d8f27ddf   
   XPost: soc.culture.baltics, soc.culture.czecho-slovak, soc.culture.russian   
   XPost: soc.culture.nordic, soc.culture.baltics   
   From: ddfr@daviddfriedman.nopsam.com   
      
   In article   
   ,   
    holman@mappi.helsinki.fi (Eugene Holman) wrote:   
      
   > In article , David Friedman   
   >  wrote:   
   >   
   > > In article   
   > > ,   
   > >  holman@mappi.helsinki.fi (Eugene Holman) wrote:   
   > >   
   >    
   > > >   
   > > > Well, consider some of the implications. This trade enabled both parties   
   > > > to bypass such basic principles of capitalist economics as interest,   
   > > > profits, losses, financing, and middlemen.   
   > >   
   > > Nonsense.   
   > >   
   > > The "trading company" described in the earlier post was a middleman. So   
   > > were all the people, Finnish and Russian, engaged in arranging the   
   > > particular deals in the barter exchange.   
   >   
   > They were civil servants working for the two governments, not free agents   
   > working on a contractual basis.   
      
   So? They still had to be paid. Cost don't vanish just because they are   
   inside the government instead of outside.   
      
   > > There were still profits and   
   > > losses, even if they didn't show up on the accounts. There was still   
   > > financing--the Finns had to pay the costs of producing the baggy suits   
   > > in advance, before getting oil in exchange that they could sell.   
   >   
   > True, but they knew precisely when the USSR would pay.   
      
   In a capitalist system, you can know exactly what you will get for your   
   goods too, provided the goods are of a sort traded on a futures market.   
   You do it by hedging.   
      
   Alternatively, you make long term contracts.   
      
   > Only during the   
   > final two or three years of the USSR, when their economy started to go   
   > into meltdown, did the interval between expected and actual payment become   
   > a problem.   
      
   That might be true. I think I've indicated elsewhere why I am less sure   
   it is true than you are.   
      
   > > Or in other words, the things you regard as unnecessary difficulties   
   > > created by capitalism are a part of the costs of production and trade,   
   > > whether or not they are labeled as such.   
   >   
   > Large amounts of goods or money changing ownership always generate   
   > opportunities for middlemen to gat a cut of the action. Still, the purpose   
   > of the barter system was to minimize this "evaporation".   
      
   Or in other words, you think of middlemen as simply a deadweight cost.   
   In fact they are performing a useful service, and charging for it. In a   
   socialist system, the service has to be performed too.   
      
   ...   
      
   > > You might want to think about why, if your view of capitalism as an   
   > > unnecessarily inefficient system is correct, not only the Soviet Union   
   > > but every other country that has tried to replace it with a socialist   
   > > system--government ownership and control of the means of production--has   
   > > done much worse than successful capitalist countries, instead of much   
   > > better.   
   >   
   > It is not *my* view that it is an unnecessarily inefficient system. That   
   > was the thinking behind Finnish-Soviet trade, particularly on the Soviet   
   > side.   
      
   You were the one who just described middlemen as if they were an   
   unnecessary cost. If your whole explanation was intended as "this is how   
   the Soviets saw the situation," rather than "this is what the situation   
   was," perhaps you should have made that clearer.   
      
   > As to government ownership of the means of production, it seems to me that   
   > the most successful capitalist countries have marginalized, but not   
   > completely excluded, the governmnt from owning the means of production.   
   > Railway and power-generating systems are the stock examples. In most   
   > capitalist countries the government allows the flagship airline to operate   
   > as a quasi-provate company, in which the government owns a majority of the   
   > shares.   
      
   Yes. But the usual experience is that the socialist parts of capitalist   
   societies don't work very well. That's one reason there has been a swing   
   towards privatization in recent years.   
      
   ...   
      
   > > Firms in capitalist economies can make long term contracts too, and   
   > > often do. More often it turns out that the costs of doing business that   
   > > way are larger than the benefits, so they don't.   
   >   
   > They often opt for the long-term contract if the only other alternative is   
   > no trade at all.   
      
   Or any other time when the terms offered for a long term contract look   
   more profitable to them than the terms for a short term contract.   
      
   --   
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