Socialism: An Economic and Sociological Analysis

Ludwig von Mises
Mises, Ludwig von
(1881-1973)
CEE
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Editor/Trans.
J. Kahane, trans.
First Pub. Date
1922
Publisher/Editor
Indianapolis, IN: Liberty Fund, Inc.
Pub. Date
1981
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Foreword by Friedrich A. Hayek not available online
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CHAPTER 6

The Organization of Production Under Socialism

1 The Socialization of the Means of Production

II.6.1

Under Socialism all the means of production are the property of the community. The community alone disposes of them and decides how to use them in production. The community produces, the products accrue to the community, and the community decides how those products are to be used.

II.6.2

Modern socialists, espcially those of the Marxian persuasion, lay great emphasis on designating the socialist community as Society, and therefore on describing the transfer of the means of production to the control of the community as the "Socialization of the means of production." In itself the expression is unobjectionable but in the connection in which it is used it is particularly designed to obscure one of the most important problems of Socialism.

II.6.3

The word "society," with its corresponding adjective "social," has three separate meanings. It implies, first, the abstract idea of social interrelationships, and secondly, the concrete conception of a union of the individuals themselves. Between these two sharply different meanings, a third has been interposed in ordinary speech: the abstract society is conceived as personified in such expressions as "human society," "civil society."

II.6.4

Now Marx uses the term with all these meanings. This would not matter as long as he made the distinction quite clear. But he does just the opposite. He interchanges them with a conjurer's skill whenever it appears to suit him. When he talks of the social character of capitalistic production he is using social in its abstract sense. When he speaks of the society which suffers during crises he means the personified society of mankind. But when he speaks of the society which is to expropriate the expropriators and socialize the means of production he means an actual social union. And all the meanings are interchanged in the links of his argument whenever he has to prove the unprovable. The reason for all this is in order to avoid using the term State or its equivalent, since this word has an unpleasant sound to all those lovers of freedom and democracy, whose support the Marxian does not wish to alienate at the outset. A programme which would give the State the general responsibility and direction of all production has no prospect of acceptance in these circles. It follows that the Marxist must continually find a phraseology which disguises the essence of the programme, which succeeds in concealing the unbridgeable abyss dividing democracy and Socialism. It does not say much for the perception of men who lived in the decades immediately preceding the World War that they did not see through this sophistry.

II.6.5

The modern doctrine of the state understands by the word "State" an authoritative unit, an apparatus of compulsion characterized not by its aims but by its form. But Marxism has arbitrarily limited the meaning of the word State, so that it does not include the Socialistic State. Only those states and forms of state organization are called the State which arouse the dislike of the socialist writers. For the future organization to which they aspire the term is rejected indignantly as dishonourable and degrading. It is called "Society." In this way the Marxian social democracy could at one and the same time contemplate the destruction of the existing State machine, fiercely combat all anarchistic movements, and pursue a policy which led directly to an all powerful state.*14

II.6.6

Now it does not matter in the least what particular name is given to the coercive apparatus of the socialistic community. If we use the word "State" we have a term in common use, except in the quite uncritical Marxian literature, an expression which is generally understood and which evokes the idea it is intended to evoke. But there is no disadvantage in avoiding this term if we wish, since it arouses mixed feelings in many people, and in substituting the expression "community." The choice of terminology is purely a matter of style, and has no practical importance.

II.6.7

What is important is the problem of the organization of this socialistic State or community. When dealing with the concrete expression of the will of the State, the English language provides a more subtle distinction by permitting us to use the term government instead of the term state. Nothing is better designed to avoid the mysticism which in this connection has been fostered by Marxian usages to the highest degree. For the Marxists talk glibly about expressing the will of society, without giving the slightest hint how 'society' can proceed to will and act. Yet of course the community can only act through organs which it has created.

II.6.8

Now it follows from the very conception of the socialistic community that the organ of control must be unitary. A socialist community can have only one ultimate organ of control which combines all economic and other governmental functions. Of course this organ can be subdivided and there can be subordinate offices to which definite instructions are transmitted. But the unitary expression of the common will, which is the essential object of the socialization of the means of production and of production, necessarily implies that all offices entrusted with the supervision of different affairs shall be subordinate to one office. This office must have supreme authority to resolve all variations from the common purpose and unify the executive aim. How it is constituted, and how the general will succeeds in expressing itself in and by it, is of minor importance in the investigation of our particular problem. It does not matter whether this organ is an absolute prince or an assembly of all citizens organized as a direct or indirect democracy. It does not matter how this organ conceives its will and expresses it. For our purpose we must consider this as accomplished and we need not spend any time over the question how it can be accomplished, whether it can be accomplished or whether Socialism is already doomed because it cannot be accomplished.

II.6.9

At the outset of our inquiry we must postulate that the socialistic community is without foreign relations. It embraces the whole world and its inhabitants. If we conceive it as limited, so that it comprises only a part of the world and the inhabitants therein, we must assume that it has no economic relations with the territories and peoples outside its boundaries. We are to discuss the problem of the isolated socialistic community. The implications of the contemporaneous existence of several socialistic communities will be dealt with when we have surveyed the problem in complete generality.

2 Economic Calculation in the Socialist Community

II.6.10

The theory of economic calculation shows that in the socialistic community economic calculation would be impossible.

II.6.11

In any large undertaking the individual works or departments are partly independent in their accounts. They can reckon the cost of materials and labour, and it is possible at any time for an individual group to strike a separate balance and to sum up the results of its activity in figures. In this way it is possible to ascertain with what success each separate branch has been operated and thereby to make decisions concerning the reorganization, limitations or extension of existing branches or the establishment of new ones. Some mistakes are of course unavoidable in these calculations. They arise partly from the difficulty of allocating overhead costs. Other mistakes again arise from the necessity of calculating from insufficiently determined data, as, e.g. when in calculating the profitability of a certain process, depreciation of the machinery employed is determined by assuming a certain working life for the machine. But all such errors can be confined within certain narrow limits which do not upset the total result of the calculation. Whatever uncertainty remains is attributed to the uncertainty of future conditions inevitable in any imaginable state of affairs.

II.6.12

It seems natural then to ask why individual branches of production in a socialistic community should not make separate accounts in the same manner. But this is impossible. Separate accounts for a single branch of one and the same undertaking are possible only when prices for all kinds of goods and services are established in the market and furnish a basis of reckoning. Where there is no market there is no price system, and where there is no price system there can be no economic calculation.

II.6.13

Some may think that it is possible to permit exchange between the different groups of undertakings so as to establish a system of exchange relations (prices) and in this way create a basis for economic calculation in the socialistic community. Thus within a framework of a unitary economic system which does not recognize private property in the means of production, individual branches of industry with separate administration could be set up, subject of course, to the supreme economic authority, but able to transfer to each other goods and services for a consideration reckoned in a common medium of exchange. This, roughly, is how people conceive the productive organization of socialistic industry when they speak nowadays of complete socialization and the like. But here again the decisive point is evaded. Exchange relations in productive goods can only be established on the basis of private property in the means of production. If the Coal Syndicate delivers coal to the Iron Syndicate a price can be fixed only if both syndicates own the means of production in the industry. But that would not be Socialism but Syndicalism.

II.6.14

For those socialist writers who accept the labour theory of value the problem is, of course, quite simple.

II.6.15

"As soon," says Engels, "as Society has taken possession of the means of production and applies them to direct social production the labour of everyone, however different its specific use may be, will immediately become direct social labour. The amount of social labour inherent in any product does not require to be ascertained in any roundabout way: everyday experience will show how much of it on the average is necessary. Society can easily reckon how many hours of labour inhere in a steam engine, in a hectolitre of wheat of the last harvest, in a hundred square metres of cloth of a certain quality. Of course society will have to find out how much work is required for the manufacture of every article of consumption. It will have to base its plans on a consideration of the means of production at its disposal—and of course the labour force falls into this category. The utility of the different objects of consumption weighed against one another and against the labour necessary for their production will finally determine the plan. The people will decide everything quite easily without the intervention of the much-vaunted value."*15

II.6.16

It is not part of our business here to restate the critical arguments against the labour theory of value. They interest us at this point only in so far as they enable us to judge the possibility of making labour the basis of economic calculation in a socialistic community.

II.6.17

At first sight it would appear that calculations based on labour take into account the natural conditions of production, as well as conditions arising from the human element. The Marxian concept of the socially necessary labour time takes the law of diminishing returns into consideration in so far as it results from different natural conditions of production. If the demand for a commodity increases and less favourable natural conditions have to be exploited, then the average socially necessary time for the production of a unit also increases. If more favourable conditions of production are discovered then the necessary quantum of social labour declines.*16 But this is not enough. Computation of changes in marginal labour costs only take account of natural conditions in so far as they influence labour costs. Beyond that, the "labour" calculation breaks down. It leaves, for instance, the consumption of material factors of production entirely out of account. Suppose the socially necessary labour time for producing two commodities P and Q is ten hours, and that the production of a unit both of P and of Q requires material A, one unit of which is produced by one hour of socially necessary labour, and that the production of P involves two units of A and eight hours of labour, and of Q one unit of A and nine hours of labour. In a calculation based on labour time P and Q are equivalent, but in a calculation based on value P must be worth more than Q. The former calculation is false. Only the latter corresponds to the essence and object of economic calculation. It is true that this surplus by which the value of P exceeds that of Q, this material substratum, "is furnished by nature without the help of man,"*17 but provided it is present only in such quantities that it becomes an economic factor it must also in some form enter into economic calculation.

II.6.18

The second deficiency of the labour calculation theory is that it disregards differences in the quality of labour. For Marx all human labour is economically homogeneous, because it is always the "productive expenditure of human brain, muscles, nerves, hands, etc." "Skilled labour is only intensified, or rather multiplied simple labour, so that a small quantity of skilled labour equals a larger quantity of simple labour. Experience shows that this resolution of skilled into simple constantly happens. A commodity may be the product of highly skilled labour, but its value equates it to the product of simple labour and represents only a certain quantity of simple labour."*18 Böhm-Bawerk was justified in describing this argument as a masterpiece of astounding naivety.*19 In criticizing it one may conveniently leave undecided whether one can discover a unitary physiological measure of all human labour, physical as well as "mental." For it is certain that between men themselves there are differences of capability and skill which result in differing qualities of the goods and services produced. What is ultimately decisive for the solution of the problem of the feasibility of using labour as a basis of economic calculation is the question whether one can assimilate different kinds of work to a common denominator without a valuation of the products by the consumer. It is clear that the argument which Marx brings to bear on this point has failed. Experience does indeed show that commodities enter into exchange regardless of the question whether they are the products of skilled or simple labour. But this would only prove that a definite quantity of simple labour is equal to a definite quantity of skilled labour if it were proved that labour is the source of exchange value. But not only is this unproven; it is exactly what Marx originally set out to prove. The fact that in exchange a substitute relation between simple and skilled labour has arisen in the form of wage rates—a point to which Marx does not here allude—is not in the least a proof of this homogeneity. This process of equating is a result of the working of the market, not its presupposition. Calculations based on labour cost rather than on monetary values would have to establish a purely arbitrary relation by which to resolve skilled into simple labour, and this would make them useless as an instrument for the economic organization of resources.

II.6.19

It was long thought that the labour theory of value provided a necessary ethical basis for the demand to socialize the means of production. We know now that this was an error. Although the majority of socialists have adopted this view and although even Marx with his professedly non-ethical standpoint could not shake it off, it is clear that, on the one hand, the political demands for the introduction of the socialistic method of production neither need nor receive support from the labour theory of value, and, on the other hand, that those who hold different views on the nature and cause of value can also have socialistic tendencies. But from another point of view, the labour theory of value is still an essential dogma for the advocates of the socialistic method of production. For socialistic production in a society based on division of labour seems practicable only if there is an objective recognizable unit of value which would enable economic calculations to be made in an exchangeless and moneyless community and labour seems the only thing to serve this purpose.

3 Recent Socialist Doctrines and the Problems of Economic Calculation

II.6.20

The problem of economic calculation is the fundamental problem of Socialism. That for decades people could write and talk about Socialism without touching this problem only shows how devastating were the effects of the Marxian prohibition on scientific scrutiny of the nature and working of a socialist economy.*20

II.6.21

To prove that economic calculation would be impossible in the socialist community is to prove also that Socialism is impracticable. Everything brought forward in favour of Socialism during the last hundred years, in thousands of writings and speeches, all the blood which has been spilt by the supporters of Socialism, cannot make socialism workable. The masses may long for it ever so ardently, innumerable revolutions and wars may be fought for it, still it will never be realised. Every attempt to carry it out will lead to syndicalism or, by some other route, to chaos, which will quickly dissolve the society, based upon the division of labour, into tiny autarkous groups.

II.6.22

The discovery of this fact is clearly most inconvenient for the socialist parties, and socialists of all kinds have poured out attempts to refute my arguments and to invent a system of economic calculation for Socialism. They have not been successful. They have not produced a single new argument which I have not already taken account of.*21 Nothing has shaken the proof that under Socialism economic calculation is impossible.*22

II.6.23

The attempt of the Russian Bolsheviks to transfer Socialism from a party programme into real life has not encountered the problem of economic calculation under Socialism, for the Soviet Republics exist within a world which forms money prices for all means of production. The rulers of the Soviet Republics base the calculations on which they make their decisions on these prices. Without the help of these prices their actions would be aimless and planless. Only so far as they refer to this price system, are they able to calculate and keep books and prepare their plans. Their position is the same as the position of the state and municipal Socialism of other countries: the problem of socialist economic calculation has not yet arisen for them. State and municipal enterprises calculate with those prices of the means of production and of consumption goods which are formed on the market. Therefore it would be precipitate to conclude from the fact that municipal and state enterprises exist, that socialist economic calculation is possible.

