Tag Archives: Economy

Analysis, Featured

Donald Clelland and Radical Interpretation of World-System Analysis

Leave a comment

Introduction

Donald Clelland is an American sociologist with over 30 years of research and teaching experience, yet with a fairly small number of published works covering the subject of World-Systems Analysis. His existing works and drafts published over the last decade bring the World-Systems Analysis back to its radical roots basing itself on new research.

Clelland’s main subjects cover analysis of commodity chains with a special focus on the role of female labour. Due to this feminist perspective, he refers to commodity chains as Gendered commodity chains.

Although it has the word “chain” in its name, commodity chains are in fact networks of production consisting of a number of geographically distributed producers, each of whom produces a single component of the final product. Every producer in the network is a node, and the distribution of nodes forms a hierarchy akin to core-periphery relationship. For example, the producers of raw materials are to be found in the lowest part of the production hierarchy, just as they happen to be on the periphery of the world-system. Above them are the producers that process the raw materials, then those who produce individual components, followed by the ones that assemble the components into final product that is delivered to the company on top of the hierarchy that maintains control over the commodity chain, owns the final product and markets it. This company is typically a corporation based in a core country.

Clelland focuses on the process of creation of value in each node and its transfer to the last node in the chain. For this reason, he describes commodity chains as surplus extraction chains. This question had been posed by Wallerstein in the 70s when he first formulated the concept of commodity chains.

The key elements of his analysis are:

  • surplus drain,
  • bright value, and
  • dark value.

Surplus Drain

Economic Surplus

Although Marxism is one of the foundations of the World-Systems Analysis, its theorists often criticise and modify Marx’s economic model. That is also the case with Clelland who presents his theory of surplus drain through modification of Marx’s labour theory of value.

Marx’s model supposes that the source of surplus value is to be found in the difference between the value created by the worker and the value of reproduction of his labour force. The logical outcome of that assumption is that the wage covers the costs of survival of the worker and his family[1]. Yet, this does not correspond to the existing situation in the periphery where labour is not completely proletarianised[2].

As an alternative to Marx’s model, Clelland uses Baran’s and Sweezy’s concept of economic surplus. Baran’s definition of surplus is shortly: “The difference between what society produces and the costs of producing it.” Baran’s concept of surplus is not to be mixed up with Marx’s concept of surplus value: economic surplus is a part of the surplus value that is being accumulated, hence it does not include capitalist consumption, state expenses for administration, defence, repressive apparatus, etc. Defined in such a way, this concept is more flexible as it allows for analysis of additional cases which do not fit into the classic model that Marx devised. For example: unpaid labour, underpaid labour, ecological degradation as a source of value, etc.[3] It would be wrong to claim that Marx did not contemplate those cases, however he did not include them into his abstract model as he considered them to be precapitalist features.

Degree of Monopoly

Second dimension of the criticism of Marx’s model refers to the supposition about the free market exchange. Much like Smith’s classic model, Marx too bases his theory on free market relations without external influences such as state intervention and monopolies.

Clelland considers that the main tendency of the capitalists is not the increase of exploitation but the increase in the degree of monopoly (deviation from the free market).

Degree of monopoly is defined as any kind of mechanism which lowers the price of production or increases the sales price in comparison to free market. Degree of monopoly is present in every node of a commodity chain, and its efficiency is directly related to the position of the node in the hierarchy of the chain. Within every node unpaid value is drained and moved upstream in the chain.

Observed from another perspective, the degree of monopoly could be understood as a capacity of an enterprise to transfer its costs to the enterprises lower down the chain.

Degree of monopoly as we have it today in commodity chains is mainly a degree of oligopsony. Oligopsony is a situation on the market characterised by a small number of buyers and a large number of sellers. This situation allows buyers to lower the price of commodities by leveraging the competition between the sellers. That is, the degree of oligopsony allows buyers to control the prices.

The Importance of Surplus Drain

Surplus drain as a concept is akin to unequal exchange, although it is used in a winder sense and it can be applied to precapitalist systems.

