Re: capitalism, market, redistribution

Dag MacLeod:

>Finally, while you note that markets could survive the fall of capitalism,
>could capitalism survive the fall of market?

I don't think so.  In a recent posting I proposed that the Soviet Union was
not a communist society, but one which could be described as extreme
capitalism.  From the end of the New Economic Policy in  the late 1920s
until the failed reforms of the 1980s, the principal objective of the Soviet
State was to industrialize; that is, to build-up capital on a massive scale.
Everything was sacrificed to this. The principal apparatus for building
capital was a vast and unwieldy planning system.  All negotiations between
buyers and sellers that mattered had to be undertaken via this apparatus and
its five year plans, an extremely cumbersome and uncertain process.
Transactions were not, however, arms length.  Whether you got your supply of
widgets or electric motors or whatever depended greatly on who you knew
within the system, what favours they may have owed you and what you might be
able to do for them, and how well you could use this to your advantage.  So,
in a non-monetary sense, it was a market of a kind.

The problem was that, as a system, it was terribly inefficient and capable
of enormous mistakes because of an absence of constraints bearing on costs
and efficiencies.  In a free market, such constraints arise normally, out of
competition.  You are forced to build a better mouse trap, because if you
don't someone else will.  In the Soviet system, if your mouse trap broke
down, you simply ordered another one of the same type and quality (there
were no other kinds), but you might have to wait awhile before it showed up.
One of the horror stories I heard involved oil drilling.  Finding and
producing oil was of a high priority because an expanding industrial system
needed expanding supplies of fuel.  If a drilling rig broke down, you did
not try to fix it, you simply pushed it aside and put another in its place,
one that was no better than the last one and would soon break down too.

By the time Gorbechev came along, the distortions in the system were so
large they were beyond fixing.  Not having produced for a market for a very
long time, the system was simply not capable of doing it.  Moreover, it had
always taken messages from the top and did not know how to get them from
buyers and sellers, and buyers and sellers did not know how to give those
messages or simply did not exist.  A factory I visited in the suburbs of
Moscow (more of junkyard than a factory) had manufactured farm machinery
during the communist era.  After the fall of communism, it went into making
the metal kiosks you see at metro stations.  The market for that had run
out, so they were in a quandary about what to do next.  They were
considering plastic pop bottles!

Ed Weick