Naturally, with the concept of laissez
faire in full vogue, few persons gave serious consideration to Owen's scheme.
In spite of David Ricardo's willingness to test the plan, the idea lacked funds
and support. Undaunted, Owen sold the New Lanark mill to finance New Harmony, a
cooperative based in Posey County, Indiana, on July 4, 1826. Because he chose
poor associates, Owen's scheme lacked sufficient practical planning. One
associate defrauded him and set up a whiskey distillery, rival communities
sprang up, and the end result was complete failure. Owen lost 80 percent of his
fortune. Finally, he sold the land and tried in vain to interest President
Jackson and Santa Anna of Mexico in another venture.
Returning to England, Owen continued to
stick to his views — notably that money and private property are trustworthy.
His philosophy made a deep impression on workers; evolving from his teachings,
a series of producers' and consumers' cooperatives developed throughout
England, some based on a moneyless system. What survived was the consumer
cooperative movement, begun by twenty-eight backers who called themselves
Rochdale Pioneers.
Owen, who launched a moral crusade for
the working class, inspired the Pioneers but was not directly involved with
them. Instead, joining with the leaders of the movement, he formed a Grand
National Moral Union in 1833 with a membership of 500,000 workers. This
forerunner of modern industrial trade unions called for broad social change,
particularly better wages and working conditions, the setting up of
cooperatives, and the abolition of money.
For two years, Owen traveled the
countryside advocating unionism, but he met failure because he encountered too
many obstacles. Not only did government disrupt the movement with anti-union
legislation, but local unions failed to control their members, and strikes
weakened the movement. Even worse, Owen and his lieutenants quarreled and ended
their association.
At the age of sixty-four, Robert Owen,
the successful capitalist who disavowed capitalism, realized that his utopian
projects had ended in failure. But he did not give up. Instead, he publicized
his ideas in tracts and wrote his Autobiography. At the age of eighty-seven, he
died, still optimistic. The most romantic of the Utopians, he influenced
capitalism by proving that industry could sponsor humanitarian projects and
still make profits.
Analysis
Robert Owen, known as the founder of
British socialism, first used the words socialist and communist. However, he
created a concept of socialism that is quite different from Karl Marx's concept
of class warfare. Owen's philosophy passed down to the Fabian Society of Great
Britain, whose leaders included George Bernard Shaw, Sidney and Beatrice Webb,
and H. G. Wells, and finally down to Britain's Labour Party, a moderate
socialist party. The legacy of Robert Owen includes British socialism, the
passage of legislation to correct deplorable working conditions, modern trade
unions, and consumer cooperatives.
Saint-Simon (1760-1825)
Summary
Count Henri de Rouvroy de Saint-Simon,
a French aristocrat, possessed the spirit of democracy and translated his
convictions into action by fighting in the American Revolution. Renowned for
his pigheadedness, he determined to become a philosopher and launched a survey
of human knowledge which, along with an unsuccessful marriage, dissipated his
finances and led to a bungled suicide attempt. His search resulted in
Saint-Simon's belief in the brotherhood of man, which evolved into an
industrial religion.
This half-mad utopian stressed the
necessity of work, which led to his conclusion that workers deserve society's
greatest rewards, and idlers deserve the least. Reality proved that the
opposite situation was true: non-working aristocrats received the greatest
share of wealth and did the least work. Saint-Simon proposed to reorganize
society along the lines of a factory, with the function of government being
economic rather than political. With the aid of scientists, technicians, and
capitalists, government should arrange for rewards to be allotted in proportion
to each person's social contribution. Rewards should go to active members and
not to lazy onlookers. But Saint-Simon offered only theory without working out
practical details. After his death, his ideas degenerated into a mystical, hazy
religion, with churches in France, England, and Germany.
Analysis
Saint-Simon, while quite impractical,
is called the founder of French socialism. Defining a nation as "nothing
but a great industrial society," and politics as "the science of
production," he took as his motto: "Everything by industry;
everything for industry."
Charles Fourier (1772-1837)
Summary
If Saint-Simon was half-mad, then his
fellow countryman, Charles Fourier, was altogether crazy. He believed that the
earth was geared to life cycles lasting 80,000 years — 40,000 years of
"ascending vibrations" and an equal number of "descending
vibrations." The advancement of humanity consisted of eight stages. Four
stages — Confusion, Savagery, Patriarchism, and Barbarousness — have already
passed.
Humanity now looks forward to
Guaranteeism and eventually Harmony, the final stage when the sea will become
lemonade, peaceable species of animals will evolve, and people will live to 144
years, of which 120 years will be spent in unrestricted sexual delight. Then
the seesaw will tip and humanity will work its way backward to Confusion before
beginning another life cycle. These eight stages would repeat themselves
endlessly.
In spite of his optimistic vision of
the future, Fourier saw the practical world as utterly disorganized. As a
solution, he proposed to reorganize society into phalanxes, or organized
communes, of 1800 persons living under one roof, as in an ultra-modern hotel.
Each person would have privacy, and the style of life would vary with one's
ability to pay. Since everyone would have to work, there would be farmers,
mechanics, and craftworkers. Children would perform dirty work and tend
flowers. Residents would labor a few hours each day at whatever job appealed to
them. A spirit of competition would exist.
Fourier believed that the phalanx
concept would produce profits as high as 30 percent of the investment. Every
member would share profits, which would be divided on the basis of 5/12 to
labor, 4/12 to capital, and 3/12 to ability or talent. Everyone would be
encouraged to become a part owner.
Surprisingly, the idea spread. In the
U.S. alone, there were over forty phalanxes, including Brook Farm, Oneida, New
Icaria, and Trumbull. However, while some lasted for several years, none proved
permanent.