Surplus drain is considered to be a basis of every world-system. Hence, the core-periphery relationship is also defined as a relationship of surplus drain – the zone which creates value but is unable to retain it, is the periphery, while the zone which captures the value is the core. Semi-periphery can be understood as a proxy which drains the value from periphery, while it is itself being drained of value by the core.

Therefore, the division of world into core-periphery zones according to the World-Systems Analysis is neither geographic nor nation-bound, it is a division which reflects the flow of surplus.

In the precapitalist systems, surplus drain was effected by forceful appropriation, or what Marx called “primary accumulation”. Modern, capitalist world-system has two characteristics regarding surplus drain:

  1. it is effected via commodity by realising production and distribution through different zones of the system, and
  2. the system has to expand in order to sustain its growth and survival, and that is achieved by searching for new locations with lower prices. (Clelland, 2012)

Surplus drain is one of the mechanisms which reproduces the core-periphery hierarchy and the capitalist world-system itself. At the same time, surplus drain not only allows increased accumulation of profit for the capitalists, but it also makes subsidies for the consumers possible by lowering the final price of the product.

Two Categories of Value

To explain the concept of value, Clelland uses the analogy from the world of physics which considers that 90% of the matter is invisible. According to this analogy, the biggest portion of value is not officially accounted for. It is not a terminology one would come across in World-Systems Analysis, rather a way for Clelland to illustrate the transfer of value.

Value is categorised as bright and dark depending upon it being registered or not in the accounting books. Namely, the capitalists run their accounting in conformity with the information they need for efficient business management. In this respect, they do not account for costs which are not closely related to production. In other words, they do not register externalised costs – the costs borne by someone else even though they should be borne by the capitalist. Unregistered costs are invisible, dark value.

Bright Value

The mechanisms of bright value drain are:

  1. export of capital (FDI) which enables the repatriation of profit to the country of origin;
  2. system of monopolies to bypass the competitive market;
  3. monopolistic control through patents and intellectual property;
  4. expats in the peripheral countries who send their earnings back to their home country or they buy luxury items from their country of origin, and
  5. debt slavery – loans which, in spite of being paid over and over, keep being serviced due to accumulated interests.

Additional mechanisms include: capital flight – when comprador bourgeoisie transfer their personal wealth to the core countries; foreign exchange manipulation – devaluation of local currency which reduces the income from imports; portfolio investments – transfer of dividends from periphery to core, among others.

Dark Value

Clelland considers dark value to be present in all factors of production: capital, labour, land, natural resources, knowledge, and energy. Dark value is being realised through ownership over each component in the production chain under its price on the world market.

Dark value is hidden in the way it subsidises commodity chains:

  • formal labour[4] paid under the market price;
  • commodity inputs to commodity chains which are paid under the market price, and they originate from the household labour in the informal market[5];
  • cheap natural resources, and
  • ecological and human externalities which are free for the capitalist (such as unpaid labour, ecological degradation, etc.).

Characteristics of dark value are:

  1. surplus drain is free for the capitalist, hence, as it is not a cost it is not accounted for in the official registers;
  2. unaccounted surplus can be converted into accounted surplus (bright value) either by being transformed into profit to the benefit of the capitalists, or it can be transferred into lower prices to the benefit of the consumers;
  3. the economic significance of dark value grows over time which is why it’s transfer has to expand with the increase of trade volume. In that case, the increase in consumption is what triggers dark value drain from the periphery.

In the context of knowledge and natural resources as a source of dark value, we can name two examples:

  • By the means of transnational flow of labour and brain drain from periphery to core, the costs of training and reproduction of the labour force is externalised to the periphery.
  • By controlling the ecosystem of the periphery, the core exercises the so called ecologically unequal exchange. The core maintains low price of the raw materials through ownership of their sources. The effects of the uncompensated ecological damage are borne by the peripheral communities via health risks, loss of access to resources for food and costs for rehabilitation of the ecosystem.

