3.1.2.2.3 Price of Commodities
Commodities have their sales value expressed by price. In a market economy, the law of supply and demand determines the price of items. Manufacturing possibilities, purchasing power, and society’s needs adjust the cost of things. Commodities also have their manufacturing value based on the cost of production.
In socialism, the manufacturing value of commodities should incorporate money intended for the work cost of all workers who produce the commodities (1); the pertaining ratio of the work of workers in the non-profit organizations (2); the pertaining proportion of the unemployed people on the territory of the commune (3); and the working cash assets invested in the production of goods (4).
In socialism, calculating the production value of goods is more accurate and just than in capitalism, so it will bring much more justice to wage distribution than it is possible today. The production value of goods can be presented by the formula:
A = ∑ (B x (1+C+D)) + E
The formula indicates that the production value of the goods includes the cost of workers who directly produce goods, then the corresponding price of work for employees working in nonprofit organizations, the related earnings for unemployed people, and finally, the value of working capital invested. Hereinafter, production value refers to the total goods produced in a company over the accounting period.
A detailed explanation of the formula:
A – The manufacturing value of commodities produced in a company.
B – The total work price of each worker who participates in manufacturing commodities. The price is defined by the number of past labour points and the current labour price of workers.
The quantity of past labour points is determined by the holdings of workers, while workers determine the current labour price by stating it in a freely competitive way. The product of these two coefficients gives the work price of a worker.
C – The coefficient of workers employed in non-profit organizations. It is expressed by the proportion of the work price of all the workers employed in non-profit organizations and those employed in a profit economy on the commune territory.
The proportion of the number of workers employed in the profit economy and the non-profit organizations is regulated by the commune’s management, following the needs and possibilities. The work price of workers in non-profit organizations is established identically to the work prices of workers in the profit economy. The workers in a profit economy produce commodities whose sale generates profit on the commodities market. The workers employed in non-profit organizations, such as teachers and police staff, do not directly realize earnings from customers because their activity is free of charge for the workers in the profit economy and the commune’s inhabitants. This means that the total quantity of produced commodities and services is a fruit of the collective work in both profit economy and non-profit organizations sectors. Workers in the profit economy use the services of non-profit activities; thus, according to the principle of mutuality, the workers in the non-profit activities must use the products of the work performed by the workers in the profit economy. By applying this coefficient, the workers’ contribution to the non-profit organizations is built into the product’s price. The coefficient establishes the share of workers in the distribution of produced commodities.
D – The coefficient of unemployed inhabitants. It is expressed by the proportion of the number of unemployed and employed workers in the profit economy on the commune’s territory in the function of the price of current labour and the quantity of past labour income-based points.
The coefficient represents the entire population that does not work directly: the young, pupils, retired people, homemakers, invalids and, generally, the whole unemployed population in the commune. The unemployed population needs to receive earnings for past and future labour and the economic security of the people. Such payment needs to be incorporated into the price of produced commodities.
The value of the past work of unemployed people determines the number of past labour points they possess. The current labour price of unemployed people determines the commune’s management according to the work needs and the power of the commune’s production. A lower price of current labour for the unemployed will generate smaller earnings, increasing their interest in work. And vice-versa, a higher price of current labour of the unemployed will generate a higher income, which will decrease the income-based work interest. In this way, the commune’s management will direct social work following social and production needs. For example, an increase in the price of current labour of students would stimulate education, etc.
These coefficients represent the income appropriations for all inhabitants in the commune in the cost of commodities. By selling goods on the market, all the commune inhabitants realize their share of the realized profit.
E – The quantity of cash working assets spent to produce the commodities. Operating assets understand the value of the parts of products manufactured by other producers and refer to intermediates, semi-finished products, and raw materials.
Working money assets are mostly set aside from the commune’s reserve fund, which is formed by redeeming cash assets in exchange for past labour points. Operating assets are taken according to the needs of the profit economy. However, the producers have the obligation of their repayment during the accounting period.
In the accounting period, factors C and D are unique and might be calculated by the coefficient k. Then manufacturing price of commodities can be expressed by the formula:
C = ∑ (A x k) + B
The sum of all labour costs of workers involved in manufacturing products burdened with contributions for workers in the non-profit companies and unemployed people gives the total labour cost for producing a particular product. By adding the value of working capital spent, one gets the manufactured value of commodities.