Analysis
The one factor which utopian socialists
shared was idealism: They dreamed of the betterment of humanity. Some of these
dreams, particularly Fourier's, were ridiculous, but it takes dreams to
stimulate people to progress. Of these utopian dreamers, all dared to be
different and to present dreams to scoffers, but Robert Owen's contributions
were the most practical and the most lasting. These thinkers were both utopians
and socialists — economic reformers who attempted to create an ideal world by
changing society. To understand their role, an explanation of several terms is
in order:
Utopia: An impractical social,
intellectual, or political scheme. "Utopia" also refers to those
ideal states which fail because they lack ideal human beings. Utopias are based
on what the author thinks ought to be rather than what actually exists. Famous
examples include Plato's Republic, Sir Thomas More's Utopia (from which the
name comes), Sir Francis Bacon's New Atlantis, and Campanella's City of the Sun.
Socialism: State ownership of the basic
means of production. The fundamental objective of socialism is to prevent
capitalists and landlords from exploiting workers. Socialists believe that
wealth should be distributed equally and that distribution under capitalism is
unfair. Their solution is the nationalization of land, forests, minerals,
factories, transportation, trade, and banking — with profits distributed by the
state to the people rather than to capitalists and landlords.
Under socialism, rent, interest, and a
leisure class would not exist. All would work according to ability.
Private property in the form of
clothing, household goods, money, shelter, and land would be allowed the
individual, but all else would be owned collectively. This is, of course, the
modern concept of socialism, which has evolved from the concept of common
ownership.
The whole idea of socialism dates to
early utopian schemes. As already noted, the term originated with Robert Owen.
But, as contrasted with communism, the socialists believe in attaining goals by
an evolutionary process through democratic means.
Communism: Redistribution of wealth
through revolution and class warfare. Basically, this belief differs from
socialism in its method of attaining the same goal.
Utopian Socialists: Reformers who were
inspired largely by the ideas of the Age of Enlightenment and the French
Revolution, particularly the belief in progress and the perfectibility of
humanity. They did not preach class hatred but appealed to the intellectual and
capitalistic classes to reform society voluntarily.
Ironically, the term is taken from Karl
Marx, who used it scornfully, saying that these reformers were nothing more
than impractical idealists. Thus they were named utopian socialists rather than
his brand of practical revolutionary socialists. From the utopian socialists
came the concept of the welfare state, held by modern socialists of Great
Britain and Scandinavia, as well as others.
The last economist to be taken up in
this chapter — John Stuart Mill — was not actually a utopian socialist but
rather the champion of democratic liberalism, which was a broad-minded view of
the principles of laissez faire. However, Mill gradually approached the
socialist point of view and, in doing so, he added respectablity to the ideas
of the utopian socialists.
John Stuart Mill (1806-73)
Summary
The son of James Mill, a famous
economist, philosopher, and champion of laissez faire, John Stuart Mill, a
child prodigy, learned Greek at the age of three and studied Latin at eight. By
the age of twelve, he had read Greek and Roman classics in the original as well
as English philosophy and history. He absorbed geometry, algebra, and
differential calculus, and wrote books on history. By the age of thirteen, he
mastered logic and read major works on economics.
Mill did not write his philosophy of
economics, however, until thirty years later. In the meantime, he fell in love
with Harriet Taylor, who educated him on the subject of women's rights. Because
she was married, their romance remained platonic for twenty years, even though
they lived and traveled together. They married after Mrs. Taylor's husband
died.
With the publication of his two-volume
economic masterpiece, Principles of Political Economy (1848), Mill gained
recognition as the greatest economist of his age. The significance of this work
is that it dealt a severe blow to the concept of laissez faire. In surveying
the field of economics, Mill discovered that laws laid down by classical
economists applied to production but not to the distribution of wealth. He
argued that, because distribution depended on society's customs and laws, there
was no right way to distribute wealth. This profound discovery meant that
society could distribute its wealth on the basis of ethics and morality instead
of cold, impersonal laws.
In contrast to the despair of Malthus
and Ricardo, Mill envisioned hope. He believed that through education, workers
would realize the impact of the Malthusian doctrine and would voluntarily
regulate population. He maintained that workers should form cooperatives and
unions to seek higher wages.
Opposed to government regulation and
recognizing communism's threat to individualism, he believed legislation was
necessary to protect women and children who worked in factories.
Consequently, by favoring government
intervention to remedy injustice, Mill modifed the doctrine of laissez faire.
He called for taxes on inheritance and rent. The success of his book led to
Mill's publication of a cheap, one-volume edition, priced to reach the working
class.
Analysis
John Stuart Mill, founder of utilitarianism,
is known for contributing to political science and ethics. His essay "On
Liberty," a manifesto against despotism, is perhaps the finest piece
written on individualism. A peaceful and reasonable man, Mill treasured his
wife and the pursuit of knowledge. He later called himself a socialist,
although his philosophy placed him somewhere between capitalism and socialism.
He was one of the first spokespersons favoring equal rights and education for
women, the subject of his "Enfranchisement of Women" and The
Subjection of Women (1869).
Glossary
Founder of British Socialism Robert
Owen.
Founder of French Socialism
Saint-Simon.
Utopia A name which classifies any
social, intellectual, or political scheme which is impractical at the time when
it is conceived. Also, a reference to ideal states peopled by perfect human
beings.
Socialism State ownership of the means
of production, which is obtained through peaceful evolution without loss of
personal liberty; the nationalization of all land and minerals, public
transportation, trade, and banking, as well as factories — with the profits
going to the people as a whole rather than to capitalists or landlords.
Utopian Socialists Reformers inspired
by the Age of Enlightenment and the French Revolution who believed in progress
and human perfectibility. Because these theorists wished to reform society by
voluntary means, they earned the scorn of Karl Marx, who dismissed them as
visionary idealists and labeled them "utopian socialists."
In 1848, the threat of revolution was
everywhere. The French endured a weak, dissolute king before fomenting riots;
the Belgians likewise found no strength in royal leadership. Uprisings in
Italy, Germany, Czechoslovakia, and Austria imitated the unrest of the French.
