn their money – they could not possibly work hard enough to justify their colossal wealth They are not responsible for most innovations and the only reason they take more financial risks than we do is because they have more money in the first place. The conclusion is that the money of a rich landowner comes from the work done by his or her tenants; the money of a rich capitalist comes from the work done by his employees, and so on.

So far, what I have presented is an argument against capitalism, which can be boiled down to the idea that capitalism takes wealth from people who worked for it and earned it (the workers), and gives it to people who did not work for it and do not deserve it (the capitalists).

But now I want to go further and write about the alternative I advocate. I am a socialist. Unfortunately, that word has suffered so much overuse as a label for so many different things – just like the words “freedom,” “democracy” or “republic” – that it has become confusing and requires an explanation.

In a nutshell, socialism is the view that since the workers create all wealth, we need a society in which they also control all the wealth and decide what to do with it. To be a socialist means first and foremost to be on the side of the working class. Socialists believe that all profits (as well as rents and interest payments on loans) are, in a sense, stolen money that rightfully belongs to the workers, and therefore, they strive to return as much of that money as possible to the workers. For this reason, socialists often support the kinds of policies that are called “wealth redistribution,” such as universal health care, free education, social security and welfare payments.

But socialists are not liberals. When liberals advocate wealth redistribution, they see it as a kind of government-run charity or a way to “save capitalism from itself.” Liberalism does not question capitalism. It accepts the idea that the rich deserve to be rich and the poor deserve to be poor and the only goal is to offer a basic safety net so that no one becomes excessively poor. In addition, liberals see this safety net as their end goal; not a step on the way to something else.

When socialists advocate wealth redistribution, we don’t see it as a safety net, but rather more like a Band-Aid. Capitalism constantly makes workers lose wealth that they should rightfully get to keep, in the same way that wounds make you lose blood. So-called wealth redistribution is not redistribution at all, but rather a way to slow the bleeding. By providing workers with health care, education and so on, we are returning some of that lost wealth back to them so their net loss is smaller.

Thus, wealth redistribution is not a matter of charity or compassion, but a matter of justice. It is not a hand-out, but a restitution of stolen goods. However, the restitution is incomplete. The workers only get back a small part of the wealth taken from them by their bosses. This is another way in which wealth redistribution is like a Band-Aid: It can be a temporary fix that makes the problem less bad, but it is not a solution. It is no more than a small step on the way to the cure for society’s ills, not the cure itself.

So what is the cure? If the money that goes into business profits rightfully belongs to the workers, does that mean we should just ban profits and make businesses pay their workers all the money they do not spend on material costs?

Of course not.

Capitalism is an economic system based on privately owned, profit-seeking firms. One does not simply tell private companies to stop making profits. If we simply told private companies to stop getting profits, interest or rent, they would all go out of business and the whole system would collapse. So how can we get an economic system without profits, interest or rent?

Clearly, the only way to do it is to have an economic system without private companies. We need to replace them with a different kind of company. For instance, we could replace them with state-owned enterprises.

If you have ever heard the word “socialism” being used as a synonym for “state ownership,” or the government doing things in general, that is a lie with a grain of truth. The grain of truth is that most socialists do indeed support an economy based on state-owned companies.

The lie, however, is the idea that state ownership is the main thing socialists care about, or that they support the government in general. We do not. We support the working class and we want an economy controlled by the workers with no profits and no income, except that earned through work.

One way for the workers to control the economy is for them to elect representatives to a government body – in free and fair elections, without money in politics – and to have this body own and manage companies. It is only in that kind of context that socialists support state ownership. It can be a useful tool, but it is not an end in itself.

To be continued…

Mike Tudoreanu is a Collegian contributor. He can be reached at mtudorea@econs.umass.edu.

 

Comments
21 Responses to “People over profit: The Socialist alternative”
  1. David Hunt '90 says:

    Might I suggest you read Thomas Sowell “Vision of the Annointed”? You might actually learn something, assuming any facts not matching your Narrative can penetrate.

