Wednesday, January 14, 2009

Capitalism, communism and free markets

RedDali argues:

You hear that the free market distributes resources efficiently and productively - why does it not?

You shouldn't believe everything you hear.

First of all, "efficiency" by itself is ambiguous: efficiency must be specifically defined by its inputs and outputs: efficient at what? Free markets are efficient at producing goods if we define the input as cost and the output as surplus value. The "most efficient" free market enterprise minimizes its labor costs while maximizing the socially necessary labor time devoted to the production of goods.

There's a fly in the ointment, though. Labor generates surplus value, the difference between the socially necessary labor time to produce labor power and the amount of socially necessary labor time generated by labor power. If on average it actually costs 4 hours of labor to produce the food, housing, clothing, etc. for a worker to generate 8 hours of labor, then each worker will generate 4 hours of surplus labor per day.

Since labor itself is a commodity, workers under a free market will be paid with 4 hours worth of goods (or the equivalent in money) for each 8 hours labored. Sooner or later someone has to consume that surplus value. But whom? Under a free market, everything is a commodity; everyone receives only the cost of their labor; the surplus value would be wasted.

Every economic system must exempt something from free market commodity relations to distribute the surplus value. Slavery exempts the ownership of people; feudalism exempts the ownership of land; capitalism exempts the ownership of capital. Under capitalism, the price of capital is related not to its cost — the socially necessary labor time to create the capital — but to its value, the amount of surplus labor generated using that capital. This relationship cannot be achieved using just free market economics.

Socialism — the transition between capitalism and communism — exempts labor itself from commodity relations. Communism will be achieved when all commodity relations become at least trivial, if not completely eliminated.

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