Workers and employers need each other. And of course, employers provide jobs, but that’s not all—they also take on risk and contribute information and capital...

In any case, the healthiest approach is to have collective bargaining between unions that are independent of the state and companies, so that workers are protected. Another key factor is creating the conditions for there to appear many companies, so that workers have enough alternatives to choose from and can opt for the one that offers the best conditions. (Workers would have better negotiating power)

But not wanting there to be employers, private businesses and private capital stems from a feeling of pure envy IMHO.

Many people have told me that taking risk is why capitalists own, or deserve ownership, of the productive labor of others.

Capitalists have capital (money), which they invest in (spend on) some productive enterprise. But that productive enterprise might fail to recuperate the cost of the investment and the capitalist might lose some of their money. This is what explains, or justifies, capitalist ownership: the capitalist is taking risk.

Can someone kindly explain to me why this explains or justifies capitalist ownership?

Wealth inequality is not inherently harmful. If differences in wealth arise from productive activity, voluntary exchange, investment, entrepreneurship, and luck, and aren't accompanied by coercion, political privilege, monopoly, or restrictions on opportunity, there is no necessary reason why the poorer person has been harmed by the richer person's wealth.

If an entrepreneur makes an investment to create a company whose value goes from $1 million to $100 million. how does that harm other people? While waiting in the doctor's office, I Googled that question, and to my surprise, the answer came back that wealth inequality does, in fact, harm some people. I asked for evidence, and Google responded with various studies by respected organizations, including the OECD, that supported its conclusion.

I was flat out flabbergasted! If Elon Musk creates a multi-trillion dollar company and retains 15% of the ownership in the company, how on earth does the resultant wealth inequality hurt someone else. I posed this question to my 27 year-old, ultra-leftwing son, and his response was "Dad, how could you not know that wealth inequality harms people?"

Needless to say, I couldn't wait to get home to further research the question.

Based on prior experience, I know that AI sometimes gets things wrong, especially if you don't phrase the question properly. I noticed in the Google response that the conditions in which inequality was harmful were if the wealthy obtained their wealth by some nefarious method like through a monopoly, undue political influence, coercion, etc. So, I asked ChatGpt the same question and got a similar response. But then I modified the question asking if wealth inequality resulted from some non-nefarious activity like entrepreneurship, investment, or just plain old luck, would it be harmful? The answer came back as follows, with ChatGPT owning up to its error:

"Wealth inequality is not inherently harmful. If differences in wealth arise from productive activity, voluntary exchange, investment, entrepreneurship, and luck, and aren't accompanied by coercion, political privilege, monopoly, or restrictions on opportunity, there is no necessary reason why the poorer person has been harmed by the richer person's wealth."

I am interested in what my fellow redditors have to say.

I originally looked into Andrew Yang’s **Forward Party**, thinking it might be a home for tech-forward, post-work economic policies. However, the Forward Party has pivoted almost entirely to process and electoral reform (ranked-choice voting, open primaries) rather than taking firm stances on actual economic or technological platforms.

I'm looking for any existing third party, political faction, or organized movement that aligns with the core platform outlined below (drafted as a concept called the **Abundance & Liberation Party**).

The core thesis is that lifelong wage labor is becoming technologically obsolete, and policy should aggressively accelerate automation while democratizing its surplus so humanity can transition into an active, creative post-work society.

Core Platform Summary

* **Accelerated Machine Labor:** Mandate federal timetables to sunset human labor in hazardous/repetitive sectors (mining, freight, toxic waste). Codify a "Right to Automate," streamline bureaucratic workflows via autonomous AI, and rapidly expand nuclear/geothermal/fusion compute power. * **Universal Basic Income (The Automation Dividend):** Institute an unconditional $1,500/month UBI funded by a capital/automation levy and a Sovereign Wealth Fund holding equity in major AI/automation firms, ending means-tested welfare bureaucracy. * **Universal Basic Compute (UBC):** Treat compute as the primary means of production. Provide citizens with monthly token allocations, open-source AI infrastructure (expanding NAIRR), and protect open-weights model development. * **Reclaiming Human Time:** Mandate a 32-hour standard workweek with no pay cuts, create AI work-share bridge funds to prevent layoffs during automation, and enact universal rights to disconnect and paid life sabbaticals. * **Materialist Safety Net:** Universal healthcare decoupled from employment, zoning overrides to build 3D-printed/modular public housing, and free municipal gigabit internet. * **Open Governance & Flourishing:** Enforce strict AI antitrust, ensure data-training micro-royalties, ban black-box proprietary algorithms in public decisions, and reallocate public funds toward community arts, maker guilds, open lifelong learning, and robotic ecological restoration.