    Might I suggest reading essays by people who actually LIVED under socialism, e.g., the essays by SVETLANA KUNIN on investors.com. (Search for her name.)

    But that would require an open mind on your part. So, knowing that you won’t bother even reading this last one, I’ll end:

    60 Second Refutation of Socialism, While Sitting at the Beach
    http://www.coyoteblog.com/coyote_blog/2004/12/60_second_refut.html

  2. Mike Tudoreanu says:

    David, you should not assume that I have not heard those arguments before. As a matter of fact, I have.
    *
    Kunin’s essays seem to largely consist of paranoid screeds about Obama being some sort of communist, which is so insane as to discredit everything else she has to say. For the record, the United States under Obama has lower taxes, fewer regulations, less government funding for education and welfare, and greater inequality than the United States under Ronald Reagan – not to mention Europe, Canada or Australia. By any objective measure, the US has been getting continuously more capitalist over the past 30 years. Empty rhetoric from Democrats trying to win votes does not count. Obama can say whatever he likes, but the fact is that his actual actions are those of a moderate Republican. Even his health care policy is based on old proposals by Nixon, and Romneycare.
    *
    Also, if having lived in the USSR or Eastern Europe somehow makes you an authority on socialism and capitalism, then I guess I’m an authority too, since I lived there until I was 19. In fact, there are literally over a hundred million such “authorities”… and a significant number of them vote for socialist or communist parties.
    *
    Now, regarding your “60 Second Refutation of Socialism”, the only thing it refutes is a straw man. It refutes the idea that all wealth is created by “brute force”, claiming that this is what socialists believe. That is a lie. We do not believe that wealth is created by “brute force”. We believe that wealth is created by labor of all kinds, both physical and intellectual, and I made sure to emphasize that in my columns. For example, in this column, I mentioned intellectual laborers in the very first paragraph.
    *
    Yes, intellectual labor creates wealth just as much as physical labor. But no, intellectual labor is NOT performed by capitalists, and it does not mean “entrepreneurship”. Intellectual labor is performed by researchers, scientists, architects, designers, computer programmers, and so on. These people are workers. They are employed for a wage. And they are not the billionaires that get to keep the wealth and run the country.
    *
    No socialist thinks that wealth is somehow “zero sum”. How could we? We believe that workers create wealth. That implies that wealth is, indeed, CREATED, and not simply moved around from place to place. Yes, there is a lot of wealth that nations like the US create internally, and do not take from anywhere else. But the point is that this wealth was created by American WORKERS, and ended up in the hands of American capitalists. Just because it wasn’t taken from outside the US doesn’t mean it wasn’t taken by one class of Americans from another class of Americans.
    *
    And finally, the fact that GDP per capita (or the general standard of living) has risen much faster since 1700 than before 1700 is well known, and it was even addressed by Marx way back in 1848. However, this is due to industrialization, not capitalism. The same rapid increase in GDP and living standards occurred in every country that moved from an agrarian to an industrial society, no matter how capitalist it was or which economic system it used.

  3. Mike says:

    This is actually a great article because it demonstrates how absurd those viewpoints you really hold are and how little of reality they take into account. We could argue all day, but you are set in your views.