The songs of workers and the poems of romanticists echoed the volatile
rumblings of internal discontent. Yet, despite all their zeal and furor, these
stirrings failed because they were spontaneous, undisciplined, and
disconnected.
From this fierce, bloody clamor,
however, a new voice made itself heard — the voice of militant workers who
comprised the Communist League. Their initial efforts proved insufficient
against the reaction of European governments, but they presaged a turn of
events in world economics which would make itself felt for years to come, for
amid this turmoil appeared The Communist Manifesto, written by Karl Marx, with
the collaboration of Friedrich Engels.
Marx (1818-83), born in Germany, the
second son of a liberal, middle-class Jewish family, pursued a college
education, but to his father's dismay, he rejected the study of law. At
universities in Bonn and Berlin, he dedicated himself to philosophy and came
under the influence of Hegel's ideas. He found his ambition to teach blocked by
authorities who rejected his liberal views, particularly his belief in
constitutional government and atheism.
Marx turned to journalism and edited
the Rheinische Zeitung, a radical newspaper which was suppressed because of his
attacks on law and the Tsar of Russia. At this time, he began studying politics
and economics. Married to the beautiful Jenny von Westphalen, daughter of a
Prussian aristocrat and his former next-door neighbor, he continued his
journalistic career in Paris, Brussels, again in Paris, then in Germany.
However, the pattern of his life changed little — radical views always led to
expulsion. Hunger was never far from the Marx household.
In Paris, in 1844, Marx formed an
immediate and lifelong association with Friedrich Engels (1820-95). The son of
a wealthy German textile manufacturer, Engels lived a double life by
associating with capitalists while devoting himself to socialism. In Brussels,
the two collaborated to produce The Communist Manifesto, which became the
program of the Communist League, a loose organization of discontented workers
who desired fundamental political and economic changes. The League eventually
died and was replaced by the International Workingmen's Association, which
underwent several phases of reorganization as its members tried to reach a
consensus.
Wherever he went, Marx, a quarrelsome
and intolerant activist, organized workers' movements and edited communist
papers. Eventually, he fled to England to spend the remainder of his life in
London. There, he and his family and a faithful servant spent a miserable
existence of abject poverty and near-starvation. Jenny and two of their five
children died, and to add to his misery, Marx suffered from chronic boils.
Despite everything, Marx remained
devoted to his family. His only steady income was derived from his reports on
European political affairs to the New York Tribune, but, at times, Marx
couldn't send his reports to New York because he lacked money for postage.
After selling the family silver and valuables, he pawned his shoes and overcoat
to survive. What kept his family going was Engels' generous financial aid;
later, Marx came into a small inheritance from an old friend. Undoubtedly,
these years of extreme poverty account for much of Marx's bitterness.
Marx worked in the British Museum
library from ten to seven each day. He pored over books and manuscripts on
economics, gathering and cataloging enormous amounts of data which formed the
basis of his Das Kapital. This meticulous book required eighteen years of
preparation, with the main part — Volume I — published in 1867, after two years
of editing.
Marx endured not only poverty but also
disappointment. His later years were filled with bickering over the validity of
his interpretations among a motley assortment of dissidents. At one point near
the end of his life, disgusted with feuding, Marx declared, "I am not a
Marxist." At his death, only Volume I of his masterpiece had been
published. Engels published Volume II in 1885 and Volume III in 1894; the final
volume appeared in 1910, making a total of 2500 pages filled with minute,
tedious points of economic theory.
As Marx did not make a systematic
presentation of his philosophy, it is necessary to discover his basic concepts
from a study of The Communist Manifesto and Das Kapital, each of which was
written for a different purpose. Marx developed the principle of dialectical
materialism from the dialectical method of Hegel, a German philosopher who
believed that change occurs as the result of a blend of opposing forces. The
given idea, or thesis, when challenged by an opposing idea, or antithesis,
results in a new concept, or synthesis, which is somewhat closer to the truth
than the initial two ideas. Accepting this fundamental premise, Marx went
further. He substituted realism for Hegel's idealism and used it to explain
world history. By stressing the reality of materialism, Marx evolved his
economic interpretation of history. Marx's writings interpret history in terms
of a class struggle for survival, which determines everything else in human
affairs. The history of humanity, according to Marx, is primarily the story of
one class' exploitation of another. Applying the theory of dialectical
materialism, Marx determined that the inevitable next step was a revolt of the
overwhelming majority of workers, who would overthrow the ruling capitalists
and establish a dictatorship of the proletariat, or workers. This economic
cataclysm would lead to communal ownership and a return to a classless society.
While The Communist Manifesto states
the revolutionary aims of communism and maintains that capitalism must
inevitably destroy itself, Das Kapital is Marx's analysis of the means of
destruction. It is a critique of political economy which attempts to explain
economics in coldly analytical and scientific terms. To Marx, his scientific
arguments comprise irrefutable evidence prognosticating the doom of capitalism.
Marx sets the scene for his attack on
capitalism by describing a capitalistic world of perfect competition — where
the market is free, without monopolies, unions, or special advantages for
anyone. Every product sells for its correct price or value. Agreeing with Adam
Smith and David Ricardo on the definition of value, Marx states that the value
of a product is the amount of labor which goes into making it. The worker
wishes to sell labor-power; the capitalist wants a profit.
But how can there be profit if
everything sells for an exact value?
It would be simple for profits to arise
if there are monopolies to set excessive prices, or if capitalists pay less for
labor than it is worth. Marx demonstrates that in its most perfect form
capitalism is unworkable. Therefore capitalism, with its monopolies and
imperfections, has no chance for survival.
Das Kapital explains that profits arise
from one product or commodity which is distinctive — labor. Because capitalists
control all access to the means of production, the worker must sell labor-power
to the capitalist for its exact worth. Its value is what it takes to keep the
laborer alive.