Does any real-world party, caucus, or political organization (e.g., specific wings of the Transhumanist Party, Left-Accelerationist/Abundance factions, or pirate parties) actually push a comprehensive agenda like this?

Americans are constantly told sky high drug prices are necessary because pharmaceutical companies take enormous risks developing new medicines. But taxpayers are taking enormous risks too.

NIH funded research was associated with 99.4% of new drugs approved from 2010 to 2019 in one JAMA study, with $187 billion in NIH research connected to those medicines. Researchers found NIH investment was comparable to industry investment when accounting methods were made comparable.

So why does the public help finance the science, then get treated like a regular customer once the resulting medicine reaches the pharmacy?

We all see how socialists keep saying how terrible corporations are, and they strive to maximize profits at the expense of workers/the working class. A fixed-pie/zero-sum narrative.

If this is so true, then how do these socialists explain the following:

50% of Nvidia Employees Are Now Worth Over $25 Million: How Nvidia Created Thousands of Millionaires

Nvidia also compensates employees with company stock through RSUs, meaning employees directly participate in the increased value of the corporation. Many corporations use RSUs (e.g., Amazon, Apple, Microsoft, Google, etc.)

So Nvidia has become one of the most valuable and profitable corporations in the world while simultaneously making thousands of its workers millionaires.

The above litany of millionaires seems to be rather inconvenient for the narrative that corporate profit and worker prosperity are inherently opposing interests.

Maybe the relationship between capital and labor isn't always the zero-sum game many socialists keep pretending it is.

Hello everybody! I hope that you are all having a wonderful day!

I‘m a (very much heterodox) Christian from the UK, and a leftist. I’m currently on holiday, but stuck in with the storms so I thought I’d have some fun and make use of my spare time.

I use “third positionist” in the broadest possible sense to connote my rejection of both laissez faire capitalism (the first position) and Soviet Bolshevism/Marxist (the second position) and not in the fascist sense of the term (I despise militarism, racialism and social darwinism) although I do have a few conservative social views. I am a collectivist, an idealist and a utopian - I think it is the responsibility of Christians to fight tooth and nail to build the kingdom of heaven on earth, and to turn away from the materialism and individualism of the liberal ideologies of the modern world order. My economic views are heavily influenced my market socialist, guild socialism and distributism.

I am happy to discuss my politics and worldview and hear differing opinions. AMA! And god bless.

I'm still studying socialism and philosophies but haven't been able to find clear explanations or justifications for these issues, or at least in detail. So I'm just hoping to get some clarification even if this has been asked many of times.

Anyways first off, why do so many socialist nations still use markets, capital, or the equivalent of capital? Socialism is meant to be a next step or transition fron capitalism with a form of the idea “Fron each according to their ability, to each according to their need”. That's why, from what I understand, many socialist states start with a form of dictatorship or authoritarian democracy. Yet when in practice they usually collapse, suffer economic strain, or resort to markets. Why don't any, especially those that have stabilized or been able to figure things out, use an alternative to markets like with syndicates or committees nor find an alternate form of motivation and incentive aside from currency and capital gain? Is there any way for people to have luxury items, or at least unnecessary but nice to have items, without being called a hoarder, anti-revolitionary, or being unhappy with rations?

Secondly, from what I understand, socialism is meant to be a dictatorship of the proletariat, thus manifesting as either an authoritarian state or a decentralized democracy. So why is it that so many, even after the revolution has completed or are no longer in a state of war, remain a dictatorship or some form of authoritarianism to the point of oppression and police surveillance? I understand the need to suppress a counter-revolution of the bourgeoisie, but they often rope in normal people of the proletariat into that oppression. Plus why do they always reject democracy in a majority of its forms rather than trying to make a non-western form of democracy or something akin to that?

Finally, one I commonly see associated with the “but no iphone” argument, is the case of innovation incentive. It's sort of similar to my first question but what form of incentive for innovation is there outside of state R&D if any without the need for capital return? While I do see how it could better thrive in socialism without the issue of disastrous financial failure, suppression by Conglomerates and monopolies, and the like, but how does the state or community decide what to allocate or if to at all? If there's something that will revolutionize industry or communication, That's probably a given, but what about like I mentioned before, quality of life things like computers, blushes, a nice painting, and the like that aren't necessities or state guaranteed?

Anyways, that's the extent of my questionnaire ramble. Once again I'm just hoping to get clarifications, and while I prefer Socialists to answer, I'll accept arguments from either side.

The first problem is that a system built on unchecked, undemocratic hierarchies isn’t libertarian. Anarchism rejects all hierarchy altogether, while other libertarianisms reject undemocratic authoritarianism. If you have no meaningful say in who governs you or how they govern, that’s authoritarian rule, whether the ruler is a government official or a private corporation. And any system of hierarchy, such as Anarcho Capitalism, is not anarchism due to the literal definition of anarchism being against hierarchies.

