18.104.22.168. Price of Commodities
Commodities have their sales value expressed by price. In a market system, the law of supply and demand determines the price of commodities. The price of commodities is adjusted in accordance with manufacturing possibilities, purchasing power and the needs of the society.
The proposed system of business activity envisages a form of social shareholding or humanistic ownership of the means of production on the territory of a commune, but also allows free production to independent private entrepreneurship. All enterprises set freely the prices for their products on the free market of commodities.
Commodities have their manufacturing value. The manufacturing value is compared to market value so that profitability of the production could be established.
In the associated economy of the commune the manufacturing value of commodities incorporates: (1) cash assets intended for the work price of all workers who produce the commodities; (2) the pertaining ratio of the work of workers in the non-profit economy; (3) the pertaining ratio of the unemployed workers on the territory of the commune; and (4) the working cash assets.
The system of calculating the production value of goods is much more accurate than the model adopted so far, and most importantly it will bring much more justice to the system of goods distribution than what is possible today. The production value of goods can be presented by the formula:
A = ĺ (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 non-profit organizations, the corresponding incomes for unemployed workers, and final the value of working capital invested. The formula applies equally to the value of each commodity and totally manufactured goods in the company. Hereinafter production value refers to the total of goods produced in the company in the accounting period of a month. A detailed explanation of the formula follows:
A – The manufacturing value of commodities produced in a company in one month.
B – The total work price of each worker who participates in the manufacturing of commodities. The price is defined by the quantity of past labour points and by the current labour price.
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 the 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 all the workers employed in profit economy on the territory of the commune.
The proportion of the number of workers employed in the profit economy and the non-profit organizations is regulated by the commune's management in accordance with the needs and possibilities. The work price of workers in non-profit organizations is established in the manner identical to that where workers in the profit economy are concerned. The workers in 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 cash earnings from customers for their work for the reason that this activity is free of charge for the workers in the profit economy and for the commune's inhabitants. This means that the total quantity of produced commodities and services is a fruit of the collective work in both the profit economy and the non-profit economy 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 also have to use the products of the work performed by the workers in the profit economy. By applying this coefficient, the contribution of the workers in the non-profit organizations is built into the price of the product. Also, the share of such workers in the distribution of all commodities is actually precisely established.
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 entire unemployed population in the commune's enterprises. The unemployed population needs to receive income in the name of past or future labour, as well as for reasons of economic safety for such a population, and such income needs to be incorporated in the price of produced commodities.
The quantity of past labour income-based points of unemployed workers is determined by the holdings of past labour income-based points. The current labour price of unemployed workers is determined by the commune's management. A lower price of current labour of the unemployed will generate a smaller income, which would increase the 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 in accordance with social needs. An increase in the price of current labour of students would stimulate education, etc.
The quoted coefficients represent, in the cost price of commodities, the income-based appropriations for all inhabitants in the commune. The sale of goods on the market allows all commune inhabitants to realize their precisely determined gross share in the realized profit.
E – The quantity of cash working assets spent to produce the commodities. Working 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 formed by redeeming cash assets in exchange for past labour points, or otherwise. Working assets are taken according to the needs of the profit economy, however, with the obligation of their repayment during the accounting period.
In the accounting period, factors C and D are unique and may be easily calculated by applying computer technology, irrespective of the quantity of entry data, and are shown by the coefficient k. In this way, the manufacturing price of commodities can be expressed by the formula:
C = ĺ (A x k) + B
The sum of all prices of the work performed by the workers participating in the manufacturing of each product, burdened by contributions, gives the total gross price of the work necessary to manufacture a certain product. If we add the working capital that was spent, we get the manufacturing value of goods.
The total manufacturing value of all goods produced in the commune is approximately identical to the income of the commune's population or more precisely, to the purchasing power of the society. That allows the accomplishment of the best possible balance in the system of the production and distribution of the market–based form of business activity.
Why is it important to determine the value of the production of goods? Because it presents the efficiency of the business 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 less than the market price, the company operates profitably.
Due to the different equipment of work, the productivity of enterprises is different, and by selling their commodities on the free market they realize different income. In the system of free choice of work on the basis of work competition, work posts realizing a higher income under identical work burdens would stir up a great interest in workers. On the other hand, work posts realizing a lower income under identical work burdens would arouse considerably less interest. That would certainly produce instabilities in the market of work and 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. The balance may be increased by employing a larger number of workers in enterprises realizing bigger profit, and by decreasing the number of workers in companies that realize smaller profit. If such an option is not economically justified the balance may be established and also larger profits earned, by investing in companies that already produce profit and by closing down the loss-making enterprises. If such an option is not possible the balance lies in investing in the enterprises operating with smaller profit, which would achieve a higher productivity and, accordingly, an increase in profit.
However, the difference in the level of productivity and in the realized income among enterprises in the commune will exist as long as a difference in the equipment of the work is in place. A sizeable automation of the production process will always significantly reduce the necessary number of workers. In this way, the productivity and income of 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 some kind of instability and inconveniences in the commune.
The proposed accounting system of payment transactions where the total income of all workers corresponds to a total value of manufactured goods and services, envisages that the total income surplus accomplished by an enterprise that is better equipped for work in the commune will be equal to the deficiency of income realized by the enterprises in the commune whose equipment is poorer.
The balance between the supply and demand for work in the commune can be achieved in the way that enterprises realizing an income surplus renounce a part of the cash profit, equal to the difference between the manufacturing and market value of the complete production, in favour of enterprises realizing less income than needed. This is a subvention. The subvention is necessary because in its absence the workers in the system of free choice of work on the basis of work competition would run for work in more productive enterprises. The task of such a measure would exclusively be to balance the income-based interest of workers in all necessary work posts.
Such a spill over of income will allow the selling of all the commodities from all the enterprises in the commune at the market value because it is still the best possible distribution of commodities to consumers. At the same time, the new system will allow all workers to realize an income proportionate to their share in the production process, irrespective of the level of the work equipment of each enterprise. The workers who possess a larger number of points will realize larger incomes even in companies that realize smaller profits and by introducing such a measure they will not be an income burden to such companies. Such a spill over of income will not, in terms of income, affect the workers in productive enterprises, because they will realize an income proportional to the work price. They will be deprived of the income surplus realized thanks to the better equipment, which is a collective ownership, in favour of the workers with the lower level equipment.
From the standpoint of the capitalistic private entrepreneurship, the system is fully non-stimulating because it does not allow the earning of extra profit by speculations beyond direct work. The new system will form a new work stimulation that will arise directly from the work competition, and from the need of seeking and certifying the individual productive power that represents one of the most important driving forces of the individual. Such a system can achieve a considerably higher productivity than the existing models can, and thus can generate greater conveniences to individuals and to society in general.
In the new system, speculations are only possible by altering statements of the coefficient of responsibility that is directly linked with work productivity and the business performance of the work collective. Individual and collective profits will continue to be realized 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, or from the better work equipment in production, or from random work conveniences, but exclusively from the equal struggle of workers in accomplishing greater conveniences to society.
In other words, if each worker equally increases the productivity of the work collective by using new means of production, they cannot speak in such cases of their important contribution to the production, and they need not to be specially rewarded. However, if an individual worker increases their productivity more than other workers in their position, then this will be their own contribution and the same will have to be accepted and rewarded.
The product of all prices of commodities and of the quantity of goods gives the total value of currently produced goods. The realization of such production requires an equivalent quantity of money in circulation as a means of payment for the goods.
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November 13, 2013