    Mike

  4. JoeRoot says:

    Oh Mike – how many revolutionary university students of the past decades have made the same arguments from their ivory-tower existence in western Massachusetts. Then they realized they liked living in houses and driving BMW’s, and they got with the program. David Hunt is correct from an intellectual point of view, but I suspect you will shape up soon enough. Socialism in any context is an utter failure, as evidenced by the collapse of every single major society that has practiced the form of it. You also fail to account for the absolute power that resides with the government in a socialist society, in which the needs of the many are even more ignored than in a capitalist society. The promise/dream of the capitalist society is that everyone has a chance to make something of themselves, achieve something and perhaps rise to greatness/wealth. There is no such promise in socialist societies, even “soft socialist” paternalistic societies like Western Europe. Would you be surprised to know that, by and large, families of ancient mobility still run things behind the scenes in Italy, France and Germany? In addition, the idea of workers could control the economy with out regard to politics or any other forces beyond those of our own economy is naive and dangerous. The world is filled with lowly skilled (including many college graduates) individuals, and as they are commodities in a society with little need for so many unskilled, and as the Earth is overpopulated by 2x (4.5 billion people or so) with even more unskilled labor, the work of such people is unfortunately less valued as time goes on. What is happening to the American worker is an unfortunate by- product of many global forces not controllable solely by us. Over-population, industrialization of third-world countries, faster communication and transport, free movement of talent to only a few nations such as the U.S., and the lack of large scale wars are all contributing factors. The truth is, the American Dream as we have come to understand it is largely the product of a hard-working innovative people born at the exact right moment in time when one nation had the foresight, power, might and human capital to profit from the aftermath of a world war that did not touch our shores. The post-WWII economic juggernaut that we became has been waning since the German Miracle of the 1960s has turned into a world-wide recovery over the last generation. Before WWII, the U.S. accounted for approximately 8% of the world’s GDP, in the 1960s it was more than a quarter. Some economists have argued that we are reverting back to the mean of 100 years ago simply based on the % of world population that we represent.

    As stated in the Wall Street Journal just days ago, even though your politicians won’t tell you this, the days of the medium-skilled high paying job is over. This has been coming for more than 30 years, most of my lifetime. No amount of idealistic political blathering will change that. At the end of the day, when you get out of school and pay taxes for a while, you will realize that you are either a “have” or a “have not” and you will have to decide whether your fallacious political beliefs will be worth compromising your opportunity to make a decent living and provide for yourself and a family.

  5. Billz says:

    In a Socialist/Communist society, what’s the incentive to work hard? If I’m going to be have the same living conditions and amenities, there’s no way I’d be putting in long hours at a relatively lousy job. I’d be making pizzas or pumping gas (summer jobs I’ve enjoyed). So much for any innovation.

    Good luck when you get to the real world…

  6. Brian D. says:

    Who said anything about everyone having the same living conditions and amenities? This is a really weird myth about socialism (or communism) that just refuses to die, despite the fact that no socialists actually advocate it, and no historical country claiming to be socialist ever tried to implement it.
    .
    Socialism is not opposed to some degree of inequality in living conditions between, say, fast food workers and software engineers. Socialism is only opposed to the extreme inequality we have right now between workers and capitalists. Like the article mentioned, socialism is opposed to profit, interest and rent, and to the inequality that comes from the fact that some people get tons of money from profit, interest or rent. But socialists don’t want to get rid of all *wage* inequality.
    .
    Also, I don’t know about you, but if I could do any job I wanted for the same pay, I would never pick something as boring and monotonous as making pizzas or pumping gas all day. That might be ok for a summer, but after that it would get really annoying really fast. I would eventually want to start doing something actually *interesting* for a living. I want to design things. I’d probably be an architect or engineer.

  7. Kris says:

    Joe Root just made me stiff. Mihnea, commenting on your own (bad) opinion piece, especially when your counter argument references your previous opinion pieces, makes you a classless boar.