II.6.24

We know indeed that socialist enterprises in single branches of production are practicable only because of the help they get from their non-socialist environment. State and municipality can carry on their own enterprises because the taxes which capitalist enterprises pay, cover their losses. In a similar manner Russia, which left to herself would long ago have collapsed, has been supported by finance from capitalist countries. But incomparably more important than this material assistance, which the capitalist economy gives to socialist enterprises, is the mental assistance. Without the basis for calculation which Capitalism places at the disposal of Socialism, in the shape of market prices, socialist enterprises would never be carried on, even within single branches of production or individual countries.

II.6.25

Socialist writers may continue to publish books about the decay of Capitalism and the coming of the socialist millennium: they may paint the evils of Capitalism in lurid colours and contrast with them an enticing picture of the blessings of a socialist society; their writings may continue to impress the thoughtless—but all this cannot alter the fate of the socialist idea.*23 The attempt to reform the world socialistically might destroy civilization. It would never set up a successful socialist community.

4 The Artificial Market as the Solution of the Problem of Economic Calculation

II.6.26

Some of the younger socialists believe that the socialist community could solve the problem of economic calculation by the creation of an artificial market for the means of production. They admit that it was an error on the part of the older socialists to have sought to realize Socialism through the suspension of the market and the abolition of pricing for goods of higher orders; they hold that it was an error to have seen in the suppression of the market and of the price system the essence of the socialistic ideal. And they contend that if it is not to degenerate into a meaningless chaos in which the whole of our civilization would disappear, the socialist community equally with the capitalistic community, must create a market in which all goods and services may be priced. On the basis of such arrangements, they think, the socialist community will be able to make its calculations as easily as the capitalist entrepreneurs.

II.6.27

Unfortunately the supporters of such proposals do not see (or perhaps will not see) that it is not possible to divorce the market and its functions in regard to the formation of prices from the working of a society which is based on private property in the means of production and in which, subject to the rules of such a society, the landlords, capitalists and entrepreneurs can dispose of their property as they think fit. For the motive force of the whole process which gives rise to market prices for the factors of production is the ceaseless search on the part of the capitalists and the entrepreneurs to maximize their profits by serving the consumers' wishes. Without the striving of the entrepreneurs (including the shareholders) for profit, of the landlords for rent, of the capitalists for interest and the labourers for wages, the successful functioning of the whole mechanism is not to be thought of. It is only the prospect of profit which directs production into those channels in which the demands of the consumer are best satisfied at least cost. If the prospect of profit disappears the mechanism of the market loses its mainspring, for it is only this prospect which sets it in motion and maintains it in operation. The market is thus the focal point of the capitalist order of society; it is the essence of Capitalism. Only under Capitalism, therefore, is it possible; it cannot be "artificially" imitated under Socialism.

II.6.28

The advocates of the artificial market, however, are of the opinion that an artificial market can be created by instructing the controllers of the different industrial units to act as if they were entrepreneurs in a capitalistic state. They argue that even under Capitalism the managers of joint stock companies work not for themselves but for the companies, that is to say, for the shareholders. Under Socialism, therefore, it would be possible for them to act in exactly the same way as before, with the same circumspection and devotion to duty. The only difference would be that under socialism the product of the manager's labours would go to the community rather than to the shareholders. In such a way, in contrast to all socialists who have written on the subject hitherto, especially the Marxians, they think it would be possible to construct a decentralized, as opposed to a centralized, Socialism.

II.6.29

In order to judge properly such proposals, it is necessary in the first place to realize that these controllers of individual industrial units would have to be appointed. Under Capitalism the managers of the joint stock companies are appointed either directly or indirectly by the shareholders. In so far as the shareholders give to the managers power to produce by the means of the company's (i.e. the shareholders') stock they are risking their own property or a part of their own property. The speculation (for it is necessarily a speculation) may succeed and bring profit; it may, however, misfire and bring about the loss of the whole or a part of the capital concerned. This committing of one's own capital to a business whose outcome is uncertain and to men whose future ability is still a matter of conjecture whatever one may know of their past, is the essence of joint stock company enterprise.

II.6.30

Now it is a complete fallacy to suppose that the problem of economic calculation in a socialist community relates solely to matters which fall into the sphere of the daily business routine of managers of joint stock companies. It is clear that such a belief can only arise from exclusive concentration on the idea of a stationary economic system—a conception which no doubt is useful for the solution of many theoretical problems but which has no counterpart in fact and which, if exclusively regarded, can even be positively misleading. It is clear that under stationary conditions the problem of economic calculation does not really arise. When we think of the stationary society, we think of an economy in which all the factors of production are already used in such a way as, under the given conditions, to provide the maximum of the things which are demanded by consumers. That is to say, under stationary conditions there no longer exists a problem for economic calculation to solve. The essential function of economic calculation has by hypothesis already been performed. There is no need for an apparatus of calculation. To use a popular but not altogether satisfactory terminology we can say that the problem of economic calculation is of economic dynamics: it is no problem of economic statics.

II.6.31

The problem of economic calculation is a problem which arises in an economy which is perpetually subject to change, an economy which every day is confronted with new problems which have to be solved. Now in order to solve such problems it is above all necessary that capital should be withdrawn from particular lines of production, from particular undertakings and concerns and should be applied in other lines of production, in other undertakings and concerns. This is not a matter for the managers of joint stock companies, it is essentially a matter for the capitalists—the capitalists who buy and sell stocks and shares, who make loans and recover them, who make deposits in the banks and draw them out of the banks again, who speculate in all kinds of commodities. It is these operations of speculative capitalists which create those conditions of the money market, the stock exchanges and the wholesale markets which have to be taken for granted by the manager of the joint stock company, who, according to the socialist writers we are considering, is to be conceived as nothing but the reliable and conscientious servant of the company. It is the speculative capitalists who create the data to which he has to adjust his business and which therefore gives direction to his trading operations.

II.6.32

It follows therefore that it is a fundamental deficiency of all these socialistic constructions which invoke the "artificial market" and artificial competition as a way out of the problem of economic calculation, that they rest on the belief that the market for factors of production is affected only by producers buying and selling commodities. It is not possible to eliminate from such markets the influence of the supply of capital from the capitalists and the demand for capital by the entrepreneurs, without destroying the mechanism itself.

II.6.33

Faced with this difficulty, the socialist is likely to propose that the socialist state as owner of all capital and all means of production should simply direct capital to those undertakings which promise the highest return. The available capital, he will contend, should go to those undertakings which offer the highest rate of profit. But such a state of affairs would simply mean that those managers who were less cautious and more optimistic would receive capital to enlarge their undertakings while more cautious and more skeptical managers would go away empty-handed. Under Capitalism, the capitalist decides to whom he will entrust his own capital. The beliefs of the managers of joint stock companies regarding the future prospects of their undertakings and the hopes of project-makers regarding the profitability of their plans are not in any way decisive. The mechanism of the money market and the capital market decides. This indeed is its main task: to serve the economic system as a whole, to judge the profitability of alternative openings and not blindly to follow what the managers of particular concerns, limited by the narrow horizon of their own undertakings, are tempted to propose.

II.6.34

To understand this completely, it is essential to realise that the capitalist does not just invest his capital in those undertakings which offer high interest or high profit; he attempts rather to strike a balance between his desire for profit and his estimate of the risk of loss. He must exercise foresight. If he does not do so then he suffers losses—losses that bring it about that his disposition over the factors of production is transferred to the hands of others who know better how to weigh the risks and the prospects of business speculation.

II.6.35

Now if it is to remain socialistic, the socialist State cannot leave to other hands that disposition over capital which permits the enlargement of existing undertakings, the contraction of others and the bringing into being of undertakings that are completely new. And it is scarcely to be assumed that socialists of whatever persuasion would seriously propose that this function should be made over to some group of people who would "simply" have the business of doing what capitalists and speculators do under capitalistic conditions, the only difference being that the product of their foresight should not belong to them but to the community. Proposals of this sort may well be made concerning the managers of joint stock companies. They can never be extended to capitalists and speculators, for no socialist would dispute that the function which capitalists and speculators perform under Capitalism, namely directing the use of capital goods into that direction in which they best serve the demands of the consumer, is only performed because they are under the incentive to preserve their property and to make profits which increase it or at least allow them to live without diminishing their capital.

II.6.36

It follows therefore that the socialist community can do nothing but place the disposition over capital in the hands of the State or to be exact in the hands of the men who, as the governing authority, carry out the business of the State. And that signifies elimination of the market, which indeed is the fundamental aim of Socialism, for the guidance of economic activity by the market implies organization of production and a distribution of the product according to that disposition of the spending power of individual members of society which makes itself felt on the market; that is to say, it implies precisely that which it is the goal of Socialism to eliminate.

II.6.37

If the socialists attempt to belittle the significance of the problem of economic calculation in the Socialist community, on the ground that the forces of the market do not lead to ethically justifiable arrangements, they simply show that they do not understand the real nature of the problem. It is not a question of whether there shall be produced cannons or clothes, dwelling houses or churches, luxuries or subsistence. In any social order, even under Socialism, it can very easily be decided which kind and what number of consumption goods should be produced. No one has ever denied that. But once this decision has been made, there still remains the problem of ascertaining how the existing means of production can be used most effectively to produce these goods in question. In order to solve this problem it is necessary that there should be economic calculation. And economic calculation can only take place by means of money prices established in the market for production goods in a society resting on private property in the means of production. That is to say, there must exist money prices of land, raw materials, semimanufactures; that is to say, there must be money wages and interest rates.

II.6.38

Thus the alternative is still either Socialism or a market economy.

5 Profitability and Productivity

II.6.39

The economic activity of the socialist community is subject to the same external conditions as govern an economic system based on private property in the means of production or indeed any conceivable economic system. The economic principle applies to it in the same way as to any and to all economic systems: that is to say it recognizes an hierarchy of ends, and must therefore strive to achieve the more important before the less important. This is the essence of economic activity.

II.6.40

lt is obvious that the production activities of the socialist community will involve not only labour but also material instruments of production. According to a very widespread custom, these material instruments of production are called capital. Capitalist production is that which adopts wise roundabout methods in contrast with a non-capitalistic production which goes directly to its end in a hand to mouth manner.*24 If we adhere to this terminology, we must admit that the socialist community must also work with capital and will therefore produce capitalistically. Capital conceived as the intermediate products, which arise at the different stages of production by indirect methods, would not, at any rate at first*25 be abolished by Socialism. It would merely be transferred from individual to common possession.

II.6.41

But if, as we have suggested above, we wish to understand by capitalistic production that economic system in which money-calculation is employed, so that we can summarize under the term capital a set of goods devoted to production and evaluated in terms of money, and can attempt to estimate the results of economic activity by the variations in the value of capital, then it is clear that socialist methods of production cannot be termed capitalistic. In quite another sense than the Marxians we can distinguish between socialistic and capitalistic methods of production, and between Socialism and Capitalism.

II.6.42

The characteristic feature of the capitalistic method of production, as it appears to socialists, is that the producer works to obtain a profit. Capitalistic production is production for profit, socialist production will be production for the satisfaction of needs. That capitalistic production aims at profit is quite true. But to achieve a profit, that is a result greater in value than the costs, must also be the aim of the socialist community. If economic activity is rationally directed, that is if it satisfies more urgent before less urgent needs, it has already achieved profits, since the cost, i.e. the value of the most important of the unsatisfied needs, is less than the result attained. In the capitalistic system profits can only be obtained if production meets a comparatively urgent demand. Whoever produces without attending to the relation between supply and demand fails to achieve the result at which he is aiming. To direct production towards profit simply means to direct it to satisfy other people's demand: in this sense it may be contrasted with isolated man's production for personal needs. But he also is working for profit in the sense used above. Between production for profit and production for needs there is no contrast.*26

II.6.43

The contrasting of production for profit and production for needs is closely connected with the common practice of contrasting productivity and profitability or the "social" and "private" economic point of view. An economic action is said to be profitable if in the capitalist system it yields an excess of receipts over costs. An economic action is said to be productive when, seen from the point of view of a hypothetical socialist community, the yield exceeds the cost involved. Now in some cases productivity and profitability do not coincide. Some economic acts which are profitable are not productive and, vice versa, some are productive but not profitable. For those naively biased in favour of Socialism, as is the case even with most economists, this fact is sufficient to condemn the capitalistic order of society. Whatever a socialist community would do seems to them undisputably good and reasonable: that anything different can happen in a capitalistic society is, in their opinion, an abuse which cannot be tolerated. But an examination of the cases in which profitability and productivity are alleged not to coincide will show that this judgment is purely subjective, and that the scientific cloak with which it is invested is a sham.*27

II.6.44

In the majority of cases in which it is usually assumed that there is a contrast between profitability and productivity no such contrast exists. This is true, for example, of profits from speculation. Speculation in the capitalist system performs a function which must be performed in any economic system however organized: it provides for the adjustment of supply and demand over time and space. The source of the profit of speculation is enhanced value which is independent of any particular form of economic organization. When the speculator purchases at a low price products which come on the market in comparatively large quantities and sells them at a higher price when the demand has again increased, his gains represent, from a business and from the economic point of view, an increase of value. That in a socialist order the community and not the individual would get this much grudged and maligned profit we do not deny. But that is not the significance of the problem in which we are interested. The point which concerns us here is that the alleged contrast between profitability and productivity does not exist in this case. Speculation performs an economic service which cannot conceivably be eliminated from any economic system. If it is eliminated, as socialists intend to do, then some other organization must take over its functions: the community itself must become a speculator. Without speculation there can be no economic activity reaching beyond the immediate present.