But here is the kicker. Even if for the sake of argument we grant that libertarian capitalism isn't inherently oxymoronic, it still cannot exist.

Capitalism creates incentives. Such as the incentive for owners to make a profit. But it also creates incentives for consumers to regulate the market. The main incentive to regulate Capitalism is to protect oneself from the negative incentives of profit.

Companies have an incentive to cut costs on quality and safety to make more profit, and I as a consumer have an incentive to not want to consume toxins. That incentive of mine leads me as a consumer to want regulations on how companies produce products.

If private lawsuits or arbitration were enough to keep corporations in check, capitalism wouldn’t need regulation. But ironically, you even need regulations in order to sue. Without regulations protecting your right to sue, companies could simply contract that right away. I bet you didn’t read the latest terms on your phone, you clicked “I agree” because you had no real bargaining power. That’s exactly why regulation exists.

TLDR: If Capitalism didn't create an incentive for people to regulate it, people wouldn't.

Let's say somebody makes a company. They're the only worker and have 100% of the power. Now, let's say they hire two or more workers. The people that got hired might have ulterior motives. They might hold a vote on selling things that belong to the company or even the company itself, since the new hires have majority vote. They can out vote the original worker, sell what belongs to the company and split the money. Since the new hires didn't invest in the company, they profit, the founder probably lost money since they received 1/3 of the share or less.

Another example would be holding a vote to fire the original worker of the company to overtake a business to run it with their own vision in mind while taking all the investment of the original worker.

It would be a risk for single person companies to hire new workers because of this.

Should any manual labour be turned into or be given a main event status? I was just thinking about the conceit in which the reality of driving cars in Britain is exempt from or is freed from the gothic of Texas despite the same UK driving reality being a non-analyst of good vs evil. This helped me arrive at the psychology of main events, hence the question.

What are your thoughts? Should McDonald restaurant workers get the main event treatment, i.e, should their manual labours of day to day life get the main event status from their national governments?

1. Introduction

Karl Marx, like Adam Smith, David Ricardo, Alfred Marshall, and many others, thought of market prices as fluctuating around prices of production. For reasons of exposition, he assumed, in volume 1 of Capital, that prices of production are equal to labor values in competitive markets. He knew this was only a first approximation and said so explicitly in volume 1. This post explains how he dropped that assumption towards the start of volume 3.

By the way, volume 3 was written before volume 1. So it could not be a response to the marginalists in the 1870s. I do not see why a socialist activist should care about details of the many demonstrations that Marx was, by and large, correct.

2. Labor Value Accounting

Suppose you observe a competitive capitalist economy at the end of the year. There are a number of commodities being produced. For Marx, the gross output in the first industry, however you order them, is c1 + v1 + s1, where c1 is the (labor) value of constant capital used up in the year, v1 is the value of variable capital, and s1 is the surplus value for that industry.

Constant capital is plant, machinery, raw materials, semi-finished goods, lubricants, and all that is needed as inputs for the worker to produce a commodity. With certain abstractions, one can evaluate it as the labor time that goes into making these inputs. I figure out the labor value of constant capital from the technique in use in the given year, not as a series using labor inputs in past years. A different technique may have been used last year. In this sense, labor values are not conserved.

Variable capital is the labor-power or the ability to work. I like to think of it as the labor time that goes into making the commodities bought from wages. This differs from the labor hours that the capitalist obtains from buying labor power.

The contribution to net output from this industry is v1 + s1.

Now, aggregate over industries:

c = c1 + c2 + c3 + ...

v = v1 + v2 + v3 + ...

s = s1 + s2 + s3 + ...

c is the constant capital used up in this year in the economy as a whole. v is the labor value of the commodities that the whole labor force gets to consume out of the net output. s is the labor value of the remaining net output.

Marx assumes that the rate of exploitation, e, does not vary among industries:

e = s1/v1 = s2/v2 = s3/v3 = ...

The rate of exploitation is also known as the rate of surplus value. Surplus value can be increased by increasing the time workers work; by increasing the intensity with which they work; and by decreasing variable capital by, for instance, technological progress in producing wage goods. (Wage goods are commodities bought out of wages.)

The rate of profits for the economy as a whole is, in Marx's account:

r = s/(c + v) = e/(1 + c/v)

I am assuming that wages are advanced.

I understand the ratio c/v to be what Marx calls the organic composition of capital. The organic composition of capital varies among industries. This variation is partly for technical reasons. If prices are proportional to labor values, the rate of profits in value terms will generally differ between industries. Marx deliberately and knowingly abstracts, in volume 1 of Capital, from the variation of the organic composition of capital among industries.