Marx concludes that labor actually
produces more for the capitalist by working extra hours. The surplus value of
labor gives rise to the capitalist's profits. In short, while the worker
receives only a daily wage equal to subsistence requirements, actual production
for a workday results in extra units of products. The value is translated into
profits for the capitalist, who steals what is rightfully the worker's.
How can such a theft occur? Simple,
answers Marx. It results when the capitalist monopolizes the means of production
and forces the laborer to work a full day in order to remain employed. Since
the typical factory work-week in England during Marx's time averaged slightly
more than eighty hours, his concept of surplus value was not as farfetched as
it seems today.
In Marx's view, the capitalist strives
to obtain more surplus value by expanding production, thereby increasing
profits. However, other capitalists compete in the same fashion, hiring more
people and bidding against other capitalists, consequently driving up wages.
This situation serves to decrease profits. Marx rejects Ricardo's notions
because he believes that workers are too enlightened to continue increasing
their offspring. At the same time he scornfully rejects the Malthusian
Doctrine, labeling it "a libel on the human race." Instead, Marx sees
the capitalist providing a solution through the adoption of labor-saving
machinery. By substituting technology, the capitalist forces workers out of
jobs, thus increasing the labor supply and decreasing wages.
However, the "solution" does
not really solve the capitalist's problem, for as the capitalist adds
equipment, the cost of each device inhibits the realization of any surplus
value from them. Therefore, the capitalist defeats the purpose of the purchase
but must continue modernizing because competitors are continually adding
machines to increase production. Consequently, the percentage of profit
steadily falls until the point is reached where production is no longer
profitable. Bankruptcies result and small firms go out of business.
If workers lose their jobs, labor is
forced to accept cuts in wages. Machines are traded, human labor is rehired by
the remaining firms, and, for awhile, surplus value and profits return. Not for
long, however, as this is a vicious cycle. Capitalists ultimately dig their own
graves, for on one hand, the working class, increasingly dissatisfied with its
misery, grows larger. On the other hand, the capitalistic class grows smaller
as larger capitalists gobble up smaller and weaker competitors. When finally only
a few powerful capitalists remain, the time comes for the proletariat to rise
and sweep away capitalism, which has, in a sense, destroyed itself.
Marx predicted trends which capitalism
would follow. Surprisingly, most of them have come true. These predictions he
called the "laws of motion":
1.As the economy expands, profits fall,
both within the business cycle and outside it.
2.As profits fall, business seeks new
survival techniques by innovating, inventing, and experimenting.
3.Business runs in cycles of depression
and boom.
4.Huge firms dominate the business
scene and suppress smaller firms.
5.Finally, the working class overcomes
factory owners and capitalism disappears.
Analysis
Some of Marx's predictions have indeed
come true. Others are not so clear-cut. For example, profits do tend to fall
within a business cycle, but they do not fall as steadily outside the business
cycle. Some have risen instead. Most significantly, even though indicators
reflect Marxist philosophy, capitalism continues to thrive in the United
States, Japan, and Great Britain, even if it has partly disappeared in Western
Europe.
Russia, the communist bloc countries,
and China are another matter. During the most intensive rule of communism,
capitalism has remained suppressed except for a trickle of imports from the
West, such as Coca-Cola, drilling equipment, medicines, and computers. However,
with the 1989 thaw in Cold War tensions, capitalism was one of the first
aspects of Western democracy to penetrate the Iron Curtain as McDonald's
brought "burgers and fries" to Moscow.
Obviously, Marx's vision of the future
has proved too inflexible. Like the laws of gravity, he expected the weakening
of capitalism to fall into place without the slightest deviation. However, he
failed to predict many mitigating factors, such as improvements in the lives of
workers. Further, in no case where communism has triumphed has the revolution
taken place in an industrialized nation at the hands of the workers themselves.
Russia, China, and Cuba were all primarily agrarian economies when the
revolutions occurred. The same could be said for the satellite nations of
Eastern Europe, except for Czechoslovakia.
Another worthy consideration is the
fact that each Communist country was taken over from without and during
wartime. These nations did capitulate according to Marx's predictions, but
largely from the work of professional revolutionaries. On the other hand,
Germany and Italy, which chose fascism over communism during the late 1930s,
today exhibit both state capitalism and private capitalism working in
partnership.
Non-communist economists find the
weakest point in Das Kapital to be the theory of surplus value, for it does not
satisfactorily explain prices. Likewise, these economists do not accept labor
as the sole measure of value. Yet, economists have not derived an agreed-upon
substitute measure of value.
Furthermore, liberals and humanitarians
cannot accept Marx's economic interpretation of history. They deny that history
evolves purely from economics — to the exclusion of religion, nationalism, and
human will. Also, they spurn the Marxian notion that the hero has a subordinate
role in the motivation of historical events. On the other hand, until the time
of Marx, historians had all but overlooked the effect of economics in human
affairs.
Undeniably, with all the flaws in his
predictions, Marx made a sizable impact. No communist nation or party fails to
pay homage to his teachings. While capitalism has not collapsed as Marx
predicted, it has been forced to adapt. Socialism has risen throughout the
world since Marx's time — and communism is an unyielding, inexorable variety of
socialism.
In the U.S., socialism has been avoided
largely as the result of support of competition through government anti-trust
legislation and regulation of public utilities. From the impoverished nations
of Latin America to the emerging nations of Africa and Asia, the communist
banner of Karl Marx continues to wave — proof that his concepts cannot be
lightly dismissed. In truth, Marx is entitled to be called the Prophet of the
Proletariat.
Here are a few terms to help clarify
Marx's philosophy:
Marxism: Karl Marx's version of
communism. While a typical Communist may believe that the final goal of
communism will come into existence by a number of methods, the Marxist accepts
Marx's every word and explanation as the only way. Both forms of communism
accept the concept of revolutionary socialism — the attainment of a classless
society by violent and bloody revolution, as opposed to the peaceful and
democratic method of socialists. In terms of "left" and
"right," Marxists are further left than Communists, who are, in turn,
to the "left" of Socialists.