II.6.45

A contrast between profitability and productivity is sometimes supposed to be discovered by picking out a particular process and considering it by itself. People may perhaps characterize as unproductive certain features peculiar to the constitution of the capitalistic organization of industry, e.g. selling expenses, advertising costs and the like are characterized as unproductive. This is not legitimate. We must consider the result of the complete process, not the individual stages. We must not consider the constituent expenses without setting against them the result to which they contribute.*28

6 Gross and Net Product

II.6.46

The most ambitious attempt to contrast productivity and profitability derives from the examination of the relationship between gross product and net product. It is clear that every entrepreneur in the capitalist system aims at achieving the largest net product. But it is asserted that rightly considered the object of economic activity should be to achieve not the largest net product but the largest gross product.

II.6.47

This belief, however, is a fallacy based upon primitive speculations regarding valuation. But judged by its widespread acceptance even today it is a very popular fallacy. It is implicit when people say that a certain line of production is to be recommended because it employs a large number of workers, or when a particular improvement in production is opposed because it may deprive people of a living.

II.6.48

If the advocates of such views were logical they would have to admit that the gross product principle applies not only to labour but also to the material instruments of production. The entrepreneur carries production up to the point where it ceases to yield a net product. Let us assume that production beyond this point requires material instruments only and not labour. Is it in the interest of society that the entrepreneur should extend production so as to obtain a larger gross product? Would society do so if it had the control of production? Both questions must be answered with a decided no. The fact that further production does not pay shows that the instruments of production could be applied to a more urgent purpose in the economic system. If, nevertheless, they are applied to the unprofitable line then they will be lacking in places where they are more urgently needed. This is true under both Capitalism and Socialism. Even a socialist community, supposing it acted rationally, would not push certain lines of production indefinitely and neglect others. Even a socialist community would discontinue a particular line of production when further production would not cover the expense, that is to say, at the point where further production would mean failure to satisfy a more urgent need elsewhere.

II.6.49

But what is true of the increased use of material instruments is true exactly in the same way of the increased use of labour. If labour is devoted to a particular line of production to the point where it only increases the gross product while the net product declines, it is being withheld from some other line where it could perform more valuable service. And here, again, the only result of neglecting the principle of net product is that more urgent wants remain unsatisfied whilst less urgent ones are met. It is this fact, and no other which is made evident in the mechanism of the capitalist system by the decline in the net product. In a socialist community it would be the duty of the economic administration to see that similar misapplications of economic activity did not occur. Here, therefore, is no discrepancy between profitability and productivity. Even from the socialist standpoint, the largest possible net product and not the largest possible gross product must be the aim of economic activity.

II.6.50

Nevertheless, people continue to maintain the contrary, sometimes of production in general, sometimes of labour alone and sometimes of agricultural production. That capitalist activity is directed solely toward the attainment of the largest net product is adversely criticized and State intervention is called for to redress the alleged abuse.

II.6.51

This discussion has a lengthy ancestry. Adam Smith maintained that different lines of production should be regarded as more or less productive according to the greater or smaller amount of labour which they set in motion.*29 For this he was adversely criticized by Ricardo who pointed out that welfare of the people increased only through an enlargement of the net product and not of the gross product.*30 For this Ricardo was severely attacked. Even J. B. Say misunderstood him and accused him of an utter disregard for the welfare of so many human beings.*31 While Sismondi, who was fond of meeting economic arguments by sentimental declamations, thought he could dispose of the problem by witticism: he said that a king who could produce net product by pressing a button would, according to Ricardo, make the nation superfluous.*32 Bernhardi followed Sismondi on this point.*33 Proudhon went as far as to epitomize the contrast between socialistic and private enterprise in the formula: that although society must strive for the largest gross product the aim of the entrepreneur is the largest net product.*34 Marx avoids committing himself on this point, but he fills two chapters of the first book of Das Kapital with a sentimental exposition in which the transition from intensive to extensive agricultural methods is depicted in the darkest colour as, in the words of Sir Thomas More, a system "where sheep eat up men," and manages in the course of this discussion to confuse the large expropriations achieved by the political power of the nobility, which characterized European agrarian history in the first centuries of modern times, with the changes in the methods of cultivation initiated later on by the landowners.*35

II.6.52

Since then declamations on this scheme have formed the stock equipment of the controversial writings and speeches of the socialists. A German agricultural economist, Freiherr von der Goltz, has tried to prove that the attainment of the largest possible gross product is not only productive from the social point of view but is also profitable from the individual point of view. He thinks that a large gross product naturally presupposes a large net product, and to that extent the interests of the individuals whose main object is to achieve a large net product coincide with those of the State which desires a large gross product.*36 But he can offer no proof of this.

II.6.53

Much more logical than these efforts to overcome the apparent contrast between social and private interests by ignoring obvious facts of agricultural accountancy, is the position taken up by followers of the romantic school of economic thought, particularly the German etatists, viz. that the agriculturist has the status of a civil servant, and is therefore obliged to work in the public interest. Since this is said to require the largest possible gross product it follows that the farmer, uninfluenced by commercial spirit, ideas or interests, and regardless of the disadvantages, which may be entailed, must devote himself to the attainment of this end.*37 All these writers take it for granted that the interests of the community are served by the largest gross product. But they do not go out of their way to prove it. When they do try, they only argue from the point of view of Machtpolitik (power politics) or Nationalpolitik (national policy). The State has an interest in a strong agricultural population since the agricultural population is conservative; agriculture supplies the largest number of soldiers; provision must be made for feeding the population in time of war and so on.

II.6.54

In contrast to this an attempt to justify the gross product principle by economic reasoning has been made by Landry. He will only admit that the effort to attain the greatest net product is socially advantageous in so far as the costs which no longer yield a profit arise from the use of material instruments of production. When the application of labour is involved he thinks quite otherwise. Then, from the economic point of view the application of labour costs nothing: social welfare is not thereby diminished. Wage economies which result in a diminution of the gross product are harmful.*38 He arrives at this conclusion by assuming that the labour force thus released could find no employment elsewhere. But this is absolutely wrong. The need of society for labour is never satisfied as long as labour is not a "free good." The released workers find other employment where they have to supply work more urgent from the economic point of view. If Landry were right it would have been better if all the labour-saving machinery had never existed, and the attitude of those workers who resist all technical innovations which economize labour and who destroy such machinery would be justified. There is no reason why there should be a distinction between the employment of material instruments and of labour. That, in view of the price of the material instruments and the price of their products, an increase of production in the same line is not profitable, is due to the fact that the material instruments are required in some other line to satisfy more urgent needs. But this is equally true of labour. Workers who are employed in unprofitably increasing the gross product are withheld from other lines of production in which they are more urgently required. That their wages are too high for an increase in production involving a larger gross product to be profitable, results indeed from the fact that the marginal productivity of labour in general is higher than in the particular line of production in question, where it is applied beyond the limits determined by the net product principle. There is no contrast whatever here between social and private interests: a socialist organization would not act differently from an entrepreneur in the capitalist organization.

II.6.55

Of course there are plenty of other arguments which can be adduced to show that adherence to the net product principle may be harmful. They are common to all nationalist-militarist thinking, and are the well-known arguments used to support every protectionist policy. A nation must be populous because its political and military standing in the world depends upon numbers. It must aim at economic self-sufficiency or at least it must produce its food at home and so on. In the end Landry has to fall back on such arguments to support his theory.*39 To examine such arguments would be out of place in a discussion of the isolated socialist community.

II.6.56

But if the arguments we have examined are untrue it follows that the socialist community must adopt net product and not gross product as the guiding principle of economic activity. The socialist community equally with the capitalist society will also transform arable into grass land, if it is possible to put more productive land under the plough elsewhere. In spite of Sir Thomas More, "sheep will eat up men" even in Utopia, and the rulers of the socialist community will act no differently from the Duchess of Sutherland, that "economically instructed person," as Marx once jeeringly called her.*40

II.6.57

The net product principle is true for every line of production. Agriculture is no exception. The dictum of Thaer, the German pioneer of modern agriculture, that the aim of the agriculturist must be a high net yield "even from the standpoint of the public welfare" still holds good.*41


