What is the economic system where the government owns all of the means of production and private property doesnt exist?

Introduction

Tools, machines, and other types of means of production are considered to be capital in many conventional economic geography texts. In this view, capital is not only a tangible thing but also a transhistorical thing. In a slightly more general view, capital is defined as any income-generating asset that generates some benefit, including income. Using capital metaphorically, scholars talk about natural capital, produced capital (means of production produced by human activity), human capital, social capital, and cultural capital. Although in this view, social relations are included in the definition of capital (at least in case of social capital), transhistoricality of capital is still implied: for example, relations of reciprocity as a form of capital have always existed.

Like means of production, money as such is wrongly considered by many to be capital. When I spend my money, which I earn by selling my services to my employer, to buy my books, the money I use is not capital. Money has existed before capital. But money ‘can’ become capital. Indeed, money is capital's first form of appearance. There are two ways of looking at money as capital. When a sum of money is advanced by a merchant or a moneylender to make a profit on it, it can be correctly called capital. Merchant and moneylending/usurer forms of capital appeared earlier than the third form of capital. This form of capital arises when the owner of money lays out money on wages and means of production to produce a new commodity which is sold for more money than what is initially advanced. This view of capital establishes capital's theoretical specificity as a social relation. As Marx says in Capital vol 3: capital is not a thing, it is rather a definite social relation of production between owners of means of production and labor, which simply takes the form of a thing. Means of production are no more capital in themselves than gold as money. They become capital under the relation between capital and labor. Capitalism is a form of society where the capital-as-money (investing money as capital to make more money) becomes the dominant relation, and more specifically when the third form of capital becomes (tendentially) the dominant form of capital relation.

Capital can be looked at in terms of capital-in-general (total capital in the global society or within a country or region) and capitals (as fractions of capital-in-general), which compete with one another for market, for support from the state, and so on. Capital-in-general appears as, and is reproduced through, various fractions of capital competing with one another, including those that are based in specific spaces (e.g., regional-scale capitalist in a country).

The remainder of the discussion is divided into five parts. First, we explain how capital in the sphere of production works, and in particular the relation between capital and labor. Then capital's space, both in terms of its normal workings and in terms of the crisis situation, is discussed. Subsequently, we discusse capital's space in the sphere of consumption. The discussion finally is summarized and some (understressed) points for further reflection are raised.

Introduction

Privatization is the transfer of publicly owned or publicly operated means of production to private ownership or operation. The argument for this transfer is usually that privately run enterprises are subject to the discipline of the market and therefore they will be more efficient. A related argument for privatization is that enterprises that are privately owned are more valued and better maintained. Both arguments support a view that privatization maximizes public benefit and welfare.

The nature and extent to which states should be involved in the affairs of the market are as old as the idea of the state itself. Urgings for privatization are equally historical. The discussion here, though, focuses on the contemporary period and its antecedents in the years following World War II.

Abstract

Privatization is the transfer of publicly owned or publicly operated means of production to private ownership or operation. There are four distinct types of privatization. The most common form is the sale of public assets such as the sale of a state-owned power station, airline, or telecommunications facility. An alternative form of privatization involves the outsourcing of services provision by the state to nonstate agencies. This can be described as a shift in state role from the provision of public goods to that of procurement. Privatization can also refer to a change in the regulatory functions of the state away from state control of markets toward a reliance on and trust in freely operating markets as the appropriate means for the efficient and fair allocation of resources and income. The general shift in attitude away from collective approaches to societal organization, generally involving a prime role for the state toward more individualized roles and responsibilities is the fourth type of privatization.

THE PRINCIPLES OF SUSTAINABLE AGRICULTURE

The concept of sustainable agriculture involves the utilization of natural resources to meet the needs of the present generation while maintaining their productivity to sustain future generations. The indicators considered for intervention may be classified as biophysical, social, and political factors. The choice of intervention technologies is influenced by the natural resource base of a community, the soil fertility status, and crop yields. Different areas show different severity levels in terms of land degradation, and therefore diversified land use management practices are needed in order to regain lost fertility and maintain fertility.

6.2.1 How the Planned Economy Worked

In traditional socialist countries, economic development is realized mainly through a plan worked out by the central planning authorities. The plan, however, is a mental construct which may or may not correctly reflect the objective requirements of economic development. If the plan is correct, economic development is smooth; if it is incorrect, not only is it of no help – it may even lead to stagnation and decline. Obviously this has been proven in China’s economic sphere, especially during the pre-reform period.