Labour as Source of Dark Value

The contribution of labour to the value of commodity consists of the total hours of work – both accounted and unaccounted (i.e. paid and unpaid)–which are realised in the production, including the work on reproduction of the labour force.

Unpaid Labour

Household labour and household resources subsidise the income of the peripheral workers allowing capitalists to pay them wages below subsistence level. The essential characteristic of semi-proletarian households is their capacity to survive via unpaid labour, which is what lowers the price of their labour force in the market.

Unpaid labour of semi-proletarian households has 4 forms:[6]

  1. capitalists do not bear the costs for the biological reproduction of women, nor for the upbringing of the new generation of workers;
  2. households engage with an array of unpaid activities for survival which indirectly subsidise capitalists, i.e. collection of unpaid resources;
  3. women and female children provide unpaid labour in form of support to the male-owned household-based business, and
  4. women provide unpaid labour for search and use of capitalist products.

From the standpoint of the capital, households are commodity producers: they produce labour force. As such, households are the basis of capitalist production.

Informal Sector

Commodity chains include horizontal chains of small commodity production based on informal sector and non-waged labour. They provide cheap labour, services and inputs for commodity chains below market price. They are also based on semi-proletarian households.

An example of this relationship is a female worker who works in a factory but also employs a caregiver from informal sector to provide care for her child while she’s at work.

Consequences of the Surplus Drain

Consumers in the Core and Dark Value

As mentioned previously, dark value is based upon uncompensated labour or underpaid labour. If production were to be carried out in the core, the final price would be significantly higher. Consumers in the core enjoy the benefits of the exploitation of the periphery through the lower prices provided by dark value.

Social consequences are reflected in the maintenance of the high living standard in the core by the means of high consumption in spite of the decrease in social spending and salary levels. In such a manner, neoliberal reforms counter the effect of lowering real wages by providing cheap imports.

Core-Periphery and Dependence

Surplus drain is super-exploitation of peripheral labour, households and ecological resources which blocks economic growth through investments and expanded production by depriving periphery of its surplus.

On the other hand, dark value drain is also a threat to the ecological sustainability and quality of life of the workers in the periphery, especially that of women.

Surplus drain from the periphery represents a big portion of its economic wealth, but it doesn’t mean a big increase of wealth in the core because the biggest portion of trade is carried out among core countries.

Commodity-Chain Analysis

Let us reformulate the analysis of commodity chains. Commodity chains are exploitative structural relations which occur in the arrays of unequal exchange between its nodes and across world-system zones. Powerful companies use degree of monopoly within the commodity chain to capture bright and dark value.

The cost structure of each node is as follows:

raw materials Value added
production costs
management
overhead costs
profit Value captured
Total: sales price

Every following node in the array takes the price of the component from the previous chain as the first item in the cost structure. Values calculated this way constitute bright value. In parallel, each node contains dark value in form of externalities. For example: by lowering the wages, the unpaid portion of the created value is captured as profit – i.e. the cost is externalised onto the worker who has to work additional hours in order to earn the wage that covers his subsistence costs.

In a purely competitive system dark value capture would quickly become universal. However, in the monopoly capitalism, the dark value can be leveraged in 3 ways:

  1. to lower the product price in relation to the price of the competition;
  2. to expand the accumulation by converting dark value in bright value (reinvestment), and
  3. as a protection from competition via degree of monopoly.

Enterprises achieve the degree of monopoly via: scale, tariff and non-tariff barriers to protect access to the market, innovation, intellectual rights, marketing… and via monopsonic conditions. Monopsony allows for unequal relations between the participants in the chain. Hence, it allows for surplus drain via unequal exchange.

Clelland reached his conclusions by applying the existing theory on Apple’s commodity chain:

In the capitalist world, Apple is the prime example of an enterprise that perfected commodity chain management becoming a model for other companies. Its model is fabless (without owning a factory) which outsources the whole production process to individual component suppliers and producers which assembles them. On top of the chain, Apple designs the product, controls the production process, coordinates it, manages marketing, logistics and sales.