Scientific Socialism: Laws evolved by
Marx and Engels which explain the economic determination of history, the class
struggle, the inevitable downfall of capitalism, and the triumph of the
proletariat.
Capitalists: Financial backers of
production; also called the "haute bourgeoisie," or high middle
class.
Bourgeoisie: The middle class,
technically divided between rich capitalists ("haute bourgeoisie")
and small shopkeepers, government officials, lawyers, doctors, teachers, and
independent farmers. A term generally applied to people with private property.
(Bourgeois is the adjective form.)
Proletariat: The workers, or the lowly
wage earners.
Anarchism: Rebellion against all forms
of government. Anarchists are not content to wait for the withering away of the
state. They believe in ending government rule by assassinating public
officials. Because they disdain any type of government, anarchists are at the
extreme "left" of all political groups.
The early modern theorist of the
benefits of anarchism was William Godwin, whose Political Justice (1793)
expressed a utopian ideal. The father of anarchism, however, is Pierre Proudhon
(1809-65) who quarreled violently with Marx and whose book What Is Property?
answered the question in the title by stating that "Property is
theft." The anarchist who championed direct action through violence was
Mikhail Bakunin, who originally followed Marxism but, in time, became Marx's
bitter enemy.
Glossary
Hegelian Dialectics The philosophical
concept that in the world of ideas, change occurs as the result of a synthesis,
or coming together of opposing forces: a given idea (thesis), when challenged
by a new and opposing idea (antithesis), results in a new concept (synthesis)
which is somewhat closer to the truth than the initial two ideas.
Dialectical Materialism Karl Marx's
application of Hegel's dialectical method to an explanation of all world
events.
Historical Materialism Marx's economic
interpretation of history, which stresses economics as the basis for all human
actions and historical events.
Communism A belief in the achievement
of socialism by revolutionary means, particularly by class warfare.
Marxism Communism according to the
exact words and predictions of Karl Marx.
Scientific Socialism What Marx and
Engels called the ideas contained in The Communist Manifesto and Das Kapital;
scientific laws explaining the economic determination of history, class
struggle, and the inevitable downfall of capitalism with the eventual triumph
of workers over the moneyed class.
Prophet of the Proletariat Karl Marx.
Capitalists The class which provides or
controls the money that underwrites the production of goods. Technically,
capitalists are the upper class of the bourgeoisie, known as the "haute
bourgeoisie," or high middle class, the most hated class under Marxism.
Bourgeoisie The middle class.
Technically, it includes the "petite bourgeoisie," or small middle
class — the small shopkeepers, government officials, lawyers, doctors,
independent farmers, and teachers — and the "haute bourgeoisie." The
term is generally used by Marxists to describe the owners of private property.
(Bourgeois is the spelling of the adjective form.)
Proletariat Lowly wage earners, or
workers.
Anarchism The support of no system of
government; the belief that government, controls, and authority are oppressive.
Father of Anarchism Pierre Proudhon.
Karl Marx's prediction that the working
class would suffer increasing misery did not come to pass during the Victorian
Age (the reign of Queen Victoria, 1837-1901), for wages climbed upward while
the working day grew shorter. Even Marx and Engels were forced to admit that
the English proletariat was becoming more bourgeois because of the Victorian
world's prosperity and optimism. The recognized economists of the day expressed
that optimism with little reference to Marx, who was dismissed as a crank. His
theories, along with those of Malthus, the utopians, and three of the five
Victorian Age economists, were confined to the underworld of economics.
Francis Ysidro Edgeworth (1845-1926)
Edgeworth, a shy, retiring professor
and brilliant scholar, became interested in economics because it dealt with
quantities. He applied mathematics to economics and derived his Mathematical
Psychics (1881). Its thesis stated that every man, based on mathematical
formulas, lives for pleasure, leisure time, and material goods. Of course,
skilled and talented people are better "pleasure machines" than
others; likewise, males are more endowed with sensibility than females. In
developing his thesis, Edgeworth justified the divisions of sex and status numerically
and denounced the future of trade-unions, which he considered imperfections.
What was unique about Edgeworth was his
use of mathematical formulation to prove his contentions. Essentially, he was
conservative and defended his philosophy through the use of long, complicated
algebraic expressions. He won a conservative following among fellow Victorians,
and his book achieved immediate success. While perhaps helpful in focusing
attention on the use of scientific inquiry as an aid to economics, much of
Edgeworth's work is worthless. His weakness lies in ignoring the human factor,
but the fact that he was not ridiculed by his contemporaries gives significant
insight into his era.
Frederic Bastiat (1801-50)
In sharp contrast to Edgeworth, the
French eccentric Bastiat heaped ridicule on the economic policies of his age.
He failed at farming and estate management, but succeeded in adding deft
touches of humor to economics. In his Economic Sophisms, he attacked
Socialists, defended free trade, and launched his most acerbic barbs for those
who selfishly supported a protective tariff. Beneath his wit lay the truth of
his criticism — yet, in the Victorian world, he was labeled a crackpot.
Henry George (1839-97)
With Henry George, the underworld of
economics gained an American recruit — a rugged but unschooled individual who
had been an adventurer, gold prospector, sailor, printer, pamphleteer,
journalist for the San Francisco Times and Post, lecturer, bureaucrat, tramp,
and politician. At one time, the University of California considered him for
the chair of political economy, but he ruined his chances by declaring in a
speech that "logical thinking was all that was needed for a study of
economics."
Unlike his fellow dwellers in the
underworld, during his lifetime he gained popularity — more in England than in
the United States. An active proponent for his beliefs, he was almost elected
mayor of New York City, barely losing to Tammany Hall's candidate and running
ahead of Theodore Roosevelt. Drafted to run a second time in 1897, he died on
election eve.