During the early 1950s, the transformation of private ownership of the means of production into public ownership and the establishment of a powerful socialist sector paved an effective way for planned development of the national economy. During the first Five-Year Plan (FYP) period (1953–57), much attention was paid to industrial construction, especially in heavy industry (see Box 6.1 for the definition of China’s ‘First-Year Plan’). At the same time, the socialist transformation of agriculture, handicrafts, and capitalist industry and commerce was effectively carried out. In line with these goals, 156 key projects and other items were arranged with the guidance of the Soviet Union. The first FYP was generally known by the PRC’s central planners and economists to be very successful because all scheduled targets were fully met.4

Box 6.1

What is the Five-Year Plan?

China’s basic national development policy is embodied in the ‘Five-Year Plan for National Economic and Social Development’. This plan mainly serves to outline the physical/geographical distribution of large-scale construction projects and centers of productivity, as well as how resources are to be apportioned out to different sectors of the national economy. The plan also sets objectives and attempts to lay out a course for the national economy.

The First Five-Year Plan was started in 1953. The current plan is the 12th and runs from 2011 to 2015 (it is colloquially called ‘Twelfth Five’). The five-year plans are approved by the National People’s Congress (NPC), the highest legislative body in the PRC. The National Development and Reform Commission (formerly the National Planning Commission, which was established in 1952) is responsible for drafting plan proposals.

As of the ‘Eleven Five-Plan’, the Chinese government replaced the Chinese term corresponding to the English ‘Plan’ with the equivalent ‘Guidelines’. Although still informally referred to as a ‘five-year plan’, the new terminology implies a set of guidelines with longer lasting ramifications. This name change reflects a desire to keep abreast of the shift in focus towards the establishment of a market economy as well as reforms and paradigm shifts in the systems of government in China. Put differently, the only kind of plans that the relevant authorities can draft and execute are guidelines that take a market economy as a given, so the name was changed to reflect the evolving nature of the plan itself.

Facing the economic difficulties during the late 1950s and early 1960s, the CCPCC and the State Council advanced a policy entitled ‘Readjustment, consolidation, filling-out, and raising standards’ (tiaozheng, gonggu, chongshi, tigao). The production targets for heavy industry were reduced and investment in capital construction was cut back. The accumulation rate, which had risen to its highest level (39.9 percent) in 1960, was adjusted sharply downwards, reaching only 10.4 percent by 1962. The enterprises with high production costs and large losses were closed or switched to other products. With these adjustments, the economy rapidly returned to normal in the following years.5

In contrast to the first FYP and the readjustment period (1963–65), the years 1958–60 provided a typical case of errors in planning, resulting in serious economic imbalances. During this period, the Great Leap Forward movement was effectively launched by the establishment of a series of high targets within a given period, most of which, however, were incapable of being fulfilled due to the limitation of resources and production capacities. To accomplish its ambitious target for an overnight entrance to the ‘communist heaven’, large quantities of raw materials and the labor force were diverted toward heavy industry while, in contrast, the development of agriculture and light industry received less attention. This situation lasted until 1960 when the serious imbalances between accumulation and consumption, and between heavy industry on one hand and agriculture and light industry on the other hand, occurred suddenly. Despite this profound lesson, similar problems arose again thereafter.6

Since a socialist economy is rigorously directed by state planning, as soon as errors occur in the plan, this will have an effect on every economic activity. China bore witness to this point by its experience and lessons. Theoretically, it is essential to make a ‘perfect’ plan for the healthy operation of the economy. However, it is almost impossible for the state planners to accurately manage a balance between social production and social needs and efficiently distribute the scarce resources even with the use of sophisticated computers. In fact, because of information constraints and asymmetries, the central planners could never obtain complete and accurate information on economic activities from which to formulate plans. Furthermore, the centrally planned system also generated a number of other problems. For example, as wages were fixed, workers had no incentive to work after they had reached the factory’s output quota. Any extra production might have led to the increase of the following year’s quota while the level of salaries would remain unchanged. Factory managers and government planners frequently bargained over work targets, funds, and material supplies to be allocated to the factory. Usually, government agencies allocated less than managers requested so managers would, in turn, request more than they needed; when bargaining over production, the managers, however, proposed a smaller quota than they were able to finish, and so they were usually ordered to fulfill a larger quota than requested.7

China’s decentralization of its mandatory planning system and the introduction of market mechanisms, which began in 1978, first focused on a gradual transition from the people’s commune system (PCS) to the household responsibility system (HRS), under which farmers were free to decide what and how to produce in their contracted farmlands and, having fulfilled the state’s production quotas, were permitted both to sell the excess of their produce on the free market and also to pursue some non-agricultural activities. In 1984, when urban reform was implemented, China aimed to regulate industrial production through the operation of market forces. In a similar manner to the system adopted in the agricultural sector, after fulfilling their output quotas, enterprises could make profits by selling their excess products at free or floating prices. It is worthwhile noting that the above efforts resulted inevitably in dual prices for commodities during the transition period and had both positive and negative effects (this will be discussed in detail in the next chapter).

