I’ve been pondering the failures and successes of both capitalism and communism. I gradually developed a hypothesis that something like the quote in the OP is probably the optimal type of economic system. Lo and behold, I come to find out that this was Stalin’s version of the old fashioned Marxist “from each according to their abilities, to each according to their needs”. The latter obviously fails because humans have wants in addition to needs. But why does the former fail? To rebut the obvious objection, it seems apparent that this wasn’t what Stalin actually implemented in the Soviet Union. It may have been some ideal he had in his head, but not what he actually tried.
What specifically am I picturing? A market economy like we currently have in the capitalist nations, but one in which the profits go to the workers rather than the stock holders. One in which the workers are paid based on how much they contribute to the company’s success. Yes, this means more highly trained workers, and those who have a skill that is in higher demand (AKA well educated professionals) would get a larger salary. It also means that the person who does a better job than someone else who is assigned the same task but doesn’t do it as well (AKA the person who does a good job at say, cleaning the toilets, will be paid better than the person who does a shitty job at cleaning the toilets, even though they have the exact same job description).
Why does I think this is a good system? Because at the end of the day the owners of a business (at least a major business like Amazon, Microsoft, Google, etc.) are basically only middle men between the customers and the workers who produce what the customers are demanding. As best I can tell, while such a job is important, it doesn’t justify hoarding the lion’s share of the company’s revenue.
That’s why instead of to each according to their needs, this version is to each according to their labor. The market still decides on how much labor is valued. It’s just that in this system being the owner no longer counts as labor.
ETA. Or at least it wouldn’t be considered a type of labor that deserves above market value levels of compensation.
Selling stock to stockholders allows companies to easily get money in order to expand. That’s one of the advantages of joint stock companies. Are you proposing to eliminate that? Or are you proposing a system where people still buy stock (maybe eliminating dividends)?
There should definitely be some bare minimum of support for people who are unable to work, whether due to disability, age, or just not wanting to work. But those who do even the most unskilled and least in demand labor should be compensated at a level above that bare minimum.
Depending on how the system works (which is clear as mud), I would say the number one problem is that no person would set up a company in the first place if they were not allowed to get any money back that they invested.
I’m not even an amateur on this subject, but I do know that not all labor is equal. An auto mechanic adds more value than a telemarketer. But even among auto mechanics, not all hours of labor are equal. Generally speaking, the more hours a mechanic puts in, the more work gets done. But if the mechanic is bad, and he works overtime every night, he shouldn’t be rewarded. Measuring output works in this case, but measuring output in a meaningful way across jobs, industries, and levels of experience is tricky. Should a brand new mechanic who is still learning and takes 8 hours to perform a task that an experienced mechanic can do in 1 hour get paid 1/8 as much? Probably not. Should a brand new mechanic who is given an expensive tool that will allow him to work as fast the experienced mechanic get paid the same as the experienced mechanic? Again, probably not.
I think the labor market in a capitalist society does a pretty good job of determining that value. It’s a good system for that, but a couple problems spring to mind. One is that greed leads to perverse incentives – people writing bad mortgage loans shouldn’t be rewarded for their labor than people who write good mortgage loans, even though the former is making someone a lot more money and is therefore (in our current system) better compensated. The second is that the labor market can lead to a “race to the bottom.” You’ll do that job for $100k a year, I’ll do it for $90k, and now you’re out of work. So you offer to do it for $80k because that’s better than starving, etc, and now we’re in a war with each other to see who can abide worse living conditions.
For both of these reasons, the labor market should be coupled with strong regulations, but otherwise I think it’s best for wages to be set naturally and not by any kind of central planning.
Why would I invest in something I would not not profit from?
The worker profits from working there. And can profit more by taking his/her pay and invest in the same company. Why should they profit more from what I invested more than their pay?
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Communism doesn’t work. And that’s just it.
If the only reason someone is willing to invest in an enterprise is to exploit people’s labor for a big payoff, maybe that’s not an enterprise that should be invested in.
The number of times people have said “A raise? No, thank you. I work just as hard as the other workers, so I deserve to get what they get and no more.” can be counted on the fingers of one foot.
I think the reasonwhy both capitalist and socialist economies will fail is because most economists over-estimate the intelligence of the average person
This rather depends on whether they are receiving fair market value for their labor, and are not getting screwed by the company by having that value artificially lowered by dubious means. There’s a reason unions exist.
Yes, the working class famously have sufficient spare income to invest in equity.
And the actual freedom of an inadequately-regulated market.
Part of the issue is that metrics can be fudged. If janitors are judged by how well they clean toilets, then the janitors will fight over who gets the easiest toilets to clean. Its easier to clean 20 fairly clean toilets than 5 extra dirty toilets. Granted there are ways to fix this (the extra dirty toilets get you more points than the clean ones) but still.
It reminds me of a story of someone who worked in tech support. They got tons of awards and raises because they closed a lot of cases. When they left it was investigated and found they closed so many cases because they cherry picked the easiest cases to close. You have issues like that where people will game the system.
I do think that a system with wealth redistribution would be vastly better than our current system. Wealth inequality is a massive issue, but I don’t know how the wealth would be redistributed. Would private companies become co-ops? Would it involve effective wealth taxes?
Humans are deeply fallible creatures, and in nature most animals are solitary. The fact that humans are capable of such wide ranging cooperation is fairly rare in the animal kingdom. most animals that are social are only social with genetic relatives and unrelated breeding partners. Humans are fairly exceptional in that we can cooperate with totally unrelated people who are not also potential breeding partners.
My reason for saying that is that, humans are fallible, cooperation is tenuous and creating a system where compensation is based on how much value you contribute to the company is going to be hard to implement. Its well known in private business that getting along with the right people will many times get you further than being competent at your job.
Its going to be hard to find concrete metrics to say ‘this person’s contributions created XYZ value’ without the system being gamed. Also value is abstract. Someone who does R&D on basic research isn’t creating much immediate value, but in 15 years that R&D into basic science can be converted into applied research into a new cancer therapy that saves millions of lives. How do you determine the salary of the people who do basic research when it may take years for that basic research to lead to applied technologies.
It’s the amount of profit that is at issue. My reasoning is that ultimately the money a business makes comes not from investors, but from customers purchasing a product or service. The investor / owner is basically a middle person who makes it easier to match the customer with the actual worker that is producing the product or service the customer wants to purchase. Why should that be more highly compensated than the person who is doing the actual work?
Right. Which is why I said that someone who works harder and better would be paid better than someone who is lazy and does the bare minimum.
Communes have their issues, especially some of the Soviet-imposed ones, but the problem was, Stalin exploited and fucked over all the communes. For instance,
In 1948 the Soviet government charged wholesalers 335 rubles for 100 kilograms of rye, but paid the kolkhoz roughly 8 rubles. Nor did such prices change much to keep up with inflation. Prices paid by the Soviet government hardly changed at all between 1929 and 1953, meaning that the State came to pay less than one half or even one third of the cost of production.