Notes for this chapter


14.
See the critique of Kelsen, "Staat und Gesellschaft," in Sozialismus und Staat (Leipzig, 1923), pp. 11 ff. and pp. 20 ff.
15.
Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, pp. 335 ff. Publisher's Note: In the English edition, Anti-Dühring: Herrn Eugen Dühring's Revolution in Science, pp. 429 ff.
16.
Marx, Das Kapital, Vol. 1, pp. 5 ff. Publisher's Note: In English, see Marx, Karl. Capital: A Critique of Political Economy. 3 volumes. Vol. I. The Process of Capitalist Production. Translated from the 3rd German edition by Samuel Moore and Edward Aveling. Edited by Frederick Engels. Revised and amplified according to the 4th German edition by Ernest Untermann. Chicago: Charles H. Kerr & Co., 1906. (Note: This Volume I also reprinted by Random House as a Modern Library Giant, with same paging as the Kerr edition.) Vol. II. The Process of Circulation of Capital. Vol. III. The Process of Capitalist Production as a Whole. Both Volumes II and III were translated by Ernest Untermann and edited by Frederick Engels. Both were published by the same Charles H. Kerr & Co. of Chicago in 1909. In this footnote, pp. 5 ff. refers to pp. 45 ff. in the English Vol. I.
17.
Ibid., pp. 9 ff. Publisher's Note: pp. 50 ff. in English translation.
18.
Ibid., pp. 10 ff. Publisher's Note: pp. 51-52 in English translation.
19.
Böhm-Bawerk, Kapital und Kapitalzins, Vol. I, 3rd ed. (Innsbruck, 1914), p. 531. Publisher's Note: Böhm-Bawerk's three volume work in English is: Böhm-Bawerk, Eugen von. Capital and Interest. 3 volumes. (South Holland, Illinois: Libertarian Press, 1959.) Volume I. History and Critique of Interest Theories. Translated by George D. Huncke and Hans F. Sennholz.
20.
We may point out here that as early as 1854 Gossen knew "that only through private property is the measure found for determining the quantity of each commodity which it would be best to produce under given conditions. Therefore, the central authority, proposed by the communists, for the distribution of the various tasks and their reward, would very soon find that it had taken on a job the solution of which far surpasses the abilities of individual men." (Gossen, Entwicklung der Gesetze des menschlichen Verkehrs, new ed., [Berlin, 1889] p. 231.) Pareto (Cours d'Économie Politique, Vol. II, Lausanne, 1897, pp. 364 ff.) and Barone ("Il Ministro della Produzione nello Stato Coletivista" in Giornale degli Economisti, Vol. XXXVII, 1908, pp. 409 ff.) did not penetrate to the core of the problem. Pierson clearly and completely recognized the problem in 1902. See his Das Wertproblem in der sozialistischen Gesellschaft (German translation by Hayek, Zeitschrift für Volkswirtschaft, New Series, Vol. IV, 1925, pp. 607 ff.) Publisher's Note: Both the Barone article ("The Ministry of Production in the Collectivist State," pp. 245-290) and the Pierson article ("The Problem of Value in the Socialist Society," pp. 41-85) are included in the Hayek edited Collectivist Economic Planning.
21.
I have briefly discussed the most important of these replies in two short essays—"Neue Beiträge zurn Problem der sozialistischen Wirtschaftsrechnung" (Archiv für Sozialwissenschaft, Vol. LI, pp. 488-500) and "Neue Schriften zum Problem der sozialistischen Wirtschaftsrechnung" (Ibid., Vol. LX, pp. 187-90. Publisher's Note: "Neue Beiträge zum Problem der sozialistischen Wirtschaftsrechnung" appears in part as the Appendix of this book on p. 473. The second essay mentioned by Mises in this footnote was published in 1928 and has not been translated into English. The essay was a review of recent literature on economic calculations under socialism.
22.
In scientific literature there is no more doubt about this. See Max Weber, "Wirtschaft und Gesellschaft" (Grundriss der Sozialökonomik, Vol. III), Tübingen, 1922, pp. 45-59; Adolf Weber, Allgemeine Volkswirtschaftslehre, 4th ed., Munich and Leipzig, 1932, Vol. II, pp. 369 ff.; Brutzkus, Die Lehren des Marxismus im Lichte der russischen Revolution, Berlin, 1928, pp. 21 ff.; C. A. Verrijn Stuart, "Winstbejag versus behoeftenbevrediging" (Overdruk Economist, Vol, 76 No. 1), pp. 28 ff.; Pohle-Halm, Kapitalismus und Sozialismus, 4th ed., Berlin, 1931, pp. 237 ff.
23.
Characteristic of this branch of literature is the recently published work of C. Landauer, Planwirtschaft und Verkehrswirtschaft (Munich and Leipzig, 1931). Here the writer deals with the problem of economic calculation quite naively, at first by asserting that in a socialist society "the individual enterprises...could buy from each other, just as capitalist enterprises buy from each other" (p. 114). A few pages on he explains that "besides this" the socialist state will "have to set up a control accountancy in kind"; the state will be "the only one able to do this because in contrast to Capitalism it controls production itself" (p. 122). Landauer cannot understand that—and why—one is not permitted to add and subtract figures of different denominations. Such a case is, of course, beyond help.
24.
Böhm-Bawerk, Kapital und Kapitalzins, Vol. II, 3rd ed. (Innsbruck, 1912), p. 21. Publisher's Note: The page in the English (Sennholz/Huncke) translation of Böhm-Bawerk, referred to here is page 14 in Volume II. Böhm-Bawerk, Eugen von. Capital and Interest. 3 volumes. South Holland, Illinois: Libertarian Press, 1959. [Information re Vol. I above.] Volume II. Positive Theory of Capital. Translated by George D. Huncke; Hans F. Sennholz, Consulting Economist. Volume III. Further Essays on Capital and Interest. Translated by Hans F. Sennholz.
25.
The limitation comprised in the words "at first" is not intended to mean that Socialism will later on, say after attaining a "higher stage of the communist society," intentionally set about abolishing capital in the sense used here. Socialism can never plan the return to the life from hand to mouth. Rather do I want to point out here that Socialism must, by inner necessity, lead to the gradual consumption of capital.
26.
Pohle-Halm, Kapitalismus und Sozialismus, pp. 12 ff.
27.
On Monopoly see pp. 344 ff. and on "uneconomic" consumption see p. 401 ff.
28.
See pp. 140 ff., 160 ff.
29.
A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book II, Chap. V (London 1776, Vol. I, pp. 437 ff.).
30.
Ricardo, Principles of Political Economy and Taxation, Chap. XXVI (Works, ed. MacCulloch, 2nd ed. [London 1852] pp. 220 ff.).
31.
Say, in his Notes to Constancio's French Edition of Ricardo's works, Vol. II (Paris, 1819), pp. 222 ff.
32.
Sismondi, Nouveaux Principes d'Économie Politique (Paris, 1819), Vol. ii, p. 331 footnote.
33.
Bernhardi, Versuch einer Kritik der Grande, die für grosses und kleines Grundeigentum angeführt werden (Petersburg, 1849), pp. 367 ff.; also Cronbach, Das landwirtschaftliche Betriebsproblem in der deutschen Nationalökonomie bis zur Mitte des 19. Jahrhunderts (Vienna, 1907), pp. 292 ff.
34.
"La société recherche le plus grand produit brut, par consequent la plus grande population possible, parce que pour elle produit brut et produit net son identiques. Le monopole, au contraire, vise constamment au plus grand produit net, dût-il ne l'obtenir qu'au prix de l'extermination du genre humain." ("Society seeks the largest gross product and thus the largest possible population, because for it gross product and net product are the same thing. On the other hand, monopoly continually aims at the highest net product which it can obtain only at the price of exterminating the human race.") Proudhon, Système des contradictions économiques ou philosophie de la misère (Paris, 1846), Vol. I, p. 270. In Proudhon's language "Monopoly" means the same as Private Property. Ibid., Vol. i, p. 236; also Landry, L'utilité sociale de la propriété individuelle (Paris, 1901), p. 76.
35.
Marx, Das Kapital, Vol. I, pp. 613-726. The arguments about "the theory of compensation for the workers displaced by machinery" (ibid., pp. 403-12) are vain in view of the Marginal Utility Theory. Publisher's Note: The page references cited here are pp. 738-821 and 478-488, respectively, in the English edition.
36.
Goltz, Agrarwesen und Agrarpolitik, 2nd ed. (Jena, 1904), p. 53; also Waltz, Vom Reinertrag in der Landwirtschaft (Stuttgart and Berlin, 1904), pp. 27 ff. Goltz contradicts himself in his arguments, for, to the assertion mentioned above, he adds immediately: "Nevertheless the amount remaining as net profit from the gross product after deducting costs varies considerably. On the average it is greater with extensive than with intensive cultivation."
37.
See Waltz, op. cit. pp. 19 ff. on Adam Müller, Bülow-Cummerow and Phillipp v. Arnim, and pp. 30 ff. on Rudolf Meyer and Adolf Wagner.
38.
Landry, L'utilité sociale de la propriété individuelle, pp. 109, 127 ff.
39.
Landry, L'utilité sociale de la propriété individuelle, pp. 109, 127 ff.
40.
Marx, Das Kapital, Vol. I, p. 695.
41.
Quoted by Waltz, Vom Reinertrag in der Landwirtschaft, p. 29.

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CHAPTER 7

The Distribution of Income

1 The Nature of Distribution Under Liberalism and Socialism

II.7.1

On logical grounds, treatment of the problem of income should properly come at the end of any investigation into the life of the socialist community. Production must take place before distribution is possible, therefore, logically, the former should be discussed before the latter. But the problem of distribution is so prominent a feature of Socialism as to suggest the earliest possible discussion of the question. For fundamentally, Socialism is nothing but a theory of "just" distribution; the socialist movement is nothing but an attempt to achieve this ideal. All socialist schemes start from the problem of distribution and all come back to it. For Socialism the problem of distribution is the economic problem.

II.7.2

The problem of distribution is moreover peculiar to socialism. It arises only in a socialist economy. It is true, we are in the habit of speaking of distribution in an economic society based on private property, and economic theory deals with the problem of income and the determination of the prices of the factors of production under the heading "Distribution." This terminology is traditional, and it is so firmly established that the substitution of another would be unthinkable. Nevertheless, it is misleading and does not indicate the nature of the theory which it is meant to describe. Under Capitalism incomes emerge as a result of market transactions which are indissolubly linked up with production. We do not first produce things and afterwards distribute them. When products are supplied for use and consumption, incomes for the greater part have already been determined, since they arise during the process of production and are indeed derived from it. Workers, landowners, and capitalists and a large number of the entrepreneurs contributing to production have already received their share before the product is ready for consumption. The prices which are obtained for the final product on the market decide only the income which a section of entrepreneurs obtain from the process of production. (The influence which these prices have on the income of other classes has already been exerted via the anticipations of the entrepreneurs.) As thus in the capitalistic order of society the aggregation of individual incomes to form a total social income is only a theoretical conception, the concept of distribution is only figurative. The reason that this expression has been adopted, instead of the simple and more suitable term formation of income, is that the founders of scientific economics, the Physiocrats and the English classical school, only gradually learned to free themselves from the etatistic outlook of mercantilism. Although precisely this analysis of income formation as a result of market transactions was their principal achievement, they adopted the practice—fortunately without any harm to the content of their teachings—of grouping the chapters dealing with the different kinds of income under the heading "distribution."*42

II.7.3

Only in the socialist community is there any distribution of consumable goods in the true sense of the word. If in considering capitalistic society we use the term distribution in any but a purely figurative sense then an analogy is being made between the determination of income in a socialist and in a capitalist community. The conception of any actual process of distribution of income must be kept out of any investigation of the mechanism of capitalist society.

2 The Social Dividend

II.7.4

According to the fundamental idea of Socialism only goods which are ripe for consumption are eligible for distribution. Goods of a higher order remain the property of the community for purposes of further production; they must not be distributed. Goods of the first order, on the contrary, are without exception destined to be distributed: they constitute indeed the net social dividend. Since in considering the socialist society we cannot quite get rid of ideas which are only appropriate to the capitalist order, it is usual to say that the society will retain a part of the consumers' goods for public consumption. We are really thinking of that part of consumption which in the capitalistic society is usually called public expenditure. Where the principle of private property is rigidly applied this public expenditure consists exclusively of the cost of maintaining the apparatus which assures the undisturbed course of things. The only task of the strictly Liberal state is to secure life and property against attacks both from external and internal foes. It is a producer of security, or, as Lassalle mockingly termed it, a night watchman's state. In a socialist community there will be the corresponding task of securing the socialist order and the peaceful course of socialistic production. Whether the apparatus of coercion and violence which serves this purpose will still be known as the state or be called by some other name, and whether it will be legally given a separate status among the other functions incumbent upon the socialist community, is a matter of complete indifference to us. We have only to make it clear that all expenditure devoted to this end will appear in the socialist community as general costs of production. So far as they involve the use of labour for the purposes of distributing the social dividend, they must be reckoned in such a way that the workers employed get their share.

II.7.5

But public expenditure includes other outlays. Most states and municipalities provide their citizens with certain utilities in kind, sometimes gratuitously, sometimes at a charge which covers only a part of the expense. As a rule this happens in the case of single services which are yielded by durable commodities. Thus parks, art galleries, public libraries, places of worship, are made available for those who wish to use them. Similarly, roads and streets are accessible to everyone. Moreover, direct distribution of consumption goods takes place, as for example, when medicine and diet are given to the sick and educational apparatus to pupils; personal service is also supplied when medical treatment is given. All this is not Socialism, it is not production on the basis of common ownership of the means of production. Distribution, indeed, occurs here, but what is distributed is first collected by taxation from the citizens. Only so far as this distribution deals with products of state or municipal production can it be described as a piece of Socialism within the framework of an otherwise liberal order of society. We need not stop to inquire how far this branch of state and municipal activity is due to views which have been influenced by the socialist critics of capitalist society and how far it is due to the special nature of certain particularly durable consumption goods which yield almost unlimited service. For us it is only important that in the case of this public expenditure, even in an otherwise capitalistic society, a distribution in the actual sense of the word takes place.

II.7.6

Moreover, the socialist community will not make a physical distribution of all consumers' goods. It is not likely to present a copy of every new book to every citizen, but rather to place the books in public reading rooms for the general use. It will do the same with its schools and teaching, its public gardens, playgrounds and assembly halls. The expenditure which all these arrangements necessitate is not deducted from the social dividend; on the contrary, it is a part of the social dividend.

II.7.7

This part of the social dividend exhibits this one peculiarity, that without prejudice to the principles which determine the distribution of consumable consumers' goods and part of durable goods, special principles of distribution can be applied to it corresponding to the special nature of the services involved. The way in which art collections and scientific publications are made available for general use is quite independent of the rules which are otherwise applied to the distribution of goods of the first order.

3 The Principles of Distribution

II.7.8

The socialist community is characterized by the fact that in it there is no connection between production and distribution. The magnitude of the share which is assigned for the use of each citizen is quite independent of the value of the service he renders. It would be fundamentally impossible to base distribution on the imputation of value because it is an essential feature of socialistic methods of production that the shares of the different factors of production in the result cannot be ascertained; and any arithmetical test of the relations between effort and result is impossible.

II.7.9

It would therefore not be possible to base even a part of distribution on an economic calculation of the contribution of the different factors, e.g. by first granting the worker the full product of his labour which under the capitalist system he would receive in the form of wages, and then applying a special form of distribution in the case of the shares which are attributed to the material factors of production and to the work of the entrepreneur. On the whole socialists lack any clear conception of this fact. But a faint suspicion of them pervades the Marxian doctrine that under Socialism the categories wages, profit, and rent would be unthinkable.

II.7.10

There are four different principles upon which socialistic distribution can conceivably be based: equal distribution per head, distribution according to service rendered to the community, distribution according to needs, and distribution according to merit. These principles can be combined in different ways.

II.7.11

The principle of equal distribution derives from the old doctrine of natural law of the equality of all human beings. Rigidly applied it would prove absurd. It would permit no distinction between adults and children, between the sick and the healthy, between the industrious and the lazy, or between good and bad. It could be applied only in combination with the other three principles of distribution. It would at least be necessary to take into account the principle of distribution according to needs, so that shares might be graded according to age, sex, health and special occupational needs; it would be necessary to take into account the principle of distribution according to services rendered, so that distinction could be made between industrious and less industrious, and between good and bad workers; and finally, some account would have to be taken of merit, so as to make reward or punishment effective. But even if the principle of equal distribution is modified in these ways the difficulties of socialistic distribution are not removed. In fact, these difficulties cannot be overcome at all.

II.7.12

We have already shown the difficulties raised by applying the principle of distribution according to value of services rendered. In the capitalist system the economic subject receives an income corresponding to the value of his contribution to the general process of production. Services are rewarded according to their value. It is precisely this arrangement which Socialism wishes to change and to replace by one under which the shares attributed to the material factors of production and to the entrepreneur would be so distributed that no property owner and no entrepreneur would have a standing fundamentally different from that of the rest of the community. But this involves a complete divorce of distribution from economic imputation of value. It has nothing to do with the value of the individual's service to the community. It could be brought into external relation with the service rendered only if the service of the individual were made the basis of distribution according to some external criteria. The most obvious criterion appears to be the number of hours worked. But the significance to the social dividend of any service rendered is not to be measured by the length of working time. For, in the first place, the value of the service differs according to its use in the economic scheme. The results will differ according to whether the service is used in the right place, that is to say, where it is most urgently required, or in the wrong place. In the socialist organization, however, the worker cannot be made ultimately responsible for this, but only those who assign him the work. Secondly, the value of the service varies according to the quality of the work and according to the particular capability of the worker; it varies according to his strength and his zeal. It is not difficult to find ethical reasons for equal payments to workers of unequal capabilities. Talent and genius are the gifts of God, and the individual is not responsible for them, as is often said. But this does not solve the problem whether it is expedient or practicable to pay all hours of labour the same price.