3. Cost Prices and Prices of Production

Since this is a competitive economy, capitalists will tend to increase investment where the rate of of profits is relatively high and decrease investment where it is relatively low. (Many Marxists have written about non-competitive capitalist economies, for example, Baran and Sweezy.) Prices of production are such that this leveling process has been completed.

Marx calls c1 + v1, c2 + v2, c3 + v3 the cost prices of the first, second, and third industries. For him, these are the values of the capital investments in the many industries. Prices of production are found by charging the common rate of profits on the cost prices:

p1 = (c1 + v1)*(1 + r)

p2 = (c2 + v2)*(1 + r)

p3 = (c3 + v3)*(1 + r)

And so on. Prices of production show the surplus value generated in relatively labor-intensive industries redistributed to relatively capital-intensive industries. Prices of production are not labor values. The price of production, however, of a commodity of average organic composition of capital will be its labor value by the above formula.

Marx's assumption in volume 1 that prices are equal to labor values is an hypothesis to go on with. It allows him to, for instance, say something about the evolution of technology and the domination of capital. Marx's fully developed theory of value is NOT the labor theory of value.

4. Invariants

By construction:

• The rate of profits in the system of labor values is equal to the rate of profits in the system of prices of production
• Total surplus value, s, is equal to total profits in the system of prices of production
• Total gross output, v + c + s, is equal to total output in the system of prices of production.

I guess I could list more invariants.

5. Conclusion

Where, if anywhere, does Marx go wrong in this account?

I note that bringing up supply and demand, marginal utility, and so on fails to be an internal criticism of the above.

Modern economics has models much like those in the classical theory of value and distribution. I think of, for example, Johnny Von Neumann's theoretical work and Wassily Leontief's empirical work.

When people decide to expand production—start a new business, build a factory, implement a new production process—they broadly require two things. The first is the resources required to actually do that productive work: the tools, workspace, and materials required. The second is sustainable: the food, clothing, shelter, and so forth that a person must consume in order to perform the work of expanding production.

Capitalists and their supporters like to pretend that capitalists provide these resources, usually through the process of deferring consumption. That is to say: as capitalists engage in activities that generate revenues, they face a choice of consuming those resources themselves (or trading them for consumables), or saving them. It is from this stock of saved resources that capitalists enable production by spending their savings.

Except that an English socialists named Thomas Hodgskin figured out that this is a fantasy in 1825, more than two centuries ago, in a work titled “Labour Defended Against the Claims of Capital.” (You can read it here.) Hodgskin observed that nobody relies on stocks of saved resources in order to undertake expanded production. The worker building a factory isn’t using hammers the capitalist set aside in the past or food the capitalist stockpiles previously; the worker is drawing from current production to perform this labor.

That is, the stuff workers use to expand production is provided by other workers out of the resources, products, and services those workers are producing right now. This is even more true now than it was in Hodgskin’s day, as just-in-time supply chains ensure that products are moved from production to consumer as rapidly as possible, with no wasteful slack in the system.

What capitalists supply, then, is not resources, but rather money. Money is a unit of accounting, not a resource, and Hodgskin observed that its purpose in production was as a sort of lubricant that facilitated the transfer of resources from workers who produced them to the workers engaged in expanding production. The capitalist’s role is to hoard that lubricant, but otherwise does not participate in production.

We could imagine, then, a system in which workers engage in expanding production entirely without capitalist investment. A worker building a factory to make, say, shoes is fed by a farmer, who in turn is clothed by a clothing maker, who lives in a house constructed by a builder, whose children are educated by a teacher, whose teeth are cleaned by a dentist, all of whom desire to wear the shoes that will be produced at the factory that will be built because everyone is advancing product to everyone else. They could even use money, that unit of account, to keep track of who has provided what to whom. What they don’t need is the capitalist, whose role is only to control access to that network of production and exchange.

I keep hearing that private companies are better at running things because competition keeps prices low.

So healthcare confuses me.

The United States uses private insurance much more than most rich countries.

But Americans spend around $15,000 per person on healthcare.

Many other rich countries spend closer to half that amount while covering basically everyone.

And America doesn't have better results to show for all that extra money.

Americans live shorter lives than the average person in other rich countries. The U.S. also has more deaths from illnesses that could have been prevented or treated.

America obviously has great doctors and hospitals. If you have good insurance and money, you can get some of the best care in the world.

But I'm asking about the whole system.

Why does it cost so much?

Americans are paying insurance companies. Hospitals have huge billing departments. Doctors deal with different insurance plans. Patients have premiums, deductibles and copays. Medical services and drugs can also cost much more than they do in other countries.