3.3 Social Stratification

Differential access to resources, in particular differences in ownership and control of the means of production, also shape household variation in both peasant communities and among urban, industrial populations. A past tendency to neglect inequality in studies of households and other domestic groups can be attributed to the assumption that the communities studied by ethnographers were basically homogeneous. When anthropologists have studied peasant communities, for example, the implicit contrast with the landowners—who were generally not studied—led them to overlook significant differences among the peasants. Consequently, there has been a tendency to dismiss stratification as a significant factor in the analysis of household variation among peasants. Yet peasant communities are nowhere homogeneous, but are always internally differentiated. Differences in wealth among peasants are also overlooked because they are often obscured by idioms of kinship that bind the landed to the landless and the land-rich to the land-poor. Significant wealth differences may exist, however, between the smaller co-residential units of a single kin-based compound or between brothers who head the main and branch households of a family. In other words, ideas and ideologies of family and kinship may obscure stratification among kin.

Glossary of Terms

Capitalism

A particular mode of production, dominant since the 18th Century, based around the private ownership of the means of production (MP) and its operation for exchange value, and the related need for people to sell their own labor power (LP) to make a living.

From a Marxist dialectical perspective, society is personified by two fundamentally opposed classes (capitalist and proletariat). As an outcome of class struggle, society can be transformed through time, from one hegemonic mode of production to another (e.g., feudalism to capitalism, capitalism to communism) as the oppressed class (e.g., workers) seeks to overthrow and liberate itself from the oppressor (e.g., the capitalist class).

Surplus value is value created by the unpaid labor of wage workers, over and above the value of their LP (necessary labor time), and appropriated without compensation by the capitalist. For Marxists, the production and appropriation of surplus value is a fundamental aim of capitalism.

The term used critically by Marxists to describe mainstream economists' failure to acknowledge, and attempts to mystify, the social relations (and exploitation) that underlie the production of commodities.

The tendency under capitalism for some places to develop very rapidly while other places experience decline. The Marxist theory contends that the two countervailing tendencies—of growth and decline—are fundamentally related and intrinsic to capitalist forms of production.

The stabilization of capitalist production through geographical extension and reconfiguration via particular organizational place-based forms and locational arrangements for the purpose of expanded capital accumulation.

Abstract

Capitalism is a socioeconomic system in which goods and services are produced and traded in a free market. The means of production are predominantly privately owned. Labor working for wages produces goods and services. The division of labor refers to functional as well as gendered subdivisions of production into separate tasks performed by different workers and spatial divisions of labor, where the higher functions of a business, research and development, and manufacture and assembly of products occur in dispersed locations. Although trade and exchange have always existed, capitalism is seen as relatively recent. Scholars believe it emerged as feudalism decayed in postmedieval England. In its first manifestation, as merchant capitalism, regulations and controls were prominent but, as full industrial capitalism developed, unfettered trade and liberal economic regimes were favored. Governments have periodically tried to manage adverse socioeconomic impacts through more or less interventionist policies. By the modern era, capitalism had spread worldwide, engendering far-reaching changes. Despite facing ideological challenges, the global influence of capitalism became dominant. The chapter comprises four main sections. First, theoretical and conceptual ideas regarding capitalism and the division of labor are reviewed. Second, the origins and early history of capitalism are discussed including the spread of mercantilism mainly through colonialism to other parts of the world, and the emergence of industrial capitalism. Third, geographies of modern capitalism shaped by the growth of large (often transnational) corporations and the adoption of Fordist production approaches, and challenged by Communism, Fascism, global conflict, world economic crises, post-Fordism, burgeoning finance capitalism, and antiglobalization movements, are examined. Fourth, the complex causes of the 21st-Century financial crisis, responses to it, and resulting consequences are reviewed.

Introduction

Capitalism is a socioeconomic system in which goods and services are produced for profitable exchange in a free market. The means of production are mostly in private ownership. As capital is accumulated, it is reinvested in further production. Investment decisions are usually made privately, and production and distribution are mainly controlled by independent companies that operate in competition with each other. The work required to produce goods and services is supplied by a labor force working for wages, and money is used to manage the distribution and exchange of goods, services, and labor. The division of labor refers to the functional subdivision of production processes into sequences of separate operations, each carried out by workers who possess relatively few skills, and whose wages cost less than those of fully skilled individuals who are capable of producing the entire product. Though discernible earlier, the adoption of a division of labor was a particular feature of the factories and mills of eighteenth-century Britain. Moreover, its principles were ultimately adopted most fully in the Fordist assembly lines of industrial capitalism devised in Detroit before 1914 but which became dominant in Western economies especially in the period from the end of World War II until the 1970s. In more recent times, the term division of labor has also been employed to describe the geographical phenomenon whereby the components of a product are manufactured in plants in widely dispersed localities.