II.7.13

The third principle of distribution is according to needs. The formula of each according to his needs is an old slogan of the unsophisticated communist. It is occasionally backed up by referring to the fact that the Early Christians shared all goods in common.*43 Others again regard it as practicable because it is supposed to form the basis of distribution within the family. No doubt it could be made universal if the disposition of the mother, who hungers gladly rather than that her children should go without, could be made universal. The advocates of the principle of distribution according to needs overlook this. They overlook much more besides. They overlook the fact that so long as any kind of economic effort is necessary only a part of our needs can be satisfied, and a part must remain unsatisfied. The principle of "to each according to his needs" remains meaningless so long as it is not defined to what extent each individual is allowed to satisfy his needs. The formula is illusory since everyone has to forgo the complete satisfaction of all his needs.*44 It could indeed be applied within narrow limits. The sick and suffering can be assigned special medicine, care, and attendance, better attention and special treatment for their special needs, without making this consideration for exceptional cases the general rule.

II.7.14

Similarly it is quite impossible to make the merit of the individual the general principle of distribution. Who is to decide on merits? Those in power have often had very strange views on the merits or demerits of their contemporaries. And the voice of the people is not the voice of God. Who would the people choose today as the best of their contemporaries? It is not unlikely that the choice would fall on a film star, or perhaps on a prize-fighter. Today the English people would probably be inclined to call Shakespeare the greatest Englishman. Would his contemporaries have done so? And how would they esteem a second Shakespeare if he were among them today? Moreover, why should those be penalized in whose lap Nature has not placed the great gifts of talent and genius? Distribution according to the merits of the individual would open the door wide to mere caprice and leave the individual defenseless before the oppression of the majority. Conditions would be created which would make life unbearable.

II.7.15

As far as the economics of the problem are concerned it is a matter of indifference which principle or which combination of different people is made a basis for distribution. Whatever principle is adopted the fact remains that each individual will receive an allocation from the community. The citizen will receive a bundle of claims which can be exchanged within a certain time for a definite amount of different goods. In this way he will procure his daily meals, fixed shelter, occasional pleasures, and from time to time new clothing. Whether the satisfaction of needs which he obtains in this way is great or small will depend upon the productivity of the efforts of the community.

4 The Process of Distribution

II.7.16

It is not necessary that each individual should himself consume the whole share allotted to him. He can let some go to waste, give some away, or, as far as the commodity permits, put some aside for later consumption. Some, however, he can exchange. The beer drinker will readily forgo his share of non-alcoholic drink to obtain more beer. The abstainer will be prepared to forgo his claim to spirits if he can acquire other commodities instead. The aesthete will surrender a visit to the cinema for the sake of more opportunities to hear good music; the lowbrow will willingly exchange tickets to art galleries for more congenial pleasures. Everyone will be ready to exchange, but the exchange will be confined to consumers' goods. Producers' goods will be res extra commercium (things beyond commerce).

II.7.17

Such exchange need not be confined to direct barter: it can also take place indirectly within certain narrow limits. The same reasons which have led to indirect exchange in other types of society will make it advantageous to those exchanging in the socialistic community. It follows that even here there will be opportunity for the use of a general medium of exchange—money.

II.7.18

The role of money in the socialist economy will be fundamentally the same as in a free economic system—that of a general facilitator of exchange. But the significance of this role will be quite different. In a society based on the collective ownership of the means of production, the significance of the role of money will be incomparably narrower than in a society based on private property in the means of production. For in the socialist commonwealth, exchange itself has a much narrower significance, since it is confined to consumers' goods only. There cannot be money prices of producers' goods since these do not enter into exchange. The accounting function which money exercises in production in a free economic order will no longer exist in a socialist community. Money calculations of value will be impossible.

II.7.19

Nevertheless the central administration of production and distribution cannot leave out of consideration the exchange relations which arise in this sort of traffic. Clearly it would have to take them into account if it desired to make different commodities mutually substitutable when assessing the distribution of the social dividend.

II.7.20

Thus if in the process of exchange the relation of one cigar to five cigarettes was established, the administration could not arbitrarily lay it down that one cigar equalled three cigarettes, so that it might be able on this basis to give one individual only cigars and another only cigarettes. If the tobacco allowance has not been equally distributed, partly in cigars and partly in cigarettes, that is to say, if some—either according to their wishes or by order of the government—received only cigars and others only cigarettes, the exchange relations already established could not be ignored. Otherwise all those who received cigarettes would be unfairly treated, compared with those receiving cigars, since the person who had received a cigar could exchange it for five cigarettes whilst he had obtained it as the equivalent of three cigarettes.

II.7.21

Alterations of exchange relationships in this traffic among the citizens would consequently compel the administration to make corresponding changes in the substitution ratios of the various commodities. Every such change will indicate that the relations between the various needs of the citizens and their satisfaction had altered, that people now wanted some commodities more than before, others less. The economic administration would presumably endeavor to adjust production to this change. It would endeavour to produce more of the more desired commodity and less of the less desired. But one thing, however, it would not be able to do: it would not be able to permit the individual citizens to redeem their tobacco tickets arbitrarily in cigars or cigarettes. If individuals were allowed free choice of cigars or cigarettes they might demand more cigars or more cigarettes than had been produced, or, on the other hand, cigars or cigarettes might be left on hand at the distributing centers because no one demanded them.

II.7.22

The labour theory of value appears to offer a simple solution of this problem. For an hour of labour a citizen receives a token which entitles him to the product of one hour of labour, with a deduction to defray the general obligation of the community, e.g. support of the disabled, expenditure on cultural purposes. Allowing for this deduction to cover the expenditure borne by the community as a whole, every worker who has worked one hour will have the right to obtain products on which one hour of labour has been expended. Any one who is ready to pay by giving to the community his own working time corresponding to the working time used to produce them can draw from the supply centers consumers' goods and services and apply them to his own use.

II.7.23

But such a principle of distribution would not work, since labour is not uniform or homogeneous. There are qualitative differences between the different forms of labour which, taken in conjunction with variations in the supply and demand of the resulting products, lead to different values. Ceteris paribus the supply of pictures cannot be increased without the quality of the work suffering. The worker who has supplied an hour of simple labour cannot be granted the right to consume the product of an hour of work of a higher quality: and it would be impossible in a socialist community to establish any connection between the importance of work done for the community and the share in the yield of communal production given for the work. Payment for work would be quite arbitrary. For the methods of calculating value used in a free economic society based on private ownership of the means of production would be inaccessible to it since, as we have seen, such imputation is impossible in a socialistic society. Economic facts would clearly limit the power of society to reward the labourer arbitrarily; in the long run the wage total can in no circumstances exceed the income of society. Within this limit, however, the community is free to act. It can decide to pay all work equally, regardless of quality; it can just as easily make a distinction between the various hours of work, according to the quality of the work rendered. But in both cases it must reserve the right to decide the particular distribution of the products.

II.7.24

Even if we abstract from differences in the quality of labour and its product and accept the possibility of determining how much labour inheres in any product, the community would never allow the individual who had rendered an hour of labour to consume the product of an hour's labour. For all economic goods entail material costs apart from labour. A product for which more raw material is required must not be made equivalent to a product requiring less raw material.

5 The Costs of Distribution

II.7.25

Socialistic criticism of the capitalist system devotes much space to complaints about the high costs of what can be called the apparatus of distribution. They include under this the cost of all national and political institutions, including expenditure on military purposes and war. They also include the expense to society arising from free competition. All the expenditure on advertisement and the activities of persons involved in the competitive struggle such as agents, commercial travellers, etc., and the costs entailed by the efforts of firms to remain independent instead of amalgamating into larger units or joining cartels which make possible specialization and thereby the cheapening of production, are debited to the distributive process of the capitalist system. The socialistic society will, so the critics think, save enormously by putting an end to this waste.

II.7.26

The expectation that the socialist community will save that outlay which can properly be termed state expenditure is derived from the doctrine, peculiar to many anarchists and to Marxian socialists, that state compulsion would be superfluous in a society not based on private property in the means of production. They argue that in the socialist community "obedience to the simple fundamental rules governing any form of social life will very soon become of necessity a habit," but this is backed up by a hint that "evasion of regulation and control enforced by the whole people will undoubtedly be enormously difficult," and will incur "swift and severe punishment," since "the armed workers" would not be "sentimental intellectuals" nor "let themselves be mocked."*45 All this is merely playing with words. Control, Arms, Punishment, are not these "a special repressive authority," and thus according to Engels' own words a "State"?*46 Whether the compulsion is exercised by armed workers—who cannot work while they bear arms—or by the workers' sons clad in police uniforms, will make no difference to the costs which the compulsion entails.

II.7.27

But the State is a coercive apparatus not only to its own inhabitants: it applies coercion externally. Only a state comprising the whole universe would need to exert no external coercion and then only because in that event there would be no foreign land, no foreigners and no foreign states. Liberalism, with its fundamental antagonism to warfare, wants to give the whole world some state form of organization. If this can be achieved it is inconceivable without a coercive apparatus. If all the armies of the individual states were abolished we could not dispense with a world apparatus of coercion, a world police to ensure world peace. Whether Socialism unites all states into a single one or whether it leaves them independent of each other, in any case it too will not be able to do without a coercive apparatus.

II.7.28

The socialist apparatus of coercion too will entail some expense. Whether this will be greater or less than the expense of the state apparatus of the capitalist society naturally we cannot say. We merely need to see that the social dividend will be reduced by the amount involved.

II.7.29

As for the wastes of distribution under Capitalism, little need be said. Since in capitalist society there is no distribution in the real sense of the word there are no costs of distribution. Trading expenses and similar costs cannot be called distribution costs, not only because they are not the costs of a distribution, which is a special process in itself, but also because the effects of the services devoted to these purposes extend far beyond the mere distribution of goods. Competition is not confined to distribution: that is only a part of its service. It serves equally the process of production, indeed it is essential for any organization of production which is to ensure high productivity. It is not enough therefore to compare these costs with the costs incurred by the apparatus of distribution and management in a socialist community. If socialist methods of production reduce productivity—and we shall speak of this later—it matters little that it saves the work of commercial travellers, brokers and advertisers.


Notes for this chapter


42.
Cannan, A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848, 3rd ed. (London, 1917), pp. 183 ff. Also p. 294 of Socialism.
43.
Acts of the Apostles, II. 45.
44.
See Pecqueur's criticism of this formula of distribution in Théorie nouvelle d'Économie sociale et politique (Paris, 1842), pp. 613 ff. Pecqueur shows himself superior to Marx, who unhesitatingly indulges in the illusion that "In a higher stage of the communist society ... the narrow bourgeois legal horizon could be completely surpassed and society could write on its banners: From each according to his abilities, to each according to his needs!" Marx, Zur Kritik des sozialdemokratischen Parteiprogramms von Gotha, p. 17.
45.
Lenin, Staat und Revolution, p. 96. Publisher's Note: pp. 305-306 in the English edition.
46.
Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 302. Publisher's Note: p. 389 in the English edition.

End of Notes


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CHAPTER 8

The Socialist Community Under Stationary Conditions

1 Stationary Conditions

II.8.1

To assume stationary economic conditions is a theoretical expedient and not an attempt to describe reality. We cannot dispense with this line of thought if we wish to understand the laws of economic change. In order to study movement we must first imagine a condition where it does not exist. The stationary condition is that point of equilibrium to which we conceive all forms of economic activity to be tending and which would actually be attained if new factors did not, in the meantime, create a new point of equilibrium. In the imaginary state of equilibrium all the units of the factors of production are employed in the most economic way, and there is no reason to contemplate any changes in their number or their disposition.

II.8.2

Even if it is impossible to imagine a living—that is to say a changing—socialist economic order, because economic activity without economic calculation seems inconceivable, it is quite easy to postulate a socialist economic order under stationary conditions. We need only avoid asking how this stationary condition is achieved. If we do this there is no difficulty in examining the statics of a socialist community. All socialist theories and Utopias have always had only the stationary condition in mind.

2 The Disutilities and Satisfactions of Labour

II.8.3

Socialist writers depict the socialist community as a land of heart's desire. Fourier's sickly fantasies go farthest in this direction. In Fourier's state of the future all harmful beasts will have disappeared, and in their places will be animals which will assist man in his labours—or even do his work for him. An anti-beaver will see to the fishing; an anti-whale will move sailing ships in a calm; an anti-hippopotamus will tow the river boats. Instead of the lion there will be an anti-lion, a steed of wonderful swiftness, upon whose back the rider will sit as comfortably as in a well-sprung carriage. "It will be a pleasure to live in a world with such servants."*47 Godwin even thought that men might be immortal after property had been abolished.*48 Kautsky tells us that under the socialist society "a new type of man will arise ... a superman ... an exalted man."*49 Trotsky provides even more detailed information: "Man will become incomparably stronger, wiser, finer. His body more harmonious, his movements more rhythmical, his voice more musical ... The human average will rise to the level of an Aristotle, a Goethe, a Marx. Above these other heights new peaks will arise."*50 And writers of this sort of stuff are continually being reprinted and translated into other tongues, and made the subject of exhaustive historical theses!