  8. Brian D. says:

    By the way, I’ve had enough of this BS about how students supposedly don’t live in the “real world” and therefore their opinions don’t matter. We’re not all rich kids living on daddy’s money, you know. Many of us work to pay for our own living expenses, and after we graduate we’ll have to work to pay off our college loans.
    .
    Many of us live on VERY low incomes with no help from our families or anyone else. We have jobs, same as any workers, and sometimes even two or three jobs. We EARN money to pay for everything we buy, or we borrow it and we’ll have to pay it back later with interest. That money isn’t GIVEN to us by anyone. Our wages are very low, usually right at the minimum wage level, and our living standards would be considered below the poverty line if we were not students. If anyone other than a student had to share a one-bedroom apartment with another person, and the only bathroom was down the hall, what would you call those living conditions? “Ivory tower”? I don’t think so.
    .
    I’m not saying we have it particularly bad. We know that we’ll be done after 4 years, and that’s very different from living this way your whole life. But I AM saying that it’s ridiculous and offensive to pretend that a working college student is somehow privileged. SOME students are privileged, sure. The ones who have their parents pay for stuff. But there are also those of us who work hard to pay for everything ourselves.
    .
    What exactly makes our lives “not the real world”? The fact that we live in a social bubble? But so do the people who live in small towns and villages across America. In fact, the UMass campus is bigger than many small towns. Or maybe the fact that it’s easy for us to get a job on campus? But these are minimum wage jobs. They’re just as easy to get outside of campus, too. Working for dining services is no different than working for McDonald’s.
    .
    There is no real difference between a working class college student paying for his own living expenses and a minimum wage worker in a small town anywhere else in the country. If you have to work to earn a living, then you live in the real world, end of story. The fact that you’re also a student doesn’t change that.
    .
    If people change their political views after graduating, it’s not because they move into the “real world”, it’s because many of them move from working for minimum wage to being well-paid professionals. They just get richer, that’s all. Of course that tends to make them more conservative.

  9. Dr. Ed Cutting says:

    The Pilgrams arrived as socialists — all for the group and everyone gets the same. Well men basically asked why they should be working so hard to feed other men’s families so they instead spent much of their time out looking for gold and the crops weren’t planted, nor tended, and the whole bunch of them damn near starved.

    Well, the next year Miles Standish had a better idea — he divided up the land and gave a piece to each man and told him that whatever he grew on it was his to keep. His family could eat it, he could trade it, whatever.

    Capitalism brought prosperity. Men were now working for themselves and to feed their own families and hence didn’t mind working hard because there was a reward for doing so (and a penalty for not).

    The problem with socialism is threefold. First those who are lazy are rewarded for such indulgence because they get as much as anyone else — they let others do their work for them. Second, those who were doing both their own work and that of others quickly resented it and soon NO ONE was doing ANY work. And third, who is to bear the risks of failure — if workers are to own and be entitled to profits then they should also be equally liable for the losses and should you loose everything you have because the company you are working for goes under?

    And once you get to the point where the workers share equally in the liability and losses, you really don’t have socialism anyway — you have capitalism.

  10. billz says:

    Brian D. sounds destined to go to Grad School, get is Doctorate then become a College Professor. Still not what we consider the real world.

  11. David Hunt '90 says:

    Mike:

    So, despite the fact that Socialism has never worked – ever – in history, and despite the fact that you apparently grew up in such a system… and you still want such a system?

    My condolances on your mental deficiencies.

  12. Reality Check says:

    Haha, David, you think it’s unusual for a person from Eastern Europe or the former Soviet Union to be a supporter of socialism or communism? Oh man, have I got news for you…
    .
    Polls indicate that most countries in Eastern Europe and the former USSR have large minorities of people (and, in some cases, actual MAJORITIES) wishing to go back to the old Soviet system. Most of these polls come from right-wing sources, by the way, who want to raise awareness about the “problem” of rising popular support for socialism in those countries.
    .
    The Wall Street Journal, for example, published a poll in 2009 that asked people in various countries across Eastern Europe, “Do you approve or disapprove of your country moving from a state-controlled economy to a market economy?” And in EVERY SINGLE COUNTRY they polled, the percentage of “approve” responses had gone down since 1989:
    http://online.wsj.com/article/SB125717785492623069.html
    In other words, after they got to live in capitalism for 20 years, a lot of people decided that communism really was better after all.
    .
    In a few countries – most notably Ukraine and Hungary, a MAJORITY of people said they disapproved of the move to capitalism. Russia was split almost exactly 50/50. Bulgaria had only slightly above 50% support for the transition to capitalism. And even in the most pro-capitalist countries, like Poland, there was still a sizable minority (around 10% or so) holding the opposite opinion.
    .
    In other news, the Communist Party is Russia has been the second-largest party and the biggest opposition group since… well, since the fall of the USSR. See election results here:
    http://www.parties-and-elections.eu/russia.html
    .
    Then there’s the article in Der Spiegel, being outraged and shocked – SHOCKED, I tell you! – by the recent discovery that a majority of East Germans think life was better under communism:

    http://www.spiegel.de/international/germany/homesick-for-a-dictatorship-majority-of-eastern-germans-feel-life-better-under-communism-a-634122.html