In the process of supplying the requirements of society, capitalism relies on the efforts of wage-earning workers to yield profits for the owners of capital. Theoretically, the two groups – the capitalist entrepreneurs and the wage-earning workers – are separate; in practice, however, a clear separation is rare. The capitalist system is, nonetheless, a highly distinctive approach to the supply of society's material needs in which the core objective is the production and self-expansion of capital; its operation has given rise to the creation of recognizable geographies of production, consumption, and exchange. Human geographers study the processes of capitalism in order to understand and explain its social, economic, and political impacts and the ways in which its related landscapes are created, used, and changed.

While they are undeniably dominant in the world today, institutionalized capitalist economic practices are in fact a relatively recent phenomenon. Thus, although some features of the system are discernible in the ancient world, and there are still strongly contested academic debates about precisely when capitalism evolved, most authorities believe that it began to emerge in the early post-Medieval period as feudalism declined. Moreover, it is suggested that capitalism developed first in England. However, it soon appeared in other countries of Western Europe. Thriving merchant capitalism – focused on investment in trade and centered on cities such as London, Amsterdam, Barcelona, Venice, and Genoa – emerged as a major feature of the economic geography of early modern Europe. By the eighteenth century, trade, colonization, and imperialism had spread this form of capitalism to the rest of the globe. Moreover, by then, industrial capitalism had developed in Europe sowing the seeds of further, far-reaching global impacts. Indeed, notwithstanding some strong ideological challenges, capitalism has profoundly changed the world and its influence has become pervasive.

1 Origins

The modes of intellectual property law developed and have evolved in response to the rise of commerce, the shift toward industrial means of production and the development of technologies for the reproduction and distribution of works of authorship (Merges et al. 2000). The first use of trademarks can be traced back almost 4000 years to the earliest merchant societies in China, India, Persia, Egypt, Greece, and Rome where craftspeople marked their wares with distinctive symbols in order to identify the source of their goods, develop a distinctive reputation for quality, and assist in resolving ownership disputes. The roots of trade secret protection can also be traced back at least as far as the Roman empire, where courts created a cause of action for corrupting a slave through bribery or intimidation to obtain disclosure of the slave owner's confidential business information. By the time of the Renaissance, most European nation-states had laws that protected businesses (notably, the Guild cartels) from those who used their secret processes and ideas without permission. These early laws were translated during the Industrial Revolution into statutes that protected ‘industrial secrets.’

The first formalized patent systems emerged during the early mercantilist period as a means for European nation-states to unify and increase their power and wealth through the development of manufacturers and the establishment of foreign trading monopolies. The term patent, derived from the Latin patere (to be open), refers to an open letter of privilege from the government to practice an art. The Venetian Senate enacted the first patent statute in 1474, providing the maker of any ‘new and ingenious device … reduced to perfection so that it can be used and operated’ an exclusive license of 10 years to practice the invention. Other nations followed suit and the granting of monopolies for inventions became the dominant means of promoting technological advance (Merges 1995).

The need for formal protection against copying did not significantly arise until the invention and diffusion of the printing press in the fifteenth and sixteenth centuries. Out of fear that this new technology would spread religious heresy and foment political upheaval, the British Crown in 1534 prohibited publication of literary works without a license and approval of royal censors. In 1557, it conferred a publishing monopoly upon the Stationer's Company, a group of London printers and booksellers. This monopoly expired in 1694, resulting in competition from new publishers and widespread counterfeiting of published works. The Stationers persuaded Parliament that such economic conditions would not support new works of authorship, leading in 1710 to the first copyright act, the Statute of Anne, ‘An Act for the Encouragement of Learning, by vesting the Copies of Printed Books in the Authors or Purchasers of such Copies, during the Times therein mentioned.’ By shifting protection from publishers to authors, this statute laid the foundation for a vibrant market for works of authorship and the flourishing of ideas. As technology for recording and distributing new works of authorship developed, copyright law has expanded and adapted to afford protection against copying in these new and evolving media (Goldstein 1994).

The rise of entertainment industries and celebrities in the twentieth century has led to the development of a right of publicity, which protects individuals against the appropriation of their name, image, or likeness for commercial gain. New information technologies have spurred new forms of protection for the design of semiconductor chips and databases.