II.8.4

Other socialist writers are more circumspect in their pronouncements but they proceed on essentially similar assumptions. Tacitly underlying Marxian theory is the nebulous idea that the natural factors of production are such that they need not be economized. Such a conclusion indeed follows inevitably from a system that reckons labor as the only element in costs, that does not accept the law of diminishing returns, rejects the Malthusian law of population and loses itself in obscure fantasies about the unlimited possibility of increasing productivity.*51 We need not go further into these matters. It is sufficient to recognize that even in a socialist community the natural factors of production would be limited in quantity and would therefore have to be economized.

II.8.5

The second element which would have to be economized is labour. Even if we ignore differences in quality it is obvious that labour is available only to a limited extent: the individual can only perform a certain amount of labour. Even if labour were a pure pleasure it would have to be used economically, since human life is limited in time, and human energy is not inexhaustible. Even the man who lives at his leisure, untrammelled by monetary considerations, has to dispose of his time, i.e. choose between different possible ways of spending it.

II.8.6

It is clear, therefore, that in the world as we know it, human behaviour must be governed by economic considerations. For while our wants are unlimited, the goods of the first order bestowed by nature are scarce; and, with a given productivity of labour, goods of a higher order can serve to increase the satisfaction of needs only by increasing labour. Now, quite apart from the fact that labour cannot be increased beyond a certain point, an increase of labour is accompanied by increasing disutility.

II.8.7

Fourier and his school regard the disutility of labour as a result of perverse social arrangements. These alone in their view are to blame for the fact that in accepted usage the words "labour" and "toil" are synonymous. Labour in itself is not unpleasant. On the contrary, all men need to be active. Inactivity entails intolerable boredom. If labour is to be made attractive it must be carried on in healthy, clean workplaces; the joy of labour must be aroused by a happy feeling of union among the workers and cheerful competition between them. The chief cause of the repugnance which labour arouses is its continuity. Even pleasures pall if they last too long. Therefore the workers must be allowed to interchange their occupations at will; work will then be a pleasure and no longer create aversion.*52

II.8.8

It is not difficult to expose the error contained in this argument, though it is accepted by socialists of all schools. Man feels the impulse to activity. Even if need did not drive him to work he would not always be content to roll in the grass and bask in the sun. Even young animals and children whose nourishment is provided by their parents kick their limbs, dance, jump and run so as to exercise powers yet unclaimed by labour. To be stirring is a physical and mental need. Thus, in general, purposeful labour gives satisfaction. Yet only up to a certain point; beyond this it is only toil. In the following diagram the line 0 x along which the product of labour is Mises Graph1.  Click to enlarge in new window measured, marks the dividing line between the disutility of labour and the satisfaction the exercise of our powers affords, which may be called immediate satisfaction due to labour. The curve, a, b, c, p represents labour disutility and immediate labour satisfaction in relation to the product. When labour commences it is found disagreeable. After the first difficulties have been overcome and body and mind are better adapted, then the disagreeableness declines. At b neither disagreeableness nor satisfaction predominates. Between b and c direct satisfaction prevails. After c disagreeableness recommences. With other forms of labour the curve may run differently, as in 0 c1 p1 or 0p2. That depends on the nature of the work and the personality of the workers. It is different for ditchdiggers and for jockeys: it is different for dull and for energetic men.*53

II.8.9

Why is labour continued when the disutility which its continuance occasions exceeds the direct satisfaction deriving from it? Because something else beside direct labour satisfaction comes into account, namely the satisfaction afforded by the product of the labour; we call this indirect labour satisfaction. Labour will be continued so long as the dissatisfaction which it arouses is counterbalanced by the pleasure derived from its product. Labour will only be discontinued at the point at which its continuation would give rise to more disutility than utility.

II.8.10

The methods by which Fourier wished to deprive labour of its unattractiveness were indeed based upon correct observations, but he greatly overrated the bearing of his argument. It is clear that the amount of work which affords direct labour satisfaction supplies such a small fraction of the needs which men consider imperative that they readily undergo the hardship of performing irksome work. But it is a mistake to assume that any significant change would take place if workers were allowed to change occupations at short intervals. For in the first place the product of labour would be reduced because of the diminished skill acquired by the individual as a result of diminished practice in each of his various occupations; also because every changeover would cause loss of time, and labour would be expended in the shuffling. And in the second place only a very slight part of the excess of labour disutility over direct labour satisfaction is due to weariness with the particular job in hand. Hence the capacity to derive direct satisfaction from another form of labour is not what it would have been if the first job had not been performed. Clearly the greater part of the disutility is due to general fatigue of the organism and to a desire to be released from any further constraint. The man who has worked for hours at a desk will prefer to chop wood for an hour rather than spend another hour at the desk. But what made his labour unpleasant was not only the need for change but rather the length of the work. If the product is not to be diminished the length of the working day can be reduced only by increased productivity. The widespread opinion that there is labour which only tires the body and labour which only tires the mind is incorrect, as everyone can prove for himself. All labour affects the whole organism. We deceive ourselves on this point because in observing other forms of occupation we see only the direct labour satisfaction. The clerk envies the coachman, because he would like a little recreation in driving: but his envy would last only as long as the satisfaction exceeded the pain. Similarly hunting and fishing, mountain climbing, riding and driving are undertaken for sport. But sport is not work in the economic sense. It is the hard fact that men cannot subsist on the small amount of labour yielding direct labour satisfaction which compels them to suffer the irksomeness of toil, not the bad organization of labour.

II.8.11

It is obvious, that improvements in the conditions under which labour is performed may increase the product with unchanged irksomeness or lessen the irksomeness for the same product. But it would be impossible to improve these conditions more than actually occurs under capitalism without rising cost. That labour is less irksome when performed in company has been known from of old, and where it seems possible to let workers work together without reducing output, it is done.

II.8.12

There are, of course, exceptional natures that rise above the common level. The great creative genius who perpetuates himself in immortal works and deeds does not when working distinguish the pain from the pleasure. For such men creation is at once the greatest joy and the bitterest torment, an inner necessity. What they create has no value to them as a product: they create for the sake of creation, not for the result. The product costs them nothing because, when working, they forgo nothing dearer to them than their work. And their product only costs society what they could have produced by other labour. In comparison to the value of the service this cost is nothing. Genius is truly a gift of God.

II.8.13

Now the life history of great men is familiar to all. Thus the social reformer is easily tempted to regard what he has heard of them as common attributes. We continually find people inclined to regard the mode of life of the genius as the typical way of living of a simple citizen of a socialist community. But not every one is a Sophocles or a Shakespeare, and standing behind a lathe is not the same thing as writing Goethe's poems or founding the Empire of Napoleon.

II.8.14

It is therefore easy to see the nature of the illusions entertained by Marxians with regard to the satisfactions and toil of the inhabitants of the socialist community. Here, as in everything else it has to say about the socialist community, Marxism moves along the lines set out by the Utopians. With express reference to Fourier's and Owen's ideas of restoring to work "the attractiveness lost through division of labour," by arranging for each form of work to be performed for a short time only, Engels sees in Socialism an organization of production "in which productive labour will be not a means for enslaving but for liberating mankind, which will give every individual the opportunity to develop and to exercise all his capabilities, bodily and mental, in all directions, and will transform a bane into a boon."*54 And Marx talks of "a higher phase of communist society after having done away with the slavish subjection of the individual under the division of labour, a society in which the contrast between mental and physical work has disappeared" and "labour has become not only a means of life but the first need of life itself."*55 Max Adler promises that the socialist society will "at the very least" not assign to anyone any work "which must cause him pain."*56 These statements distinguish themselves from the utterances of Fourier and his school only by the fact that there is nowhere any attempt to provide them with a basis of proof.

II.8.15

Fourier and his school, however, had another device, apart from changes of occupation, for rendering work more attractive: competition. Men would be capable of the highest achievement if inspired by un sentiment de rivalité joyeuse ou de noble émulation (a feeling of joyous rivalry or noble emulation). Here for once they recognize the advantages of competition, which everywhere else they describe as pernicious. If the workers show a deficiency in achievement it will be sufficient to divide them into groups: immediately a fierce competition will blaze up between the groups, which will double the energy of the individual and suddenly arouse in all un acharnement passioné au travail (A passionate tenacity for work).*57

II.8.16

The observation that competition makes for greater accomplishment is of course correct enough, but it is superficial. Competition is not in itself a human passion. The efforts put forth by men in competition are not made for the sake of the competition but for the end attained thereby. The fight is waged not for its own sake, but for the prize which beckons the victor. But what prizes would spur to emulation the workers in a socialist community? Experience shows that titles and rewards of honour are not estimated too highly. Material goods to increase the satisfaction of wants could not be given as prizes since the principle of distribution would be independent of individual performance, and the increase per head through the increased effort of a single worker would be so insignificant that it would not count. The simple satisfaction from duty performed would not suffice: it is precisely because this incentive cannot be trusted that we seek others. And even if it were so, labour would still be irksome. It would not thereby become attractive in itself.

II.8.17

The Fourier school, as we have seen, regards it as the main point of their solution of the social problem that work will be made a joy instead of a toil.*58 But unfortunately the means which it provides for this are quite impracticable. If Fourier had really been able to show the way to make work attractive he would have deserved the divine honours bestowed on him by his followers.*59 But his much lauded doctrines are nothing but the fantasies of a man who was incapable of seeing clearly the world as it really is.

II.8.18

Even in a socialist community work will arouse feelings of pain and not of pleasure.*60

3 The "Joy of Labour"

II.8.19

If this is recognized, one of the main supports of socialist structure of thought collapses. It is therefore only too easy to understand why socialists try stubbornly to maintain that there is in man an innate impulse and striving to work, that work gives satisfaction per se and that only the unsatisfactory conditions under which work is performed in capitalist society could restrict this natural joy of labour and transform it into toil.*61

II.8.20

In proof of this assertion they assiduously collect statements made by workers in modern factories on the pleasurability of the labour. They ask the workers leading questions and are extraordinarily satisfied when the answers are of the kind they want to hear. But because of their prepossession they omit to notice that between the actions and replies of those whom they cross-examine there is a contradiction which demands solution. If work gives satisfaction per se why is the worker paid? Why does he not reward the employer for the pleasure which the employer gives him by allowing him to work? Nowhere else are people paid for the pleasure given to them, and the fact that pleasures are rewarded ought at least to give pause for reflection. By common definition, labour cannot give satisfaction directly. We define labour as just that activity which does not give any direct pleasurable sensations, which is performed only because the produce of the labour yields indirectly pleasurable sensations sufficient to counterbalance the primary sensations of pain.*62

II.8.21

The so-called "joy of labour" which is generally adduced in support of the view that labour awakens feelings of satisfaction, not of pain, is attributable to three quite separate sensations.

II.8.22

There is first the pleasure which can be obtained from the perversion of work. When the public official abuses his office, often while performing his function in a manner which is formally quite correct, so as to satisfy the instincts of power, or to give free rein to sadistic impulses, or to pander to erotic lusts (and in this one need not always think merely of things condemned by law or morals), the pleasures that follow are undoubtedly not pleasures of work but pleasures derived from certain accompanying circumstances. Similar considerations apply also to other kinds of work. Psychoanalytic literature has repeatedly pointed out how extensively matters of this sort influence the choice of occupation. In so far as these pleasures counterbalance the pain of labour they are reflected also in the rates of pay; the larger supply of labour in the occupations offering the greatest scope for this kind of perversion tending to lower the rate of pay. The worker pays for the "pleasure" with an income lower than he otherwise could have earned.

II.8.23

By "joy of labour" people mean also the satisfaction of completing a task. But this is pleasure in being free of work rather than pleasure in the work itself. Here we have a special kind of pleasure, which can be shown to exist everywhere, in having got rid of something difficult, unpleasant, painful, the pleasure of "I've done it." Socialist Romanticism and romantic socialists praise the Middle Ages as a time when joy of labour was unrestricted. As a matter of fact we have no reliable information from medieval artisans, peasants, and their assistants about the "joy of labour," but we may presume that their joy was in having performed their work and begun the hours of pleasure and repose. Medieval monks, who in the contemplative peace of their monasteries copied manuscripts, have bequeathed us remarks which are certainly more genuine and reliable than the assertions of our romantics. At the end of many a fine manuscript we read: Laus tibi sit Christe, quoniam liber explicit iste.*63 (Praise be to you, O Christ, for this book is completed.) Not because the work itself has given pleasure.

II.8.24

But we must not forget the third and most important source of the joy of labour—the satisfaction the worker feels because his work goes so well that through it he can earn a living for himself and his family. This joy of labour is clearly rooted in the pleasure of what we have called the indirect enjoyment of labour. The worker rejoices because in his ability to work and in his skill he sees the basis of his existence and of his social position. He rejoices because he has attained a position better than that of others. He rejoices because he sees in his ability to work the guarantee of future economic success. He is proud because he can do something "good," that is, something society values and consequently pays for on the labour market. Nothing raises self-respect higher than this feeling, which indeed is often exaggerated to the ridiculous belief that one is indispensable. To the healthy man, however, it gives the strength to console himself for the unalterable fact that he is able to satisfy his wants only by toil and pain. As people say: he makes the best of a bad job.