His best known work is Progress and
Poverty (1879), a passionate commentary which professes that the true cause of
poverty is land rent. To Henry George, it was the height of injustice that
landowners should enjoy huge incomes while they contribute nothing to society.
Not only does rent work a hardship on the capitalist, it also straps the worker
and leads to speculation in land values, as was evident in his time in
California. Worst of all, rent is the cause of depression, George claimed.
Part of his naive thesis contains a
solution: a single tax on land equal to its rent. By negating rent with one
tax, all other taxes could be eliminated. Wages would rise, and capital
earnings would increase, for money would circulate more freely with no taxes
for the non-landowner to pay. In short, the single tax would be society's magic
cure.
Regardless of George's lack of logic,
his book became a bestseller; he achieved overnight fame. Progress and Poverty
received praise as the worthy successor to Smith's Wealth of Nations. George
won an international reputation after a lecture tour to England. The single tax
became an obsession with him. However, the official world of economics decried
his ideas, so Henry George was exiled to the underworld of economics.
John A. Hobson (1858-40)
Of greater importance than the theories
of Edgeworth, Bastiat, and George is the theme of the fourth economic heretic
of the age — imperialism. The Victorian Era was a time when Great Britain,
France, Germany, Belgium, Portugal, Holland, Italy, and Russia grabbed up
colonies and economic concessions in Africa and Asia. The spirit of imperialism
swept through the Western world, including the United States. Between the
Napoleonic Wars (1803-15) and 1870, the laissez faire doctrine of free trade
dominated.
From 1870 onward, however, various
factors caused a drastic change in attitude and policy relating to colonial
expansion. Notably, as a result of the rise in Europe's population, the desire
for military bases, nationalism, and the Industrial Revolution, imperialism
became an extremely popular policy with virtually all classes of society; its
chief spokesman, Rudyard Kipling, praised its virtues.
Into this setting appeared John A.
Hobson, a nervous, stuttering little man who took a critical look at capitalism
and imperialism, in particular. He adopted John Ruskin's humanistic viewpoint
toward economics, which stressed human values over cold statistics. By
coauthoring an economic treatise which suggested that savings might lead to
depression and unemployment, he lost favor with orthodox economists and was
banished from London University Extension Lectures. As a result, he became a
social critic, examining topical questions.
The chief topic of interest to England
was Africa, where the Boer War between Dutch colonists and the English in South
Africa was brewing. Hobson journeyed to Africa, and his research there
convinced him that his warning of the results of oversaving was justified.
Returning to England, he quietly prepared a major work, in which the effects of
savings and imperialism were combined to form his thesis. He published
Imperialism, a Study (1902), a devastating attack on capitalism as well as
imperialism.
Hobson, a non-Marxist, went even
further than Karl Marx. Whereas Marx predicted that capitalism would destroy
itself, Hobson declared that imperialism would become the road to war, leading
to the destruction of the world. In his view, capitalism has an insolvable
problem: the rich get richer and the poor get poorer. Because of the vast
inequality in the distribution of wealth, neither the rich nor the poor can
consume enough goods.
Because the rich are few, they can
consume only so much. The poor, while large in number, lack the income to
purchase more goods. Therefore, the rich — both individuals and corporations —
must invest the bulk of their income in savings, which are useless unless spent
on further production of goods. Otherwise, purchasing power dries up. But since
there is no market for more goods, production leads to a glut on the market.
Here, Hobson injects his comment on
imperialism, for the only obvious answer to the problem is the utilization of
savings in overseas investment. Foreign investments take off the excess
capital, and foreign markets use the excess goods. This problem of excess,
then, is the reason for modern imperialism, which is a direct outgrowth of the
capitalistic system. But dire consequences lie ahead, he warns. Capitalistic
nations each suffering the same glut, race each other to partition the world.
With each nation trying to grab the biggest slice, bitter competition and
rivalry promote the possibility of war.
Needless to say, Hobson's indictment of
capitalism hardly dented the official economic thought of his day. He was
dismissed into the same backwater with Bastiat and Henry George. Yet, from one
quarter there came a warm response. Lenin, a Russian exile, read Hobson's work
and appropriated its thesis, augmenting it and wrapping it in a glittering
package — Imperialism, the Highest Stage of Capitalism (1916).
The antithesis of Lenin, Hobson
disdained communism; his book analyzed capitalism and imperialism through
logic. Hobson avoided class favoritism and refrained from turning thesis into
dogma. He was puzzled over periods of history when capitalism showed little
interest in imperialism. Further, even though his thesis points to the
likelihood of war, he did not maintain that imperialism inevitably leads to
war.
On the other hand, Lenin declared that
war was a certainty if capitalism and imperialism remained unchecked. He
carried Marx's prediction of the doom of capitalism even further, showing that
imperialism is the final stage in a downward spiral. For Lenin, imperialism is
capitalism's death knell. Not only did Stalin share this view, but hard-line
communists today still hold to its truth. During the height of the Cold War,
Communist countries charged that all U.S. interest in underdeveloped countries
was actually motivated by imperialistic designs, whether that interest was
shown by private corporations or the Peace Corps.
The U.S. reply to this charge has been
that foreign investment and foreign trade alone do not represent imperialism,
for there must be political interference and economic exploitation to justify a
claim of imperialism. In point of fact, American foreign policy results from a
defense of ideology — to protect less sophisticated nations from the intrusions
of socialism. The U.S. differentiates between profit and plunder, noting that
the best example of a powerful country looting weaker nations is given by the
Soviet Union itself, especially in the cases of Hungary and Afghanistan.
Another aspect to consider in the
internationalization of capital is the fact that cheap goods manufactured in
Hong Kong, Taiwan, Korea, or Mexico undersell similar products produced by the
motherland. Such an intensification of competition ironically threatens
American interests. The problem of imperialism has proven that it inevitably
lashes back against the nation which created it.