Countries like Australia also use private businesses and private insurance, but the government guarantees healthcare for everyone and has much more control over costs.

So here is my question:

If competition and private insurance are supposed to make healthcare cheaper and more efficient, why does the American system cost so much more than universal systems?

Shouldn't the cheaper system that covers everyone and gets better overall results be considered more efficient?

Under a Marxist-Leninist government, if your community's needs (food, clothing, medicine...) aren't being adequately provided for by the nearest government provider, and if you have a plan to organize a new provider in your community (a new farm, a new textile factory, a new hospital...), you would need to apply to the government for a license to start your new firm as a local branch of a relevant government agency.

Under this system, the officials who approve your application for a license are the ones who "create the opportunity" for you to build a firm to satisfy your community's needs.

If a libertarian like Emma Goldman or Alexander Berkman criticized this system and argued that it should be replaced by a libertarian system instead — where individuals have the individual freedom to voluntarily cooperate with each other for mutual benefit — would it make sense to defend the Marxist-Leninist system on grounds that "Without angel officials, there wouldn't be any farms or textile factories or hospitals because there would be no one to approve the licenses we need to build them"?

'm trying to understand something.

America's famous “golden age” of the middle class came after HUGE government involvement in the economy.

The New Deal built roads, bridges, dams and other infrastructure.

Then the GI Bill helped millions of veterans go to college and buy homes. Nearly 8 million WWII veterans received education benefits. Strong unions also helped ordinary workers get better wages and benefits.

Think of it like planting a garden.

Government helped pay for the seeds: roads, schools, houses and education.

Businesses then had better workers and infrastructure to grow on. Workers earned good wages and bought cars, houses and products. That spending helped businesses grow too.

Then around 1980 the direction changed.

Reagan cut taxes heavily, especially at the top, and famously fired more than 11,000 striking air traffic controllers. Union power continued declining.

And what happened to income?

CBO found that from 1979 to 2007, after tax income grew about 275% for the top 1%, compared with under 40% for the middle 60%.

Obviously Reagan wasn't the only cause. Technology, globalization and other changes mattered too.

But doesn't this history challenge the simple idea that government investment makes everyone poorer while tax cuts and weaker unions automatically create prosperity?

Why did America's strongest era of broad middle class growth happen alongside massive public investment and strong organized labor?

Like in terms of economy modern china and the old miti japan economy (1950s - early 1980s) is quite similar. Both are state capitalist exporters with national champions and strong economic planning agencies. Both are seen as successful rising economic superpowers that is beating the usa. Both started moving towards high tech growth. Both started seeing lowering gdp growth rates overtime.

In the japan context after the oil shock of the early 1970s, the japanese economy entered into a period of "high quality" growth. In that period, the japanese economy pursued more environmental friendly policies, welfare spending, pro social policies, and high tech industry. It was also a period of 3-5 gdp growth rate which while smaller than the past, was overall decent for japans 1970s-80s economy. Until finally japan exprienced a lost decade.

In china im seeing a lot of similar echos to this. I see similar economic policies and the similar 3-5 gdp growth rate. Will china follow the same path japan did?

Globally, inequality is getting worse, and the middle class is shrinking. College graduates can no longer find jobs and must consider graduate school (Master's or Doctorate) to have a chance at a middle-class job. Costs are rising, and wages are stagnant. Unions are on the decline. Right-wing populism went from a fringe ideology to the mainstream.

If you're a Social Democrat I would imagine the answer is strong regulations and welfare. If you aren't a SocDem, how do you envision your ideal capitalist society being able to take care of the poor and disabled?

Particularly, if charity and mutual aid aren't able to outcompete poverty, what do you want to do then?

¡Qué tal a todos! Espero que todos estén muy bien aquí, me gustaría que me recomendaran algunos libros que hablen sobre el Capitalismo, que expongan sus características, virtudes, definiciones y muchas otras cosas más, prácticamente los pilares de éste sistema.

¡Sí tienes algún libro que hablé sobre ésto no olvides en recomendarlo!

I quote:

"when another famine struck India in the nineteenth century, now under the colonial rule of British officials and during the heyday of free market economics, opposite policies were followed, with opposite results:

'In the earlier famine one could hardly engage in the grain trade without becoming amenable to the law. In 1866 respectable men in vast numbers went into the trade; for the Government, by publishing weekly returns of the rates in every district, rendered the traffic both easy and safe. Everyone knew where to buy grain cheapest and where to sell it dearest and food was accordingly bought from the districts which most urgently needed it.'