II.8.25

Of the three sources of that which we may call the "joy of labour" the first, arising from perversion of the true ends of the work, will undoubtedly exist in the socialist community. As under capitalist society it will naturally be restricted to a narrow circle. The other two sources of the joy of labour will presumably dry up completely. If the connection between the yield of labour and the income of the labourer is dissolved, as it must be in socialist society, the individual will always labour under the impression that proportionately too much work has been piled on him. The over-heated, neurasthenic dislike of work will develop which nowadays we can observe in practically all government offices and public enterprises. In such concerns where the pay depends upon rigid schedules, everyone thinks he is overburdened, that just he is being given too much to do and things which are too unpleasant—that his achievements are not duly appreciated and rewarded. Out of these feelings grows a sullen hate of work which stifles even the pleasure in completing it.

II.8.26

The socialist community cannot count on the "joy of labour."

4 The Stimulus to Labour

II.8.27

It is the duty of the citizen of the socialist commonwealth to work for the community according to his powers and his ability: in return he has a claim against the community for a share in the social dividend. He who unjustifiably omits to perform his duty will be recalled to obedience by the usual methods of state coercion. The economic administration would exercise so great a power over individual citizens that it is inconceivable that anyone could permanently withstand it.

II.8.28

It is not sufficient however that citizens should arrive at their tasks punctually and spend the prescribed number of hours at their posts. They must really work while they are there.

II.8.29

In the capitalist system the worker receives the value of the product of his labour. The static or natural wage-rate tends to such a level that the worker receives the value of the product of his labour: i.e. all that is attributable to his work.*64 The worker himself is therefore concerned that his productivity should be as great as possible. This does not apply to work done for piece rates only. The level of time rates is also dependent upon the marginal productivity of the particular kind of work concerned. The technical form of wage payment which is customary does not alter the level of wages in the long run. The wage rate has always a tendency to return to its static level, and time rates are no exception.

II.8.30

But even so work done for time wages gives us an opportunity of observing how work is carried on when the worker feels that he is not working for himself, because there is no connection between his output and his remuneration. Under time wages the more skilful worker has no inducement to do more than the minimum expected from every worker. Piece wages are an incentive to the maximum activity, time wages to the minimum. Under Capitalism the graduation of time wages for different kinds of work greatly mitigates these social effects of the system of payment by time. The worker has a motive in finding a position where the minimum work required is as great as he can perform, because the wage increases with the rise in the minimum requirements.

II.8.31

Only when we depart from the principle of graduating time wages according to the work required does the time wage begin to affect production adversely. This is particularly noticeable in the case of state and municipal employment. Here, in the last few decades, not only has the minimum required from the individual workers been continually reduced, but every incentive to better work—for example, different treatment of the various grades and rapid promotion of industrious and capable workers to better-paid posts—has been removed. The result of this policy has clearly vindicated the principle that the worker only puts forth his best efforts when he knows that he stands to gain by it.

II.8.32

Under Socialism the usual connection between work performed and its remuneration cannot exist. All attempts to ascertain what the work of the individual has produced and thereby to determine the wage rate, must fail because of the impossibility of calculating the productive contributions of the different factors of production. The socialist community could probably make distribution dependent upon certain external aspects of the work performed. But any such differentiation would be arbitrary. Let us suppose that the minimum requirement is determined for each branch of production. Let us suppose this is done on the basis of Rodbertus' proposal for a "normal working day." For each industry there is laid down the time which a worker with average strength and effort can continue to work and the amount of work which an average worker of average skill and industry can perform in this time.*65 We will completely ignore the technical difficulties in the way of deciding, in any particular concrete example the question whether this minimum has been achieved or not. Nevertheless it is obvious that any such general determination can only be quite arbitrary. The workers of the different industries would never be made to agree on this point. Everyone would maintain that he had been overtasked and would strive for a reduction of the amount set to him. Average quality of the worker, average skill, average strength, average effort, average industry—these are all vague conceptions that cannot be exactly determined.

II.8.33

Now it is evident that the minimum performance calculated for the worker of average quality, skill, and strength will be achieved only by a part—say one-half—of the workers. The others will do less. How can the authorities ascertain whether a performance below the minimum is due to laziness or incapacity? Either the unfettered decision of the administration must be allowed free play, or certain general criteria must be established. Doubtless, as a result, the amount of work performed would be continually reduced.

II.8.34

Under Capitalism everybody who takes an active part in business life is concerned that labour should be paid the whole product. The employer who dismisses a worker who is worth his wage harms himself. The foreman who discharges a good worker and retains a bad one, adversely affects the business results of the department under his charge, and thereby indirectly himself. Here we do not need formal criteria to limit the decisions of those who have to judge the work performed. Under Socialism such criteria would have to be established, because otherwise the powers entrusted to persons in charge could be arbitrarily misused. And so then the worker would have no further interest in the actual performance of work. He would only be concerned to do as much as is prescribed by the formal criteria in order to avoid punishment.

II.8.35

What kind of results will be achieved by workers, who are not directly interested in the product of the work, can be learnt from the experience of a thousand years of slave labour. Officials and employees of state and municipal undertakings provide new examples. An attempt may be made to weaken the argumentative force of the first example by contending that these workers had no interest in the result of their labour because they did not share in the distribution; in the socialist community everyone would realize that he was working for himself and that would spur him on to the highest activity. But this is just the problem. If the worker exerts himself more at the work then he has so much the more labour disutility to overcome. But he will receive only an infinitesimal fraction of the result of his increased effort. The prospect of receiving a two thousand millionth part of the result of his increased effort will scarcely stimulate him to exert his powers any more than he needs.*66

II.8.36

Socialist writers generally pass over these ticklish questions in silence or with a few inconsequential remarks. They only bring forward a few moralistic phrases and nothing else.*67 The new man of Socialism will be free from base self-seeking; he will be morally infinitely above the man of the frightful age of private property and from a profound knowledge of the coherency of things and from a noble perception of duty he will devote all his powers to the general welfare.

II.8.37

But closer examination shows that these arguments lead to only two conceivable alternatives: free obedience to the moral law with no compulsion save that of the individual conscience, or enforced service under a system of reward and punishment. Neither will achieve the end. The former supplies no sufficient incentive to persist in overcoming the disutility of labour even though it is publicly extolled on every possible occasion and proclaimed in all schools and churches; the latter can only lead to a formal performance of duty, never to performance with the expenditure of all one's powers.

II.8.38

The writer who has occupied himself most thoroughly with this problem is John Stuart Mill. All subsequent arguments are derived from his. His ideas are to be encountered everywhere in the literature of the subject and in everyday political discussion; they have even become popular catchwords. Everyone is familiar with them even if he is totally unacquainted with the author.*68 They have provided for decades one of the main props of the socialist idea, and have contributed more to its popularity than the hate-inspired and frequently contradictory arguments of socialist agitators.

II.8.39

One of the main objections, says Mill, that could be urged against the practicability of the socialist idea, is that each person would be incessantly occupied in evading his fair share of work. But those who urge this objection forget to how great an extent the same difficulty exists under the system under which nine-tenths of the business of society is now conducted. The objection supposes that honest and efficient labour is only to be had from those who are themselves individually to reap the benefit of their own exertions. But under the present system only a small fraction of all labour can do this. Time rates or fixed salaries are the prevailing forms of remuneration. Work is performed by people who have less personal interest in the execution of the task than the members of a socialist community, since, unlike the latter, they are not working for an enterprise in which they are partners. In the majority of cases they are not personally superintended and directed by people whose own interests are bound up with the results of the enterprise. For employees paid by time carry out even the supervisory, managing and technical work. It may be admitted that labour would be more productive in a system in which the whole or a large share of the product of extra exertion belongs to the labourer, but under the present system it is precisely this incentive which is lacking. Even if communistic labour might be less vigorous than that of a peasant proprietor, or a workman labouring on his own account, it would probably be more energetic than that of a labourer for hire, who has no personal interest in the matter at all.

II.8.40

One can easily see the cause of Mill's mistake. The last representative of the classical school of economists, he did not survive to see the transformation of economics by the subjective theory of value, and he did not know the connection between wage rates and the marginal productivity of labour. He does not perceive that the worker has an interest in doing his utmost because his income depends upon the value of the work which he performs. Without the light of modern economic thought he sees only on the surface and not into the heart of things. Doubtless the individual working for a time wage has no interest in doing more than will keep his job. But if he can do more, if his knowledge, capability and strength permit, he seeks for a post where more is wanted and where he can thus increase his income. It may be that he fails to do this out of laziness, but this is not the fault of the system. The system does all that it can to incite everyone to the utmost diligence, since it ensures to everyone the fruits of his labour. That Socialism cannot do this is the great difference between Socialism and Capitalism.

II.8.41

In the extreme case of obstinate perseverance in not performing a due share of work, the socialist community, Mill thinks, would have reserve powers which society now has at its disposal: it could submit the workers to the rules of a coercive institution. Dismissal, the only remedy at present, is no remedy when no other labourer who can be engaged does any better than his predecessor. The power to dismiss only enables an employer to obtain from his workman the customary amount of labour; but that customary labour may be of any degree of inefficiency.

II.8.42

The fallacy of this argument is plain. Mill does not realize that the wage rate is adjusted according to this customary amount of labour, and that the worker who wishes to earn more must do more. It may be admitted straight away that wherever the time wage prevails the individual worker is obliged to seek elsewhere for a job in which the customary amount of labour is greater because he has no chance of increasing his income by doing more work if he remains where he is. In the circumstances he must change over to piece work, take up another occupation, or even emigrate. In this way millions have emigrated from those European countries, where the customary amount of labour is low, to Western Europe or to the United States, where they have to work more but earn more. The inferior workers remain behind, and are content to work less for less wages.

II.8.43

If this is kept in mind it is also easy to understand the case of supervisory and managerial work performed by employees. Their activities, too, are paid according to the value of the service: they, too, must do as much as they can if they wish to obtain the highest possible income. They can and must be given authority in the name of the entrepreneur to take on and dismiss workers without any fear that they will abuse the power. They perform the social task incumbent upon them of securing that the worker obtains only as much wages as his work is worth, apart from any other consideration whatever.*69 The system of economic calculation supplies a sufficient test of the efficacy of their work. This distinguishes their work from the kind of control which could be exercised under Socialism. They harm themselves if from revengeful motives they treat a worker worse than he deserves. (Naturally "deserves" is not used here in any ethical sense.) This authority to dismiss workers and fix their wages which the employer possesses and delegates to subordinates, is considered by socialists to be dangerous in the hands of private individuals. But the socialists overlook the fact that the employer's ability to exercise this power is limited, that he cannot dismiss and mistreat arbitrarily because the result would be harmful to himself. In endeavouring to purchase labour as cheaply as possible the employer is fulfilling one of his most important social tasks.

II.8.44

Mill admits that in the present state of society the neglect by the uneducated classes of labourers for hire of the duties which they engage to perform is flagrant. This, he thinks, can only be attributed to a low level of education. Under Socialism, with universal education, all citizens would undoubtedly fulfill their duty towards society as zealously as the majority of those members of the upper and middle classes who are in receipt of salaries, perform it today. It is clear that Mill's thought repeatedly involves the same error. He does not see that in this case too, there is a correspondence between payment and performance. Finally he is compelled to admit that, there can be no doubt that remuneration by fixed salaries does not produce the maximum of zeal in any class of functionaries. To this extent, Mill says, objection could reasonably be made against the socialist organization of labour. It is, however, according to Mill, by no means certain that this inferiority will continue in a socialist community as is assumed by those whose imaginations are little used to range beyond the state of things with which they are familiar. It is not impossible that under Socialism the public spirit will be so general that disinterested devotion to the common welfare will take the place of self seeking. Here Mill lapses into the dreams of the Utopians and conceives it possible that public opinion will be powerful enough to incite the individual to increased zeal for labour, that ambition and self-conceit will be effective motives, and so on.

II.8.45

It need only be said that unfortunately we have no reason to assume that human nature will be any different under Socialism from what it is now. And nothing goes to prove that rewards in the shape of distinctions, material gifts, or even the honourable recognition of fellow citizens, will induce the workers to do more than the formal execution of the tasks allotted to them. Nothing can completely replace the motive to overcome the irksomeness of labour which is given by the opportunity to obtain the full value of that labour.

II.8.46

Many socialists of course think that this argument can be refuted by appeal to the labour which in the past has been performed without the incentive of a wage payment. They instance the case of the labours of scientists and artists, of the doctor who exhausts himself at the sickbed, the soldier who dies the death of a hero, the statesman who sacrifices all for his idea. But the artist and the scientist find their satisfaction in the work itself, and in the recognition which they hope to gain at some time, if only from posterity, even though material gains are not forthcoming. The doctor and the professional soldier are in the same position as many other workers whose work is associated with danger. The supply of workers for these professions reflects their lesser attractiveness, and the wage is adapted correspondingly. But if, in spite of the danger, a man enters the profession for sake of the higher remuneration and other advantages and honours, he cannot evade the dangers without the greatest prejudice to himself. The professional soldier who turned tail, the doctor who refused to treat an infectious case, would endanger their future careers to such an extent that they have virtually no choice in the matter. It cannot be denied that there are doctors who are concerned to do their utmost in cases where no one would detect remissness, and that there are professional soldiers who incur danger when no one would reproach them for avoiding it. But in these exceptional cases, as in the case of the staunch statesman who is ready to die for his principles, man raises himself, as is given to few to do, to the highest peak of manhood, to complete union of will and deed. In his exclusive devotion to a single purpose which sets aside all other desires, thoughts and feelings, removes the instinct of self-preservation and makes him indifferent to pain and suffering, such a man forgets the world, and nothing remains except the one thing to which he sacrifices himself and his life. Of such men it used to be said, according to the estimate set on their aims, that the spirit of the Lord moved them, or that they were possessed of the devil—so incomprehensible were their motives to the ordinary run of mankind.

