First, communism is an economic system in which the state owns the means of production. In something closer to common English, there are no privately owned businesses, since all businesses are owned and run by the state, and accordingly all business profits go to the state. As to how the workers are compensated, the ideal under communism is ‘from each according to his ability, to each according to his need.’ Even in the ideal it is not ‘everyone gets the same thing’, but everyone gets what they need. The ideal is never realized, so in practice, the upper echelon (the top dogs) gets far more than the ordinary workers. They get more money and more benefits. There is little incentive for a worker to work harder, since they are not likely to get ahead or to get more money based on working harder. Advancement is based on who you know – strictly. Since managers similarly are not incentivized, there is little reason to try to make the business more profitable. The joke among workers under some communist regimes was ‘they pretend to pay us, and we pretend to work.’ Beyond that, since private business owners and private land owners are not going to give up their ownership voluntarily, communism can only be imposed by a dictatorial government. Communist societies can limp along and have, to the extent that they can use propaganda to motivate the workers. Even in communistic societies, there is nearly always a thriving black market. What communism can do and what has kept it afloat, is take care of the lowest tier of workers, providing them with food, clothing, housing, and medicine that they never received under strict laissez faire capitalism. The loyalty and efforts of those workers can maintain communistic societies longer than might otherwise be expected.
Socialism often has some of the means of production under state ownership or ownership by the workers in that company. Ideally, ownership for most would be what in the US has been termed ESOPs – employee stock ownership plans. Some notable companies have ESOPs, one of the larger ones being Publix Supermarkets with 175,000 employees. Other large companies have flirted with ESOPs, but in many cases moved away from them. Even under ESOPs there have been conflicts between workers and management, and the question becomes one of how management is chosen. These issues have never been satisfactorily solved on a large scale. Under socialism, many or even most businesses are still under private ownership, and where there is state ownership, it is usually what has been deemed “key” industries. The general idea was to prevent ownership and control of businesses as a whole from being held by a small number of very wealthy people. As to how people are compensated, the ideal was ‘from each according to his ability, to each according to his contribution’. There was an idea of incentivizing high volume and quality of production. To my knowledge, no country or even business has had its wages based on that ideal, but at least at a theoretical basis there was a means of sidestepping the lack of incentives under communism. The overall purpose was some measure of advancement based on merit. Under most socialistic structures, there was room for private enterprise, though with controls to ensure fairness to workers and consumers. There are no pure socialistic systems, but most capitalistic systems including the US have some degree of socialism under a “mixed” economic structure. This has provided a level of protection for ordinary workers, while allowing a large measure of capitalism. Socialist worker protections include minimum wage levels, unemployment compensation, compensation for injured employees, retirement (social security) systems, worker safety protections, child labor laws, the right for workers to unionize, and social health care systems (Medicare, etc.). These programs have generally been implemented at the insistence of ordinary workers, and over the objections of most business owners.
Under capitalism, all businesses and all property are privately owned. Under laissez faire capitalism, which is perhaps closest to ‘ideal’ capitalism, there would be no governmental interference in business whatsoever. Everything would be based on profits and the choices of the business owners. As to worker compensation, that was based on supply and demand. When the demand for workers exceeded the number of workers available for that job, wages would be bid up, and when the supply of workers exceeded the demand, the wages would be pushed down. Individual business owners would set their own wage scales, and since economies are seldom at full employment, there is little incentive for employers to raise wages. Some capitalist business owners have believed it in their interests to have higher wages, but often those have been the exceptions, and there is no obligation to do so. Let’s also take a look at some of the failings of capitalism. Businesses may not find it in their interests to install worker protections, resulting in things like the Triangle Shirtwaist Fire, where over one hundred workers died, or coal mines where many hundreds of miners have been killed, along with others who suffered black lung and similar ailments. Businesses may not find it in their interests to eliminate or reduce pollution of the air, water, or land. Businesses will often pay workers as little as they can get away with and will fire workers who try to unionize the workforce. Pay is not based on one’s contribution, but rather is based on economic power, and those with the power will reap most of the rewards. Advancement is not necessarily based on merit, but on whatever measure the existing managers choose to use. Markets are not self-regulating, regardless of what capitalist idealists say, but rather are quite capable of distortions based on market power.
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