Monday, January 9, 2012

Bauer and Lenin: The Problem of Economic Calculation

By Ludwig von Mises (written in 1920)
Since recent events helped socialist parties to obtain power in Russia, Hungary, Germany and Austria, and have thus made the execution of a socialist nationalization program a topical issue, Marxist writers have themselves begun to deal more closely with the problems of the regulation of the socialist commonwealth. But even now they still cautiously avoid the crucial question, leaving it to be tackled by the despised "Utopians." They themselves prefer to confine their attention to what is to be done in the immediate future; they are forever drawing up programs of the path to Socialism and not of Socialism itself. The only possible conclusion from all these writings is that they are not even conscious of the larger problem of economic calculation in a socialist society.
To Otto Bauer the nationalization of the banks appears the final and decisive step in the carrying through of the socialist nationalization program. If all banks are nationalized and amalgamated into a single central bank, then its administrative board becomes
“the supreme economic authority, the chief administrative organ of the whole economy. Only by nationalization of the banks does society obtain the power to regulate its labor according to a plan, and to distribute its resources rationally among the various branches of production, so as to adapt them to the nation's needs.”
Bauer is not discussing the monetary arrangements which will prevail in the socialist commonwealth after the completion of the nationalization of the banks. Like other Marxists he is trying to show how simply and obviously the future socialist order of society will evolve from the conditions prevailing in a developed capitalist economy. "It suffices to transfer to the nation's representatives the power now exercised by bank shareholders through the Administrative Boards they elect, "in order to socialize the banks and thus to lay the last brick on the edifice of socialism. Bauer leaves his readers completely ignorant of the fact that the nature of the banks is entirely changed in the process of nationalization and amalgamation into one central bank. Once the banks merge into a single bank, their essence is wholly transformed; they are then in a position to issue credit without any limitation. In this fashion the monetary system as we know it today disappears of itself.
When in addition the single central bank is nationalized in a society, which is otherwise already completely socialized, market dealings disappear and all exchange transactions are abolished. At the same time the Bank ceases to be a bank, its specific functions are extinguished, for there is no longer any place for it in such a society.
This is excerpted from Economic Planning in the Socialist Commonwealth.  Read or download the entire book at the AntiMarxists Internet Archive e-library.
Image and book courtesy of the Ludwig von Mises Institute

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