Calculating the cost of soup in the socialist commonwealth
I started working when I was 15, as an apprentice of the culinary arts. Four days of work, 2 days of school.
I was working in this pride of communist achievements, the then brand new Hotel Budapest.
(No, not the Grand)
Around the corner from the kitchen, in a small glass office, there were two desks for the ‘economists’.
I found their work fascinating. Their task was to calculate the ‘right’ price for every dish we served. Not through some willy-nilly guess work, but scientifically, taking into consideration absolutely everything that went into the production of a bowl of soup.
They had detailed calculations about the cost of every dish on the menu. Just think about the enormity of the task. Start with the ingredients down to the last pinch of salt. When done, it was broken down exactly this way, 50 grams of mushroom, 2dl of water, 5 grams of flour, 1 gram of paprika, .5 gram of salt .25g of black pepper, etc., each item priced out at its official rate. No matter how ridiculous this calculation was, it was still the simple part.
They also had to figure out how to price the salt and the pepper we had to put on the table in case the customer wanted some more of either – approximating average use.
Then the cost of the utilities that were needed to produce it. How do you calculate the exact amount of gas that was needed to cook it? Or the amount needed to keep it warm through lunch hours? The amount of labour that went into its production? Anybody who ever worked in a kitchen can tell you that a cook does at least three-four things at the same time. How do you apportion his time when he is cooking a small pot of mushroom soup and large pot of broccoli soup at the same time? You can easily double the volume of something you cook with only marginal increase in the labour needed.
I could go on entertaining you with more questions about the details, but I am sure you got the point.
I was standing there as a sixteen year old wondering what the hell do they think they are doing.
Were they trying to heroically tackle an impossible task or just doing something colossally stupid and futile? In their effort of taking the guess-work out of economics, in their attempt of making market signals irrelevant, they made the calculation of economic value impossible.
The reason why they did it was quite simple. They were told. That was their job. That is what economists did in communist countries; trying to calculate the right price of everything. It was a dull and frustrating job but it had to be done. It was required by the dogma.
Marx, who never did a day of labour in his life, who never, ever set foot on a factory floor explained not only how capitalism works and why it is doomed to fail, but also how a just society will remedy the ills of capitalism. He described it only in the broadest terms, but communist counties had armies of economists labouring on the practical application of the ‘scientific’ theory.
A few years later, when I was working on a research project that took me into some factories, I met some more economists who were trying to price what the factory produced for both the domestic and the international market. I was already an adult and the economists were a little more cynical. They explained to me that the price on the international market is meaningless because the country is in such a desperate need for foreign currency that it would sell anything at any price, even at a loss which would be difficult to calculate anyway as the domestic price levels had nothing to do with the officially set exchange rates.
Trade with our largest trading partner, the Soviet Union was mostly bartering with the terms dictated by the other side and the domestic market was irrelevant as the prices were determined by politics, not by any measure of cost, supply or demand. The domestic market of producer goods was akin to putting money from one pocket into another driven entirely by political considerations.
Communist economics was “I, Pencil” standing on its head. “I, Pencil” shows how a complex system of cooperation can function with the help of the price system. The communist economists tried to demonstrate that they can master and control the complexity that is required to produce anything.
The results were the predictable shortages, shoddy quality and wasted resources.
Yet, as long as it lasted, tremendous effort was put into making the wonderful theories of Karl Marx work.
I do not think any of the economists who were trying to price a pinch of salt or divine the value of some machinery ever heard of Ludwig Von Mises or Friedrich Hayek. I doubt they learned about Carl Menger or Böhm-Bawerk’s critique of Marx’s labour theory of value. Communist dogma was the only thing they knew and even if they could, they were not allowed to think outside the framework of the theory.
This is moot, you may say, this is history. Communism is dead.
Is it? Marx is more popular than ever. Our universities where the Marxists are teaching unchallenged are churning out generations of the brainwashed who were never exposed to information critical to Marxist theories. Just like for the economists of communism, for most university graduates, Marxism is the only available explanation to any of their malaise.
Potential Presidential candidates are advocating openly Marxist ideas. Very vocal public figures such as Paul Krugman, Elizabeth Warren, Robert Reich are advocating such ideas.
They have to be opposed with an emotional vehemence matching their own. The ill-informed irrationality of their arguments has to be exposed.
The point of this post is that what I experienced in my life can happen again. Lamenting it when it does will be too late.
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