Alfred Marshall (1842-1924)
Summary
Alfred Marshall, a refined academician
and the most famous economist of the Victorian Age, was both accepted and
respected for his Principles of Economics (1890), a tremendous success that is
still used as a textbook. His thesis was equilibrium — the self-adjusting and
self-correcting nature of economics; the foundation of his economics was the
concept of time. For Marshall, there is a short period and a long period to
consider. Both have to be weighed in answering the question of value. With diamonds,
for example, in the short-run, it is demand which makes them expensive; in the
long-run, it is the cost of production. To determine price, the economist must
consider both supply and demand as equally important as two blades of a pair of
scissors.
To Marshall, a remarkably compassionate
scientist, economics was an engine for the discovery of truth concerning the
cause and cure of poverty. He contrived an elaborate system of economics which
delighted established thought and which satisfied business. Introductory
economics courses in England and the U.S. incorporate his system. Even more
important is the fact that his most brilliant pupil, John Maynard Keynes, made
a large splash in the world of economic thought.
Yet, brilliant as Marshall was, nothing
that he said went far enough. The time which he wrote about is an abstract. His
economics, therefore, is a world of theory, and those theories are hopelessly
unrelated to reality.
Analysis
Imperialism refers to the extension of
authority or control, either directly or indirectly, of one people over
another. In this sense, imperialism is as old as history. During the early days
of Western civilization, Greece and Rome furnished worthy examples. In modern
times, the Age of Discovery ushered in a period when the nation-states of
Europe raced to stake out colonies and to monopolize overseas trade. Portugal,
Spain, Holland, France, and England formed a keen rivalry which provoked
colonial wars in the early part of the eighteenth century and continued through
the Napoleonic Era. Then interest weakened as the doctrine of laissez faire
replaced that of mercantilism.
A new period of imperialism, referred
to as new imperialism, or economic imperialism, took place from 1870-1914. This
was Europe's golden age of imperialism, motivated by the effects of the
Industrial Revolution and characterized by economic and political domination of
underdeveloped nations. Western Europe, which controlled most of world finance,
commerce, military might, and intellectual life, extended its power over the
peoples of Asia and Africa. The entire continent of Africa was so partitioned
that only two nations remained independent by 1944 — Ethiopia and Liberia. Asia
was a fertile hunting ground for Europe, and vast but weak China soon became
known as a "ripe melon." By 1914, some 283 million whites controlled
over 900 million non-Europeans, mostly in Africa and Asia. This staking out of
colonies led to bitter rivalry among European nations and was a strong factor
leading to the outbreak of World War I.
The basic question raised by Hobson was
whether this stage of imperialism is inseparably related to capitalism. In
other words, do capitalism and imperialism naturally go together? Communists
charge that they do. The U.S. and Western Europe say otherwise. Current
developments today differ, for practically every form of imperialistic holding
has reverted to the original owners. At the height of imperialism, five-sixths
of the world was needy and defenseless. Today, the poor five-sixths are still
impoverished, but they are independent and defiantly aggressive, as was evident
in South Africa's struggle against apartheid. The formerly rich one-sixth is
still rich, but on the defensive. The key question — and the reason for
Hobson's importance to economics — is whether the defiantly aggressive majority
will be swayed by Marxism.
Glossary
The Victorian Age The period associated
with the reign of Queen Victoria of Great Britain, 1837-1901.
Imperialism The extension of authority,
or control, of one nation over another.
Economic Imperialism The economic
and/or political domination of underdeveloped countries by powerful nations.
The period between 1870 and 1914 is known as Europe's "Golden Age of
Imperialism."
As the full effects of the Industrial
Revolution spread from Europe to America, the free enterprise atmosphere of the
United States became a far different thing from the European practice of
laissez faire. The game of making money in the United States was rough and
savage, devoid of sportsmanship. The gentleman's rapier gave way to the
roughneck's brass knuckles.
In the United States, any man could
prove his worth through business success, regardless of his ancestry, and money
became the passport for entrance into the upper classes. Men such as William H.
Vanderbilt, John D. Rockefeller, Jay Gould, Jim Fisk, and J. P. Morgan
dedicated themselves to ruining competitors. They gave no quarter. In their
public dealings, these robber barons were guided by J. P. Morgan's sentiment:
"I owe the public nothing."
From 1865 through the early part of the
twentieth century, dishonesty was a virtue, the investor a gullible fool, and
the stock market a private casino which the public financed. A practical
demonstration was William Rockefeller and Henry Rogers' purchase of Anaconda
Copper Company by paper manipulation and without a cent of personal investment
— resulting in a $36,000,000 profit. Official economists viewed this scene
unperturbed, their thoughts wrapped up with such terms as enterprise, thrift
and accumulation, and consumption. At best, they apologized only slightly and
shared the common blindness: They were too close to the scene to judge
objectively. What was needed was the disinterested, detached view of an
outsider, which was ultimately filled by the most aloof of skeptics, Thorstein
Veblen (1857-1929).
Veblen, born of immigrant Norwegians in
Wisconsin, grew up in a pioneer Norwegian community in Minnesota. His austere
childhood reflected the drab farm life. He grew up remote and aloof, an
alienated, enigmatic man whose chief pattern of behavior was nonconformist. At
the age of seventeen, Veblen's family sent him to study religion at a pious
Lutheran college, where he promptly threw the faculty into an uproar when it
came his turn to suggest a way of converting the heathens. He titled his method
"A Plea for Cannibalism." To add to his apostate behavior, he
converted the niece of the college president to agnosticism and, several years
later, married her.
