The first ever socialistic country in history was USSR. In USSR there was dramatic increase in productivity in various directions but the economy was suffering from various maladjustments. Sometimes there was shortage of food or fodder or sometimes there was lack of availability in the consumables.
The allocation of resources was not optimal in many cases. There was more or less discontentment among several groups of population. The central mechanism of planning did not yield desirable results. There were allegations of favour and deprivation among various states.
Several times the nation lacked invisible surplus. Ultimately the USSR disintegrated into several parts. Inspite of many theoreticians contribution in the theory of socialism, nobody suggests rightly what in the true nature of socialism.
The Marxian theory does not spell out what is the exact feature of socialism. “Marxists confuse socialism with statism, where the latter describes conditions of state ownership of the means of production.”
The Soviet Union has, until recently, been ‘statist’ and this has directly led to subjugation of the workers by a small group of elite managers. Instead radicals define socialism as a set of productive relations and productive forces that are democratically run by workers or by citizens, so that it is impossible to have a class of exploiters and a class of exploited.
This can only be achieved if the ownership and control over the means of production is firmly in the hands of the workers themselves, and not controlled by the state which Marxists mistakenly depict as the servant of the communist society.
Elements of planning accepted as essential for all socialist economies, but equal reliance has to be placed on market forces. Many Radicals point to the calamitous economic performance of the soviet union and other East European countries as confirming the limitations of economic planning.
The intellectual world had a conflicting view about what would be true nature of socialism. After the success of Bolshevik Revolution and Lenin’s direction socialism took a shape.
Other countries followed some structure, basic of elements of which were:
Social ownership of the means of production. Government owns the major resources and means of production. To generate the power of market forces every socialist society has given allowance for some private property. This private property results have created enormous scope of private business.
In the crude socialism it is presumed that all means of production belong to the working class that is why in a socialist set up means of production are state-owned. The industries, agriculture, transportation, services and communication are owned by labourers. Nobody can exploit labour in a socialist state, in principle.
As ownership of means of output is vested with the working class, the production relations change and the mutual conflict and internal contradiction come to an end. The ownership structure of property is such that nobody can exploit or there is no question of surplus value or economic tension with respect to production relations or property rights. The labour is not a commodity but social component. After collectivisation of Agriculture in Soviet Russia workers became wage paid labourers by the government agencies. In the late thirties private cultivation to a minimum extent was allowed. This gave new fillip for enhancing production in agriculture. China has allowed private property after the death of Mao. There has also been private farming in China.
The inflow of capital and foreign Direct Investment is enormous. Thus a socialist country has changed its policy and deviated from crude socialism envisaged by Lenin, Stalin and Mao. China’s economic reforms have made World’s third largest economy. The country has a high degree of trade surplus around 40-50 billion dollar and foreign exchange reserves of more than 160 billion dollar and a trade surplus.
In crude socialism, all input supply agencies are of socialistic in nature. The seeds, manures, fertilisers are state owned-means of production and belong to commune or co-operatives so theoretically there is no individual property. Same is the case with heavy industries. But after the socialism has changed its face the private capital and property rights have come into being. But enterprises now belong to private owners.
We will finish our note on socialism after mentioning the role of planning in a socialist economy. Planning authorities determine the what to produce for whom to produce and how to produce. For this purpose planning authorities make an assessment of availability of resources.
They also analyse the demand base and welfare target to ensure an equitable distribution. While capitalism under its price mechanism process it creates a situation those who can afford to purchase but in socialism planning process tries to develop a situation in which even poor can maintain their livelihood.
Many renowned economists have shown that socialism can allocate resources in more than optimum manner. Samulson showed a socialist regime producers of product can reach the consumer at a greater case than the private capitalism. Oscar Lange has shown that socialism can ensure better and efficient mode of resource allocation than a free-enterprise economy. Sir A.C. Pigou also was in high praise for socialism.
Planning authorities in a socialist country, determine the level of prices that are being charged for any commodity or services. Prices are decided not on the basis of supply demand mechanism but on the basis of accounting and administered norms. There is subsidy for high cost items to facilitate the all sections people to purchase the products.
The crude theory of profit does not hold good here. Since all major factors of production are owned by the state so profit or loss is equally borne by the nation as a whole. The planning authorities decide the price of consumer goods and prices of means of production. The ultimate objective of planning authorities to strike a balance between factor price and commodity price so that equitable distribution, justice and fair price prevail.