The way Apple carries out its degree of monopoly is via: innovation, intellectual property, oligopoly relations with the producers in the commodity chain, and externalisation of costs onto them. Apart from the products themselves, the innovation is also to be found in the control of the production process, selection of component suppliers etc. However, innovation alone is not enough. What is also required to ensure monopoly conditions is the legal protection (intellectual property and patents), strict control over the production process and quality control.

The buyer, Apple in this case, encourages competition between suppliers by hiring multiple producers of the same component. At the same time, it keeps searching for new ones who could deliver the component at a lower price. In this way the “non-competitive” suppliers are eliminated from the chain, and on the other hand, pressure is applied by the means of competition in order to prevent the increase of component prices. As a result, the suppliers are forced to drive their costs down and externalise them onto their own suppliers in the lower instances of the chain (for example, suppliers of raw materials, informal sectors, households, etc.).

Finally, Apple provides credit lines for the suppliers. The credits are conditioned by long-term obligations which provide: raw materials below market price, transfer of risk over to suppliers and long-term use of the suppliers’ labour force.

Reference:

Amin, Samir, 1974. “Accumulation on a World Scale: A Critique of the Theory of Underdevelopment”

Baran, Paul, 1957. “The Political Economy of Growth”

Baran, Paul and Sweezy, Paul, 1966. “Monopoly Capital: An Essay on the American Economic and Social Order”

Clelland, Donald, “Surplus Drain versus the Labor Theory of Value”

—, 2012.”Surplus Drain and Dark Value in the Modern World-System”

—, 2014. “Unpaid Labor as Dark Value in Global Commodity Chains”

—, 2015. “The Core of the Apple:Dark Value and Degrees of Monopoly in Global Commodity Chains”

Emmanuel, Arghiri, 1972. “Unequal Exchange: A Study of the Imperialism of Trade”

Wallerstein, immanuel, 1974. “The Modern World-System I”

  1. This is what the reproduction of labour force refers to, i.e. it’s renewal on daily basis by covering basic material necessities, and upbringing of new generation of workers. ↑
  2. Proleterisation refers to a process which integrates workers into the labour market making them dependent on it (i.e. selling their labour force on the labour market is their only source of income). Contrary to the full proletarisation, a class of semi-proletarian labour has to complement their income from the sales of labour force by different means typically outside of formal economy in order to subsists (for example, cultivating their own crops for personal use). ↑
  3. Emmanuel ‘sand Amin’s formulation of the concept of unequal exchange is completely based on Marx’s classical model and does not deviate from Marx’s assumptions. ↑
  4. Formal labour refers to the legal employment of workers with all welfare benefits. ↑
  5. Informal employment refers to production without legally arranged work and production relations between the worker and the capitalist. This implies various types of violation of workers’ rights.↑
  6. Examples for this cases. Families in Uganda survive first and foremost by horticulture. However, they need money for scholarisation of children and other expenses which drives them to grow coffee. Coffee cultivation is performed mostly by women, although children also take part in the harvest. The sales is carried out by men as owners. They also keep the earnings. Also, the excess of food produced in semi-proletarian households is sold  on the market to the formal workers. Food produced in such a way has a price lower then the market price which lowers the price of the workers that buy it. They then sell their labour force to a supplier which takes part in a commodity chain of a big core-based corporation. ↑

 

Analysis

Marx and the Three Basic Problems of Socialism

Leave a comment

„Water, water everywhere

And all the boards did shrink

Water, water everywhere

Nor any drop to drink“

T. Coleridge

Communism everywhere

Yet all our hopes did sink!

Comunism everywhere

But all we need is think!