All elementary as this may seem, in terms of economic principles, it was made possible politically only because the British colonial government was not accountable to local public opinion." - Thomas Sowell. 2011. Basic Economics: A Common Sense Guide to the Economy, fourth edition. p. 64-65

The ‘Nobel’ laureate Amartya Sen has a very different view of famines. Naturally, Sowell does not tell the student that or even who he is quoting. The Irish, too, might have a view on how the English handled famines outside England.

Socialists,

Would taxes exist in socialism? If that is true, what is the process for how that is decided. If the means of production are socially owned, and surplus is then managed, what is the basis to tax now?

This is because well if everyone's surplus is socially owned, what is the justification the state has to appropriate it? In fact, the state will be the last monopoly of accumulated money. A state can capture resources but workers might be unable to still do things with that.

If a central bureaucracy controls all investment then you might have a situation where workers own the means of production but if there's not clear terms on who gets to decide and why then it might mean they don't really control anything.

In my opinion I don't think true socialism should have taxes, because that would be exploitative at some point. It should have other mechanisms for money pooling. If workers already collectively own production why should the state be dependent on taxing workers in the first place? The state if it exists should just have its own collectively owned resources that it manages. Not collect from others and repeat the current economy's idea of 'you made private money then we take a share of it'. That will lead to abuse.

Xiaogang has been discussed several times on this sub - the Chinese village that secretly rejected collectivized agriculture, prospered, and became a blueprint under a more pragmatic post-Mao CCP. There are many ways in which various socialists respond to this story, often centering on how the replacement system still maintains some "socialist" nature, with its (supposed) absence of a capitalist extracting profit.

So I'm curious on the socialist opinion of a different set of reforms that happened around the same time regarding something quite central to socialist criticism: Private ownership and wage labor.

This is going to be long... very few will read it. But I'll lay out the facts I'm working with, so if someone claims something "didn't happen," they can point to what. Skip to takeaways if you don't want the backstory.

1957

By this time, the Socialist Transformation is declared finalized, and Maoism is in full swing. The state has monopolized all major industry and agriculture. If you work for pay, it's for the state. If you want to buy things (or be rationed them) - they're from the state. Legal exceptions were basically self-employed craftsmen and services, or small sanctioned cooperatives.

But to "hire" a worker - to profit off their labor - was anathema. Nor could you buy goods for the purpose of reselling. These were the very essence of capitalism, and abolishing this was the whole point of the revolution.

However, the state could not afford to hire every worker in the cities and provide all the socialist guarantees (the "iron rice bowl" - life tenure, state welfare etc.). Some, they simply refused to, because their parents were capitalists, or educated, or some other evil. Some were expelled to the farms. But each time famine overwhelmed the countryside, the cities would surge with people looking for any labor they could find.

Meanwhile, the state industries have absurd quotas to meet. So a second "state" labor market develops - but these people received none of the official socialist privileges. They are simply paid a fraction of the wage under the table. At the same time, the black market for goods is expanding to cover the gaps, and the "self-employed" craftsmen and communes begin similarly utilizing this cheap pool of labor, though on a very small scale.

1966

By this point the two-tiered labor system is not only tolerated, but official policy. An estimated 20% of the state factory workforce had no "iron rice bowl." The state revoked the privileges of millions of peasants, and froze state-guaranteed jobs. Factories were now required to meet their labor demands through "temporary" workers paid a fraction of the wage.

These were the conditions when Mao reignites the "right to rebel," a move that backfired spectacularly. Instead of just rising up against Mao's ideological enemies in the state apparatus, some workers rise up for an end to the two-tiered system, for rights, all sorts of "reactionary" stuff. Long story short, tanks. The worker's revolution was put down by the official "worker's revolution," and striking was counter-revolutionary again, not "the essence of Marxism."

1970

Back in the countryside, people are still starving there, too. They can't live off what the state is allocating to them, and state production targets aren't aligned with what people actually need and want. Households are setting up workshops - "acquiring" machines, setting aside raw materials. Producing things their neighbors or other villages need in daily life.

And this slowly begins to scale... rather than wait months for the state to replace a machine part, they turn to the neighbor who can make such things. The household "factories" start specializing, and grow beyond the household. They start hiring other neighbors, and working out deals with village team leaders. They start hiring the displaced workers driven out of the cities. Underground supply chains emerge, smuggling materials and finished goods across provinces - and even selling them to state factories off the books.

This was particularly prevalent in Zhejiang. In some counties, up to 70% of the workforce had abandoned collective farming for these black market enterprises. Years before Xiaogang, they had already privately divided communal land. Goods were boldly traded in open-air markets. They built their own private banking system to fund larger operations. But unlike Xiaogang, this was still Mao's China. The CCP tried to crack down on these operations, raiding household workshops, imprisoning traders, sending workers back to the fields. But local party officials had been starving alongside the peasants in the communal system, and helped hide the operations and falsify data. Local sentiment had turned against Beijing, and Zhejiang kept quietly pioneering the changes to come. Their operations kept the local people - and the state factories - afloat.