    I particularly love the part where the author of the article and a university professor start whining about how young people get the “wrong” impression of communism because they listen too much to their PARENTS who lived in East Germany, when they should be listening to the “correct” version of history given to them by their teachers in school. And the “solution” they propose for this “problem” is to have more government-funded capitalist propaganda. Hilarious.
    .
    Maybe they should hire you to teach kids about how their parents are completely wrong and socialism has “never worked – ever – in history”.

  13. hm says:

    on the one hand i have to kind of applaud you for continuing to write in spite of all the negative feedback. don’t worry about the few bitter right-wing alums who keep coming back here for some reason in some cases decades after they’ve graduated (and are proud of it too) to come back and harass anyone they don’t agree with.
    .
    i also like your idea with the dots. on the other hand, it really is kind of a battle of straw men. mihnea, i have a hard time understanding how deeply you might understand all the stuff you talk about when most of it strikes me as superficial propaganda rehashed from the ISO central committee or whatever.
    .
    first of all one thing i disagree with everyone here about is that capitalism has incorporated socialist elements for almost a century now. the state, whether the ‘free market’ societies or the more bureaucratic ‘socialist’ countries, which have all been state-run monopolies rather than actually non- or anti-capitalist. one of the few things, maybe the main thing, that socialist government have actually done well is to rapidly industrialize a backwards economy. and the engine of the economy in capitalism is not simply ‘work’ or rich people running the state, it is the way in which surplus value is extracted from living labor and reinvested into the means of production, which then produce the commodities the worker buys back at a loss. the kind of alienation which begins in this system has been extended through the process of socialization of capital into almost every facet of life and i think if you want to talk to people about capitalism you could start there.
    .
    unfortunately you don’t seem to be interested in that. you keep using these words like ‘rights’, ‘justice’, ‘deserve’, etc. without defining them. wouldn’t you agree that the language and logic of ‘common sense’, ‘good morality’ etc is almost entirely a product of our material conditions? and who is this ‘we’ you keep talking about? how could taking control of the state possibly improve things for the working class? are things really ‘working’ any better in any of the current or former socialist economies than they are here, just because (some) people are going to work? look at what’s happening in china, the working class is enraged and the state can barely keep them under control. not over wanting capitalism but over the same things that american workers struck and rioted about in the 19th century (leading to the fact that we have things like social security and the weekend).
    .
    i could go on way longer but i hope i have given you some food for thought, and that you start writing more substantive pieces if you keep writing about this. there is an argument to be unfolded here and you have only begun to make it in this rather vague and dull piece.

  14. Brian D. says:

    Wait, since when is this about Eastern Europe or the USSR? Give it a rest already. Unless someone is actually advocating that kind of system, bringing it up is just a red herring. It’s like me talking about Somalia or Victorian England as a way of showing that capitalism is bad. Under some forms of capitalism, young children were made to work in factories 12 hours a day. This doesn’t mean all supporters of capitalism want that. The same principle holds true for socialists and the bad parts of the Soviet system. Supporting an -ism doesn’t make you a defender of everything ever done by anyone else who ever advocated that -ism.
    _
    So let’s talk about the kind of socialism that the article actually supports. The author defines socialism as “a society in which [the workers] control all the wealth and decide what to do with it.” That really doesn’t sound like the USSR to me. He also talks about it being a democracy, with representatives being elected “in free and fair elections, without money in politics.” Again, this isn’t the Eastern Europe version of so-called “socialism” or “communism.”