Before Lenin, Marxist theorists, for the most part, avoided the discussion on how a communist society should be structured. Marx’s work was primarily focused on identifying the contradictions of capitalism and explaining the inevitability of its collapse and the subsequent communist revolution. The main reason why Marx made this principled decision was that he was extremely frustrated with the Utopianism of French socialist thinkers so even though he shared their desires he agreed with the conservative dismissals of Saint Simon who was ridiculed as a person whose view was that under socialism, the Atlantic Ocean would turn into lemonade. However, Marx noticed an extremely important fact in his historical works, which is that revolutions are always midwives of history in the sense that in revolutionary times a new world is not created out of thin air; rather, the social relations which are already highly developed at that moment simply rise to the position of the dominant ones, which are in deep crisis. In that way, he explains the French Revolution as a moment in which the capitalist class, which had existed for several centuries before the revolution itself, overthrew the monarchy as the social arrangement which was in terminal decline. In that sense, it would be natural to expect from Marx to identify the social forces, formations and tendencies in capitalism that contain the elements of socialism which can be expected to overthrow the bourgeoisie in the moment of revolution.

Another important Marxist thinker, Vladimir Lenin, started where Marx had left off. His work was partly motivated by the recognition that Marx had left no sketch of a communist society that could be offered as a platform for revolutionary struggle. Therefore, Marx’s anti-Utopianism proved to be self-defeating because it left no clear idea for the revolutionary party in the sense of precise goals of the struggle. Lenin’s work in this domain was, of course, later motivated by the practical needs because his part managed to gain power in Russia through a revolution. To illustrate how a communist society should look like, Lenin once stated that the socialist society should function like the German postal system. In that sense, Lenin had identified an existing structure in the capitalist society, distilled its key features and determined that the principles on which it was organized would be useful for a communist society. Here, the goal will be to describe several forms of social relations in capitalism that provide a potential answer to the question of how to regulate the social relations in socialism. Of course, the sketch that will be given here represents merely an invitation for Marxist forces to further analysis, motivated by the realization that Marxism cannot entirely abandon its utopian or programmatic character. Based on the experience so far, we are also aware that many Marxists will criticize this attempt as pure Utopianism and ultra-leftism. However, following Lenin, we must realize that without any kind of general sketch or platform, we cannot expect the support of the masses for a dash into the unknown. As revolutionaries, we owe to the working class at least some kind of description about what we want to create. It should also be mentioned that the sketch that we are about to present refers to the goals that should be achieved without any discussion of how to achieve them, which is also a crucial topic for the discussion. It is certain that some of those solutions should be prioritized over others in the period of transition to socialism, but for now, we will not address the criteria according to which such prioritization should be carried out. Those problems will be left for some other occasion.

The sketch presented here is inspired by the answers to three crucial problems of capitalism which are analyzed in turns in three separate volumes of Marx’s Capital. First, is the problem of the capitalist production and exploitation of labor power (volume I). Second, the problem of capitalist distribution of the market economy (volume II). The third problem is the problem of money, banks and finance (volume III). From the perspective of the volume I of Capital and the problems of capitalist production, the key issue is the exploitation of labor power or the fact that in a capitalist enterprise, surplus value (profit) has to be created. The surplus value is produced by paying the worker less than the value that he created during in his working time. Therefore, we are dealing with exploitation. There we have the problem of alienation because workers are not owners of the products they make, they do not influence the decisions that affect their work and they are alienated from their co-workers who are mainly seen as competition for promotions and the like. In socialism, this problem has to be solved through elimination of exploitation and alienation, which means that workers have to collectively decide about the issues pertaining to their work and they have to be paid in accordance with the amount of work they complete.