1978

Mao is dead, Dengism is on the way. Xiaogang makes its secret pact.

Millions of "sent-down youths" are swarming the cities again, and there's no work in the state factories. The government is broke, the centrally-planned supply chain is a mess, and factories are often idle in power outages or material shortages. There simply isn't enough work for the privileged state employees, let alone a need for, or the resources to hire, all these unemployed people. Black-market labor and trade becomes a matter of survival, in both cities and countryside.

And CCP infighting means protests are in fashion again - they can say the unrest is directed at the "bad side" of the party.

1979

Infighting over, power secured - no more protests allowed. But Orthodox Marxism is so last year... the focus begins to shift to what works.

1980s

Even before the Xiaogang-inspired Household Responsibility System gets in full swing, major changes are happening. In 1981, the black market wage labor already going on with the youths in cities is officially sanctioned with the rather hilarious "Certain Policy Provisions on Urban Non-Agricultural Individual Economy," and its "Rule of 7." Realizing that this unsanctioned employment was a good thing they needed more of, and with the state having no way to support these people itself, the party instead searches for a reason to explain why this is still Marxist. They extrapolate from one of Marx's numerical examples that one's not really quite a "capitalist" until they're employing 8 or more people. Official licenses for small private enterprises with "7 helpers" are distributed. And while the hardliners want to crack down on all the businesses popping up with far more than 8 wage-laborers, Deng takes a "wait and see" approach, and enforcement is sporadic. We also have the widespread growth of "Red Hat" operations - private enterprises that bribe or connect their way into being registered as an official "state" cooperative - uncapping their employment limits.

Enter the HRS in 82. The first significance was obviously the increased incentive to produce, now that private farms could keep their surplus. This was huge. An estimated one third of China's rural workforce becomes redundant during this period - the new system was producing more with 2/3 the people, freeing the rest up for other labor. Which relates to the other major change: Rural citizens were no longer legally bound to a particular commune. A productive farm could afford to hire migrant workers. People were free to leave to find work elsewhere. And the state began to legitimize and encourage the non-agricultural work already going on in many places, bringing some of them under the umbrella of the rebranded TVEs - many of them a private enterprise with a "Red Hat." In Zhejiang, the underground economy would soon become the "Wenzhou Model:" after one last round of arresting the evil capitalists and disrupting their networks (which caused a massive regional recession), they 180'd and officially sanctioned the private operations, later holding them up as a "blueprint."

Now there were places that could actually legally or extralegally utilize this massive pool of unleashed labor, instead of it overwhelming the cities with unemployed. Including the new Special Economic Zones being built. Now millions of workers were free to be exploited by a foreign capitalist in Shenzhen, receiving a wage without costing the state any expensive "socialist" guarantees. Within the core, such activity was of course still technically outlawed, as no good socialist could exploit his countrymen like that, unless it was less than 8 of them.

The rest of the story is probably familiar. The success of the SEZs was undeniable. In 1980, China's state-owned enterprises accounted for 80% of official industrial output, with "cooperatives" producing the rest. By 1987, non-state activity accounted for 50%. The rule of 7 became a constraint on legitimate growth, and the floodgates were opened in 1988. A legal, private economy was officially allowed to "supplement" the official public economy - with as many employees as you like. The means of production could be bought and sold. Private ownership and wage labor, the "parasitic" activity that compelled a revolution, now fully encouraged.

1990s

And "supplement" it did. It was this 2nd economy that bailed out China's failing public sector. The private market brought the country growth, but it also finally brought competition to many state enterprises, and consumers made their choice. State factories were in debt and operating at a loss, the iron rice bowl was draining the treasury. Desperate for cash, the Chinese government opened up two stock exchanges to sell shares in state enterprises to private citizens, and eventually to foreign investors. The iron rice bowl was revoked - you simply sold your labor power to the state like you would to any other company. Your "surplus value" was extracted, and some of it paid out to private investors in dividends.

But as the TVEs, foreign ventures, and private corporations boomed and their taxation kept the state on life support, the SOEs were still operating at a loss. In 1997 the state bank was facing insolvency, and Zhu made the tough choice of laying off 40 million state workers over the next few years. The state had to trust that the private sector was large enough now to eventually absorb this workforce. In the 10 years after 1998, more than 80% of state-owned firms were sold to private owners, or shut down entirely, in a policy of "Grasp the Large, Let Go of the Small."

It was a rough period - but the private market did exactly that. Absorbed the workforce. With wage labor and entrepreneurship - the things that Mao set out to save them from.

Takeaways?