  15. mason says:

    I wonder why there is such a visceral response to socialism, it’s simply an alternative model for government or for an economy. It’s one of the only two economic theories that have been applied in the last 200 years which were successful and the soviet union prior to it’s collapse was the second richest country on the planet and technlogically measured in terms of inventions, patents, military/space technology and nobel prizes the second most advanced nation on the planet.

    Although that said the utopian concept of “equality” doesn’t exist in socialism in practice, the soviet union had a class society that was very similar to ours, in that there was a distinct lower,middle and upper class; although in the case of the soviet union wage disparity was legally mandated to be lower, therefore benefits to compensate the higher skill members of society were in the form of superior services, i.e special super markets, superior healthcare, dachas(seasonal homes), et cetera.

    Also I would not agree with the argument that workers are the real wealth creators, they are usually generate the least wealth for a society. I think an economic firm does not make consideration of salary based on social principals but solely on economic consideration and therefore what an employee is paid is often a reflection of the amount of revenue that employee makes the company, i.e sales per employee.

    I think if you look at the bottom of the employment structure, say a factory worker or retail employee, getting paid 10 dollars an hour and the amount of profit they generate maybe 30 to 40 dollars an hour, maybe 3 to 4 times their wage. Versus an engineer in the same company whose improvement of existing products by reducing cost, innovating them or creating new product may yield hundreds of thousands of dollars in profit and thefore their wage is higher. THan the executive whose skills in marketing, planning company strategy, finding new opportunities and otherwise nets the company millions or tens of millions in revenues and therefore their wage is even higher.

    I think the aims of socalism are fractured, at it’s very core what karl’s marx theory is a polotical theory and it’s a polotical theory based on exploiting the masses to gain power. However it’s also an economic theory whose goal is based on the same underlying foundation of capitalism(utitalitiansm) but seeks a different method of attaining it, in both they have failed to signficantly improved the condition of the working class. It’s not to say the goal of improving the condition of the less fortune isn’t possible but I think there are better ways to achieve it.

    Good article, it’s not easy to go against the grain.

  16. howee says:

    “soviet union prior to it’s collapse was the second richest country on the planet…”
    This absurd- not to mention false- statement makes the rest of your post irrelevent Mason.
    Sorry.

  17. Reality Check says:

    Actually, mason’s statement is correct. The Soviet Union was indeed the second richest country in the world before its collapse, based on the usual way we measure a country’s wealth (GDP). According to the CIA World Factbook for 1990 (not exactly known to have communist sympathies), the top five richest countries in 1990 and their respective GDPs were as follows:
    .
    1. United States — $5,233,300.00
    2. Soviet Union — $2,659,500.00
    3. Japan — $1,914,100.00
    4. Germany, Federal Republic of — $945,700.00
    5. France — $819,600.00
    .
    link for the full list:
    http://www.theodora.com/wfb/1990/rankings/gdp_million_1.html
    .
    People need to stop believing common stereotypes and start looking at the data.

  18. hm says:

    brian,
    fair enough but look at the ISO politics that mihnea is advocating. there is a lot of emphasis on the idea of the leadership of the party. there are a number of reasons comparisons to the ussr may be off base, but a fundamentally different view of political authority is not one of them. unless m. would like to give a clearer version of his political views. it is easy to point out what is wrong with the given system, it just makes me suspicious when the proposed alternative is shrouded in idealistic rhetoric with a history associated with totalitarianism. knaamean? and like i said, i don’t think that soviet-style authoritarianism is even necessarily the worst thing about socialism but like i said, that in some ways it’s even worse than capitalism in some of the ways we would probably both agree are ‘bad’ about it.

  19. billz says:

    And the USSR was a great place to live back in 1990.

  20. peter says:

    If anything we need to encourage more capitalists to teach young people how to get involved in the free market.

  21. txr says:

    Would that happen before or after those capitalists tell those young people that they have no intention to hire them for a decent wage?

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