There are historical examples of enterprises that have functioned this way in the framework of socialist countries as well as the examples of companies that work this way in capitalist economies. The example of workers’ self-management in former socialist Yugoslavia is one of the examples that are frequently cited. It can be said, as it has been frequently pointed out in the literature, that the problem of exploitation was solved quite successfully in the former Yugoslavia. However, Yugoslavia had a major problem from the perspective of volume II of Capital, which was the problem of the restoration of the market economy which resulted in stratification among enterprises and consequent inequality among individuals and regions. In essence, it can be said that Yugoslavia had a capitalist market and a socialist organization of enterprises. There are also examples of similar, worker-managed, enterprises operating inside capitalist economies. The best-known example is Mondragon in the Basque country in Spain, which employs around 100 thousand people. Mondragon has been competing very successfully with capitalist corporations for decades and it has been growing consistently. Of course, Mondragon is not a perfect model for a socialist enterprise because inequalities in income of different workers are significant and have been growing. However, what is very useful is the principle of worker’s self-management, which ensures a lot smaller income inequalities, almost complete protection from unemployment (even when it goes against the company’s profits), guaranteed education and professional development, collective solidarity in terms of healthcare, etc. There are many more examples of such firms that compete in the capitalist markets quite successfully, and just like in the case of capitalist firms – some of them thrive and some of them fail.

Next problem that needs to be solved is the problem of distribution or markets as mechanisms for the distribution of goods and services. The bulk of trade in goods and services in capitalist societies takes place in the market where those who have the money can buy practically anything while those who do not have the money are deprived from even the most basic necessities. In contrast to the liberal doctrine that the market leads to a balancing of prices, quality, supply and demand, as Marx argued, the market is a highly volatile system which constantly oscillates and periodically leads to crises. A completely free market can be thought of as a traffic system without signs and lights. Such a system is certainly good for those who drive tanks, but it is in no way desirable for those who ride bicycles. That way, markers naturally benefit the biggest and strongest companies that push the smaller firms out of the market competition, thereby forming monopolies and quasi-monopolies. Luckily, traffic systems are not organized according to market principles. Rather, detailed analyses are carried out in order to reduce the risks for all participants and ensure a relatively high level of security. Communist or socialist economies have to contain elements of planning. As the example of Yugoslavia has shown, good organization inside the enterprises does not reduce the risk of growing inequality because stronger companies grow bigger and the weaker ones collapse. The Soviet Union, in contrast to Yugoslavia, had a much stronger planning system, but it lacked the democratic organization of enterprises. In that sense, we can say that Yugoslavia had a better answer to the problems of volume I of Capital while the Soviet Union had a better solution in terms of volume II issues. However, it is necessary to resolve all the potential sources of contradictions in order to establish a stable socialist economy.

Here, it is necessary to address the widespread attack on the socialist planning as an example of “inefficiency”. This critique is completely mistaken for two reasons. First, the Soviet Union accomplished the industrialization of the country and rose into the status of a global power in just several decades thereby overtaking numerous capitalist countries that took centuries to get to where they were at the time. Moreover, the sacrifices of the working class in the Soviet Union were minimal in comparison to the victims of development in capitalist countries. In the Soviet Union, from the very beginning, there was an eight-hour workday, high degree of safety at work and relatively stable wages. During the Industrial Revolution, in capitalist countries the working day lasted for fourteen hours, workers regularly died at work and wages were miserable. Also, during WWII, only the Soviet planning economy could rise to the challenge of war and subdue the fascist militarized economy. It is also worth mentioning that the British and American economies were transformed virtually overnight into planned economies because it was clear that only a system of that sort can be appropriate for the given conditions. Therefore, the idea that planning is inefficient is a complete fabrication. Economic planning exists, of course, in capitalist societies as well. The multinational corporations, whose wealth and yearly output are often bigger than the total wealth and output of many countries, are organized as planned economies. For example, individual segments of Mercedes Benz do not trade among themselves on a market. They rater distribute parts and products among themselves according to a plan. If Mercedes Benz operated according to market principles, it would constantly face a surplus of small and simple parts and a shortage of electronic equipment, engines and the like. Therefore, the organization of corporations, as the central economic institutions in capitalism, shows that planning is far more efficient than markets but this glaring fact is almost never mentioned for obvious reasons. It is important to add that large corporations, in addition to planning internal distribution, also make plans about the demand. That is, since they are unable to exert complete control over the market (as much as they would like to) but they know that planning is necessary and they cannot always work in full capacity because they would be unable to sell all their products, corporations use complicated statistical methods of predicting demand. In those tasks, based on the data about the demand in previous years and quarters they make complicated and often imprecise planning about future demand and the production is then adjusted to those estimates. The imprecision in those estimates comes of course form the unpredictable changes in the market. Using techniques of planning developed by capitalist corporations and enriched with rich data which could be added to such calculations if there were no market oscillations, a socialist economy could make incredibly precise predictions about the social needs in the coming years. This would be a powerful way of harmonizing supply and demand. The modern information technologies which were not available in the Soviet Union could help enormously in those projects. Therefore, even today, we have systems of planning and planning technologies that could be used to optimize and arrange socialist economies. Finally, the caricatures of socialism presented by right wingers about the obsessive planning in socialism that would require predictions about the exact number of paint jobs on cars or small repairs in households are completely misplaced. There is no reason to think that socialism would require a complete eradication of small businesses that perform these kinds of jobs particularly when they do not involve employer-employee relationships (i.e. self-employment or family businesses) because as Lenin said, a million small businesses count for nothing, a few giant cartels count for everything.