This method of calculating the value of the price of goods equates the total value of all goods produced in the commune with the income of the commune’s inhabitants. In other words, it equates the prices of goods with the purchasing power of society. In this way, the production and distribution system achieves balance.
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It is crucial to determine the production value of goods because it presents the efficiency of the business performance of enterprises in the commune. If the production value of goods is higher than the market price, the company is unprofitable. And if the production value of goods is lower than the market price, the company operates profitably.
Due to the different work equipment, enterprises’ productivity varies, and by selling their commodities on the free market, they realize various incomes. In a free choice of labour system through labour competition, jobs that generate higher salaries with equal workloads would arouse great interest among workers. On the other hand, lower-income jobs with similar workloads would arouse less interest. This would undoubtedly cause instability in the labour market and thus in society.
The commune’s management needs to solve the issue of balancing the demand for all work posts in the commune’s enterprises by analyzing the advantages and disadvantages of different forms of production. For example, the balance may be increased by employing more workers in enterprises, realizing a more significant profit and decreasing the number of workers in companies that realize smaller profits. If it is not economically justified, the balance may be established and more significant profits earned by investing in companies that already produce profit and closing down the loss-making enterprises. If such an option is not justified, the balance lies in investing in the enterprises operating with smaller profits, which would achieve higher productivity and, accordingly, an increase in profit.
However, the difference in productivity and the realized income among enterprises in the commune will exist as long as a difference in the production equipment exists. This is because sizeable automation of the production process will always significantly reduce the necessary number of workers. In this way, the productivity and income of workers in such a company will rise in relation to the producers of the commune having a lower level of automation in their production. Hence, if work competition were the only coordinator between the supply and demand of work, it would always create instabilities in the labour division created by the needs of workers for better-paid jobs.
The proposed payment settlement in which the total income of all workers corresponds to the full value of goods and services produced predicts that the entire surplus income of enterprises with better material equipment in the commune will correspond to the lack of income of companies with lower material equipment in the commune.
A balance between supply and demand for labour in the commune can be achieved in the way that companies that perform the surplus-value, in which workers earn more than they demand, give up their surplus value in favour of companies making less money than workers demand. This is a subvention. The subvention is necessary because, in the system of free labour competition, workers would compete for work in more productive companies, where they would earn more money than they asked. This would bring instabilities in the division of labour. Such a measure has the sole task of equalizing the income interest of workers for all necessary jobs.
In this way, the commune becomes the basic working organization. It will allow all goods in all enterprises of the commune to be placed at market value as this is still the best possible distribution of goods to consumers. At the same time, in socialism, all workers will earn incomes in proportion to the value of work they share in the production process, regardless of the companies’ revenue.
Workers who have more past labour points will earn higher incomes even in companies that make less profit in the market. They will not be an income burden to their companies because the salaries will spill over between companies. Workers who have a considerable number of past work points with which they earn high incomes will not burden their co-workers. By sharing the revenue, everyone will make wages equal to the price of labour they asked for achieved productivity. Highly productive companies will be deprived of the surplus value achieved thanks to better equipment or market advantages, favouring workers who earn less than they demanded for their work.
From the standpoint of capitalistic entrepreneurship, socialism is fully non-stimulating because it does not allow the earning of extra profit by speculations beyond direct work. Instead, socialism will form a new work motivation that will arise directly from the competition for work, from the need to find and confirm individual productive power, which is one of the most critical drivers.
In socialism, speculations are only possible by altering statements of the coefficient of responsibility directly linked with work productivity and the business performance of the work collective. Individual and collective profits will continue to be achieved thanks to the rise in productivity. However, these profits will be smaller as they will not include the privileges resulting from a better status in society, from the better work equipment in production, or random market conveniences, but exclusively from the equal struggle of workers in accomplishing more significant benefits for society.
In other words, if workers can equally increase the productivity of the work collective by using newly developed means of production, they cannot speak of their essential contribution to the production, and they need not be specially rewarded. However, suppose an individual worker increases their productivity more than other workers can in their position. In that case, this will be their contribution to the production process and will have to be accepted and rewarded.
The product of all commodities prices and the number of produced goods give the total value of produced goods. The realization of such production requires an equivalent amount of money in circulation as a means of payment for the goods.