II.8.47

It is certain that mankind would not have risen above the beasts if it had not had such leaders; but it is certain that mankind does not in the main consist of such men. The essential social problem is to make useful members of society out of the general masses.

II.8.48

Socialist writers have for a long time ceased to exercise their ingenuity on this insoluble problem. Kautsky can tell us nothing more than that habit and discipline will provide incentives to work in the future. "Capital has so accustomed the modern labourer to work day in and day out that he cannot endure to be without his work. There are even people who are so accustomed to work that they do not know what to do with their leisure time and are unhappy when they cannot work." Kautsky does not seem to fear that this habit could be shaken off more easily than other habits such as eating and sleeping but he is not prepared to rely on this incentive alone, and freely admits that "it is the weakest." He therefore recommends discipline. Naturally not "military discipline" nor "blind obedience to an authority imposed from above," but "democratic discipline—the free subjection to elected leadership." But then doubts arise and he endeavours to dispel them with the idea that under Socialism labour will be so attractive "that it will be a pleasure to work," but finally admits that this will not be sufficient at first, and at last arrives at the conclusion that besides the attractiveness of the work some other incentive must be brought to bear, "that of the wages of labour."*70

II.8.49

Thus even Kautsky, after many limitations and considerations, arrives at this result, that the irksomeness of labour will only be overcome if the product of labour, and only the product of his own labour, accrues to the worker, in so far as he is not also an owner or an employer. But this is to deny the feasibility of socialistic organization of labour, since private property in the means of production cannot be abolished without abolishing at the same time the possibility of remunerating the labourer according to the product of his labour.

5 The Productivity of Labour

II.8.50

The old "distributivist" theories were based on the assumption that it only needed equal distribution for everyone to have if not riches, at least a comfortable existence. This seemed so obvious, that hardly any trouble was taken to prove it. At the beginning Socialism took over this assumption in its entirety, and expected that comfort for all would be achieved by an equal distribution of the social income. Only when the criticisms of their opponents drew their attention to the fact that equal distribution of the income obtained by the whole economic society would scarcely improve the conditions of the masses at all, did they set up the proposition that capitalist methods of production restrict the productivity of labour, and that Socialism would remove these limitations and multiply production to ensure for everyone a life in comfortable circumstances. Without troubling about the fact that they had not succeeded in disproving the assertion of the liberal school that productivity under Socialism would sink so low that want and poverty would be general, socialist writers began to promulgate fantastic assertions about the increase in productivity to be expected under Socialism.

II.8.51

Kautsky mentions two ways of achieving increased production by a transition from capitalistic to socialistic methods of production. One is the concentration of all production in the best concerns and the closing down of the less efficient.*71 That this is a means of increasing production cannot be denied, but it is a means which operates most effectively under the regime of an exchange-economy. Competition ruthlessly eliminates all inferior productive undertakings and concerns. That it does so is a constant source of complaint from those involved, and because of it the weaker undertakings demand State subsidies, special consideration in public contracts, and in general restriction of freedom of competition in every possible way. Kautsky is forced to admit that trusts formed by private enterprise exploit these means to the utmost, so as to obtain higher productivity, and in fact he frankly regards them as the forerunners of the social revolution. It is more than questionable whether the socialist State would feel the same necessity to carry out similar improvements in production. Would it not continue an unprofitable undertaking rather than provoke local prejudice by its discontinuance? The private entrepreneur closes down without much ado undertakings that no longer pay; and in this way he compels the worker to change his locality and sometimes even his occupation. Undoubtedly this involves initial hardships for the people concerned, but it is to the general advantage, since it makes possible a cheaper and better provisioning of the market. Would the Socialist State do likewise? Would it not, on the contrary, be constrained for political reasons to avoid local discontent? On most state railways all reforms of this kind are frustrated by the attempt to avoid the harm to particular districts which would result from the elimination of superfluous branch offices, workshops, and power stations. Even the army administration has encountered parliamentary opposition when for military reasons it has been desired to withdraw a garrison from a particular place.

II.8.52

His second method of achieving increased production, viz., "economies of every description," on his own admission, Kautsky already finds operating under the trust of today. He particularly mentions economies of materials, transport charges, advertisements and publicity costs.*72 As far as economies in materials and transport are concerned, experience shows that nothing is operated with less economy and with more waste of labour and material of every kind than public services and undertakings. Private enterprise on the other hand naturally induces the owner to work with the greatest economy in his own interest.

II.8.53

Of course the Socialist state would save all advertising expenses, all the costs of commercial travellers and agents. But it is more than probable that it would employ many more persons in the service of the apparatus of distribution. Wartime experience has taught us how cumbrous and expensive the social apparatus of distribution can be. Were the costs of bread, flour, meat, sugar, and other cards really less than the costs of advertisement? Has the enormous personnel required to run a rationing system been cheaper than the expenditure on commercial travellers and agents?

II.8.54

Socialism would eliminate the small retailers. But in their place it must set up distributive centers which would not be cheaper. Co-operative stores do not employ less hands than the retail stores organized on modern lines, and many of them, because of their large expenses, could not compete with the latter if they were not granted privileges of exemption from taxation.

II.8.55

Speaking generally, it must be said that it is inadmissible to pick out special costs in capitalist society, and then at once to infer from the fact that they would disappear in a socialist society, that the productivity of the latter would surpass that of the former. It is necessary to compare the total costs and the total yields of both systems. The fact that the electromobile needs no gasoline is no proof that it is cheaper to run than the gasoline-powered car.

II.8.56

The weakness of Kautsky's argument is evident, when he asserts that "by the application of these two methods a proletarian regime could raise production to such a high level that it would be possible to increase wages considerably and at the same time reduce the hours of labour." Here he is making an assertion for which he offers no proof whatever.*73

II.8.57

And it is no better with the other arguments that are often brought forward to prove the supposed higher productivity of a socialistic society. When for example people argue that under Socialism everyone capable of work will have to work, they are sadly mistaken as to the number of idlers under Capitalism.

II.8.58

So far as can be judged there is no convincing reason for supposing that labour under Socialism would be more productive than under Capitalism. On the contrary it can be asserted that under a system which provides no incentive to the worker to overcome the irksomeness of labour and to strive his utmost, the productivity of labour must inevitably decline. But the problem of productivity cannot be dealt with only within the limits of a study of static conditions. Incomparably more important than the question whether the transition to Socialism would increase productivity is the question whether, given the existence of a socialistic order, it would be able further to increase production and to achieve economic progress. This leads us to the problem of dynamics.


Notes for this chapter


47.
Fourier, Oeuvres complètes, Vol. IV, 2nd ed. (Paris, 1841), pp. 254 ff.
48.
Godwin, Das Eigentum, Bahrfeld's translation of that part of Political Justice which deals with the problem of property (Leipzig, 1904), pp. 73 ff.
49.
Kautsky, Die soziale Revolution, 3rd ed., (Berlin, 1911), II, p. 48.
50.
Trotsky, Literatur und Revolution (Vienna, 1924), p. 179.
51.
"Today all enterprises ... are first and foremost a question of profitability ... A socialist society knows no other question than of sufficient labour forces, and if it has these the work ... is done." (Bebel, Die Frau und der Sozialismus, p. 308. Publisher's Note: p. 427 in the English edition.) "Everywhere it is the social institution and the methods of production and distribution connected with these which produce want and misery, and not the number of people." (Ibid., p. 368. Publisher's Note: p. 492 in the English edition.) "We suffer not from a lack but from a superfluity of foodstuffs, just as we have a superfluity of industrial products." (Ibid., p. 368, p. 429 in the English. Also Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 305. Publisher's Note: pp. 390-391 in the English edition.) "We have ... not too many but rather too few people." (Bebel, op. cit., p. 370; p. 494 in the English edition.)
52.
Considerant, Exposition abrégee du Système Phalanstérien de Fourier, 4th Impression, 3rd ed. (Paris, 1846), pp. 29 ff.
53.
Jevons, The Theory of Political Economy, 3rd ed. (London, 1888), pp. 169, 172 ff.
54.
Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 327. Publisher's Note: p. 408 in the English edition.
55.
Marx, Zur Kritik des sozialdemokratischen Parteiprogramms von Gotha, p. 27. Publisher's Note: This passage can be found on p. 7 of the Eastman edited Modern Library edition and p. 10 of the International Publishers edition.
56.
Max Adler, Die Staatsauffassung des Marxismus (Vienna, 1922), p. 287.
57.
Considerant, Exposition abrégée du Système Phalanstérien de Fourier, p. 33.
58.
Considerant, "Studien über einige Fundamentalprobleme der sozialen Zukunft" (contained in Fouriers System der sozialen Reform, translated by Kaatz, Leipzig 1906), pp. 55 ff. Fourier has the distinction of having introduced the fairies into social science. In his future state the children, organized in "Petites Hordes" (small groups), will perform what the adults do not do. To them will be entrusted, amongst other things, maintenance of the roads. "C'est à leur amour propre que l'Harmonie sera redevable d'avoir, par toute la terre, des chemins plus somptueux que les allées de nos parterres. Ils seront entretenus d'arbres et d'arbustes, même de fleurs, et arrosés au trottoir. Les Petites Hordes courent frénétiquement au travail, qui est exécuté comme oeuvre pie, acte de charité envers la Phalange, service de Dieu et de l'Unité." (It is to their own self-esteem that "Harmony" will be indebted for having, everywhere, roads more magnificent than the walks in our flower gardens. They will be maintained with trees, shrubs, even flowers, and they will be irrigated along the footpaths. The small groups run frantically to their work, which will be carried out as a pious duty, an act of love [charity] for the Phalanx [community], a service for God and Unity.) By three o'clock in the morning they are up, cleaning the stables, attending to the cattle and horses, and working in the slaughter houses, where they take care that no animal is ever treated cruelly, killing always in the most humane manner. "Elles ont la haute police du règne animal." (They are the eminent police of the animal kingdom.) When their work is done they wash themselves, dress themselves, and appear triumphantly at the breakfast table. See Fourier, Oeuvres complètes, Vol. V, 2nd Edition (Paris, 1841), pp. 141, 159.
59.
Fabre des Essarts, Odes Phalanstériennes, Montreuil-sous-Bois 1900. Béranger and Victor Hugo also venerated Fourier. The first dedicated to him a poem, reprinted in Bebel (Charles Fourier, Stuttgart 1890, pp. 294 ff.).
60.
Socialist writers are still far from knowing this. Kautsky (Die soziale Revolution, II, pp. 16 ff.) considers that the main task of a proletarian regime is "to make work, which today is a burden, into a pleasure, so that people will enjoy working and the workers go joyfully to work." He admits that "this is not such a simple matter" and concludes that "it will hardly be possible to make work in factories and mines attractive quickly." But he cannot naturally bring himself to abandon completely Socialism's fundamental illusion.
61.
Veblen, The Instinct of Workmanship (New York, 1922), pp. 31 ff.; De Man, Zur Psychologie des Sozialismus, pp. 45 ff.; De Man, Der Kampf um die Arbeitsfreude (Jena, 2927), pp. 249 ff.
62.
We here disregard the above-mentioned pleasure in beginning work, in practice unimportant. See p. 145.
63.
Wattenbach, Das Schriftwesen in Mittelalter, 3rd ed. (Leipzig, 1896), p. 500. Amongst the many similiar sayings and verses quoted by Wattenbach is the still more drastic: Libro completo saltat scriptor pede laeto (Once the book is finished, the author dances with joy).
64.
Clark, Distribution of Wealth (New York, 1907), pp. 257 ff.
65.
Rodbertus, Johann Karl, Briefe und sozialpolitische Aufsätze, ed. R. Meyer (Berlin, 1881), pp. 553 ff. We shall not enter here into Rodbertus' other proposals for the normal working day. They are throughout based on the untenable view Rodbertus has formed about the problem of value.
66.
Schäffle, Die Quintessenz des Sozialismus, 18th ed. (Gotha, 1919), pp. 30 ff.
67.
Degenfeld-Schonburg, Die Motive des volkswirtschaftlichen Handelns und der deutsche Marxismus (Tübingen, 1920), p. 80.
68.
J. S. Mill, Principles, pp. 226 ff. We cannot here examine how far Mill took over these ideas from others. Their wide diffusion they owe to the brilliant exposition in which Mill has presented them in his much read work.
69.
Competition between the entrepreneurs sees to it that wages do not fall below this level.
70.
Kautsky, Die soziale Revolution, II, pp. 25 ff.
71.
Kautsky, Die soziale Revolution, II, pp. 21 ff.
72.
Kautsky, Die soziale Revolution, II, p. 26.
73.
In the years of controlled economy we heard quite often of frozen potatoes, rotten fruit, spoiled vegetables. Did such things not happen formerly? Certainly. But they happened less often. The merchant whose fruit spoiled suffered monetary loss, and that made him careful in the future. If he did not take better care he was ruined at last. He ceased to direct production and was removed to a place in economic life where he could do no more harm. But it is otherwise with the goods which the state deals in. Here there is no individual interest behind the commodities. Here officials trade, whose responsibility is so divided that no one gets particularly excited about a small misfortune.

End of Notes


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