The third and perhaps the most complex problem is the problem of creation and distribution of money. This problem has been shown to be one of the most difficult tasks for both capitalist and socialist economies. Traditionally, capitalist economies have relied on the assumption that gold has a certain real and stable value so for a long time all the money in circulation had to have its equivalent in gold. The problem was that the capitalist production and value creation are much faster than the expansion in the amount of gold available so the prices of goods and wages declined constantly when countries held on to the gold standard. This process is known as deflation. On the other hand, when this system faced a crisis, countries would begin to print money that would have no equivalent in gold and the prices of goods and wages would rise, which is known as inflation. Therefore, the oscillations in the market were reflected in the oscillations in the value of money and vice versa. In socialism, the problem was similar because countries like Yugoslavia had a market economy but no gold standard which meant a constant tendency towards inflation. In the Soviet Union, the supply of money was also planned and the problem in the planning of production and distribution meant that the process of planning in the domain of money creation failed as well.

Today’s capitalist superpowers have abandoned the gold standard a long time ago and now money is created as the central banks hand out loans to commercial banks each time a commercial bank finds an individual prepared to incur debt. Therefore, money is created through indebtedness. This system is efficient to the extent that it guarantees that individuals would be forced to give their best to repay the loans so a certain degree of stability in the value of money is assured. On the other hand, the money needed to repay the accumulated interest is never printed which automatically means that a large number of people cannot in principle pay back their loans. This of course leads to foreclosures and crises in the banking system. It is interesting to note that regardless of who carries the loan the money always has the same value so a loan of $10 000 creates the same amount of money regardless of whether it was taken by a doctor or a worker at McDonalds. This abandonment of the gold standard and the idea of money creation in response to people’s needs as well as “equality in debt” can find certain applications in the communist economy. It is necessary to replace debt as the guarantee for the value of money with the real basis of value which is human labor. Namely, Marx was a proponent of the labor theory of value according to which value is created through human labor. The fact that different kinds of labor are paid differently because of the market mechanisms of supply and demand, made the stability in the value of money under capitalism impossible. The lesson that we can draw from modern banks is that money can be created not on the basis of debt taken on by an individual but on the basis of labor that an individual has invested. In other words, in socialism, money supply would have to be enlarged each time wages are paid by the amount of new value that they have created through labor. That way, money supply would increase in proportion to the newly created value and the contradiction of capitalism tied to the instability of the money supply would be overcome. This kind of system could not lead to either deflation or inflation by definition as the value of money would always match the value of goods in the market.

Here, we have sketched only the basic structural mechanism which would have to exist in a socialist economy in order to ensure the stability and safety of the entire society. It should be noted that none of the items mentioned here is utopian because each of them is already employed in some fashion in the modern capitalist society. What should be done in socialism would be to arrange the existing components in such a way as to create a completely transformed society that would be far superior to the existing one. This rough sketch should certainly be developed in far greater detail but it can definitely represent a blueprint for a program of communist organization focused not just on the critique of capitalism but on the real transformation of society as well.