Bad luck tagged Veblen. He found no
immediate success in his teaching career. His first job lasted a year, and then
the academy closed. He enrolled at Johns Hopkins on the expectation of a
scholarship, which never materialized. After transferring to Yale, he received
a Ph.D. in 1884. Returning home, he read, loafed, and buried himself in
political science, economics, sociology, and anthropology. By normal standards,
he was lazy and unassertive. He refused to make his bed, and when the dishes
were dirty, he hosed them down. His eccentricity extended to his disdain for
the telephone. His isolation continued for seven years until at the age of
thirty-four, he yielded to family pressure to resume graduate studies.
His appearance at the office of the
economics department of Cornell in 1891 must have shocked the conservative
department chairman, for Veblen was wearing corduroy pants and a coonskin cap.
Still, his learning impressed the older man, and Veblen received a fellowship.
The following year, he accompanied the head of the department when the latter
moved to the University of Chicago.
At the age of thirty-five, with a
salary of $520 a year, Veblen earned a reputation among his students for
refusing to take roll and assigning the grade of "C" to all students,
although he upgraded the "C" to an "A" when a student
needed to qualify for a scholarship. Veblen felt that there were too many
students. The fewer he had, the better. Nevertheless, in spite of his rambling,
mumbled lectures, his immense knowledge led to an annual salary of $1000 by
1903.
Veblen possessed an unusual fascination
for women; he engaged perpetually in affairs. After he made a trip to Europe
with one of his lovers, he was forced out of his job, and his wife divorced
him. He went to Stanford and then to the University of Missouri, remarried, and
finally retired at the age of seventy. He chose to live alone in a small,
western-style cabin, where he could meditate without distraction. There, aloof
from society, he died.
Even though Veblen was a failure in his
personal life, he established a national reputation in the academic world as
the result of two major books and a series of essays. His first book, The
Theory of the Leisure Class (1899), appeared when Veblen was forty-two. An
overnight success, it is his most famous work, due primarily to the fact that
readers took it to be a satire of aristocratic foibles. Actually, the book was
much more, for Veblen refused to accept the assumptions underlying classical
economic thought. While orthodox American economists accepted European
teachings, Veblen dug to the root of the economy to discover the nature of his
society.
The Theory of the Leisure Class
examines the nature of economics and the meaning of leisure. While established
economists explained human actions entirely by self-interest and competition,
Veblen probed deeper. He doubted that self-interest held society together or
that people preferred leisure over work.
Also, he discovered that there was no
leisure class among American Indians, the Ainus of Japan, or Australia's
bushmen. Everyone in these cultures worked — not for profit, but because of
pride in workmanship and a common concern for their children's welfare.
His study of Polynesians, ancient
Icelanders, and the shogunate system of feudal Japan revealed a different kind
of society. A leisure class existed in each, but it was not an idle class.
Instead, its members worked hard at seizing riches through force or cunning and
didn't contribute to the actual production of wealth. What was significant was
that they prevailed with the approval of their community.
To Veblen, this fact marked a
fundamental change in the attitude of the savage toward work. What had once
been a source of pride had become degraded by the transfer of approval to the
plundering and predatory ways of the leisure class. Classical economists
considered the desire for leisure inherent in human nature, but Veblen
maintained that what was inherent in human nature was pride in work. As men
plundered, seized booty and women, and received admiration for their prowess,
approval transferred from the once-honored way of life to the spirit of plunder
— and the leisure class gained respect.
As societies progressed, continued
Veblen, the leisure class changed its occupation and refined its methods, but
its goal remained the same — the accumulation of goods without productive work,
but by seizure. Applying his findings to the United States, Veblen wrote:
". . . by heredity human nature still is, and must indefinitely continue
to be, savage human nature." Modern plunder did not exist for booty or
women, but for the accumulation of money and its lavish display. The savage
displayed numerous wives, the barbarian his conquests of war; in the same vein,
modern savages displayed wealth.
So Veblen arrived at a thesis: the
leisure class advertises its superiority through conspicuous consumption —
enjoying leisure more fully by being able to display it before the public.
Thus, the modern
U.S. businessman, by seeking and
accumulating money and then displaying it — either subtly or conspicuously — is
the modern counterpart of a savage heritage. Furthermore, everyone — the
worker, the middle-class citizen, and the capitalist — seeks through
conspicuous expenditure and even the waste of money to prove status.
Carrying the theme a step further,
Veblen explained why a proletariat revolution, as Marx predicted, had not
occurred in the United States. It was simply that workers did not seek to
overthrow the upper class, but rather strove to join it themselves. This
ambition explained the nation's social stability.
Published in 1904, Veblen's The Theory
of Business Enterprise established his concept of business at the turn of the
century. The book shocked readers, but it failed to make the splash of his
earlier work on the leisure class. This time, there was no mistaking the book
as satire; consequently, only economists and scholars read it.
Rejecting earlier theories that the
capitalist is the driving force behind economic progress, Veblen charged that
the businessperson is the saboteur of business. As he explains, machines
dominate society, but machines care nothing for profit. Therefore, business
people are no longer needed. Eliminated by the machine, they are replaced by
technicians and engineers.
Entrepreneurs, however, as members of
the leisure class, are still acutely interested in the accumulation of profit.
Their only opportunity of gaining profit is to cause breakdowns in production
so that values fluctuate. Being on the inside, businesspeople then make a
profit during the resulting confusion. Thus, the entrepreneur cunningly builds
up credits, loans, and artificially high capitalizations. Unfortunately, in the
process, the efficiency of production remains continually off-balance.
Looking to the future, Veblen predicted
the end of the capitalist — not through the action of Marx's proletariat, but
by a tougher force: the machine. The recurring business crisis brought about by
the entrepreneur would show to all the inability of the system to remain in
balance. As the alternative, Veblen hoped for the day when a corps of engineers
would take over the running of the economy, along the lines of a huge,
well-ordered production machine. And if this didn't come to pass, then
eventually the plundering spirit of Big Business would increase until the
system gave way to fascism.
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