this post was submitted on 18 Jun 2024
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I'm not an economist either but this one isn't that hard to figure out. A socialist state won't require all its SOEs to operate that way but it also obviously won't object if some of them do make a profit, since that can be used to offset some of the losses of the unprofitable SOEs.
This has always been a part of how socialist economies work. Even the USSR had some form of this iirc. The idea was that consumer goods industries were more "naturally" profitable and could be used to prop up the essential but less profitable heavy industries. (I'm simplifying here as i don't necessarily want to get into a whole discussion about the Kosygin reforms.)
This is a core idea of economic planning, that one part of the economy can balance and support another for the good of society rather than forcing every element of the economy to function as its own isolated entity competing against all others.
This is one of the features that distinguish economic planning from liberal market economies which require each individual enterprise to turn a profit (and ideally more so than it's competitors if it wants to survive long term).
I’ll preface this with IANAE either, but I have been following Michael Hudson for the last few years.
I don’t think it’s strictly necessary for the profitable SOEs to prop up the unprofitable ones. In principle anyway (and if one ignores international trade), all of the SOEs could be run at a loss. The state creates Yuan out of thin air to pay for things. The prices they set for SOE goods & services don’t necessarily have to reflect the costs at all. This allows them great flexibility in using prices to influence the consumption of each good & service. The only real limit is to not print too much money too quickly without destroying some of it through pricing/taxation.
Edit to add: In practice you can’t completely unmoor prices from costs. For instance, if you do that without also imposing rationing, you’ll get gray market arbitrage.
While it's true that money is created out of thin air, you're missing that it is backed by production. The limit to printing money is related to production growth. While is technically true monetary problems can be managed through taxation, it is the wrong policy to make. Increasing/creating taxes only leads to social unrest, no one likes paying more taxes.
The biggest challenge for economists is to accurately project production growth, something they havent been able to do.
Yes, production growth/shrinkage is another factor. In the case of SOEs, this is another case where the state has enormous control compared to in capitalist states, especially neoliberal ones that avoid SOEs like the plague.