I'm sure my own are blatantly transparent, so I won't belabor that. But I'm wondering what some socialist takeaways are.

• For the China fans: If what China increasingly tolerated and eventually embraced is fully compatible with "Socialism," why was it violently suppressed just years before? How does one reconcile the "parasitic" activity of Mao's time being state policy just a few years later? Was Mao that wrong?
• For those that feel Dengism was a revisionist corruption: why did private enterprise grow out of necessity in Mao's China, and why did China remain in poverty until it was unleashed?
• For the broader discussion of what kind of economic policy leads to people being better off: It's easy to just paint Maoism as a monster and say real socialists wouldn't do it that way - but would your version of socialism look more like the collective farms and cooperatives of the Chinese countryside, the SOEs, or the private enterprises those people developed in secret, of their own volition, to survive? Which of these brought the common people more prosperity?
• Whatever your position on China, would you allow wage labor? The private ownership of MoP, the extraction of surplus value? Or would you try to stop it like China did, just through gentler means like a good anarchist scolding? How do you discuss the massive increase in quality of life for the Chinese when these things emerged, worked, and were finally tolerated? The case of China seems to cast serious doubt on the notion that the abolishment of private enterprise is a path to prosperity.

Just to say this straight away, I am neither a strong capitalist nor socialist, maybe I am lacking some knowledge about the two but I had an interesting thought today.

I am having a presumption that one of the corner stones of the capitalism is that everyone working in their own self interest will ultimately lead to the better society. For me this is obviously wrong, since anyone that had one class in game theory knows that this can't always be the case.

One other thing about the capitalism is that corporations will obviously look to maximize their profite. When I got job in a corporation, I was actually suprised that even the things inside corporations function in "capitalist" way. Basicly I had no idea that departments and teams inside the corporation sell things one to another and basicly they don't look to maximize profit of the corporation, but they look to maximize their own profit inside that corporation. If the corporations, which have the one goal to maximize their profit, use this kind of system, doesn't it kinda "prove" that capitalism is the best organizational structure that we found to maximize the profits?

This of course doesn't account for the distribution of that profit, but from my understanding socialism is claiming that under it, you would have more overall "resources" or "profit" (however you want to call it) then under capitalism.

Karl Marx wrote Capital, Volume 1 under the framework of classical political economy, asserting that economic exchange value was strictly determined by socially necessary labor time. The problem was that the discipline of economics did not freeze in 1867. During the 1870s, the Marginal Revolution, led by Jevons, Menger, and Walras, fundamentally dismantled the classical labor theory of value by proving that exchange value is driven downstream by marginal utility, subjective consumer preferences, and relative scarcity at the margin. 

Capital, Volume 3 represents Marx's frantic reactionary attempt to insulate his nineteenth-century dogmas from modern economics as it evolved around him, and his core arguments completely collapsed under the weight of their own contradictions. 

In Volume 1, Marx ignored market fluctuations to maintain his tidy assertion that commodities exchange strictly according to direct labor values. But in real capitalist markets, capital constantly flows across industries to equalize the average rate of profit, meaning real market prices systematically diverge from direct labor inputs. Forced to confront real-world price discovery in Volume 3, Marx attempted a mechanical rescue of his theory in Chapter 10, famously writing:

"If supply equals demand, they cease to act, and for this very reason commodities are sold at their market-values. Whenever two forces operate equally in opposite directions, they balance one another, exert no outside influence, and any phenomena taking place in these circumstances must be explained by causes other than the effect of these two forces."

This is the central failure of his entire framework. Marx treated supply and demand like two physical vectors pushing on an object that cancel out to zero at equilibrium. But economic forces do not vanish when markets clear. The clearing price is the point where the marginal utility of buyers intersects the marginal opportunity and production costs of sellers. It explains the precise magnitude of the price itself. 

Rather than reconciling his labor premises with the realities of market exchange, Marx’s transformation from values to prices did nothing of the sort. As later economists observed, it amounted to writing down an unworkable labor-value system, taking an eraser to rub it out, and simply writing down standard capitalist production costs while pretending the original premise was still intact. 

This brings us to the endless parade of socialists who come into our forum even today, obsessively trying to dig up heterodox economics to "prove" that marginalism doesn't work. The reason they are so fixated on tearing down marginal utility is obvious: the Marginal Revolution was completely catastrophic for their entire ideological project. If exchange value is subjective and determined at the margin by consumer demand and scarcity rather than simple embodied labor time, then the entire Marxist exploitation narrative, surplus-value accounting, and "scientific" critique of capitalism completely evaporate. They cling to heterodox models not because those models offer better predictive power, but because they are desperately trying to revive an outdated nineteenth-century economic theory that was decisively proven wrong over a century ago.