Outline:
1st
Introduction
2nd
The different socialist directions
3rd
The deterministic approach
4th
The labour theory of value
5th
Application of the labour theory of value to the labour power itself
6th
The creation of added value
7th
Compulsion for accumulation
8th
Tendency to concentration
9th
The impoverishment thesis
10th
The collapse of the capitalist society
1st
Introduction
In this chapter we will address the scientific socialism. The
founders of this teaching were Karl Marx and Friedrich Engels. Marx called this
direction of socialism 'scientific' because he thought he could prove
scientifically that out of the present capitalist economy a socialist society
would necessarily grow.
Marx differed in this approach from e.g. Adam Smith or other
advocates of a liberal national economy. Adam Smith, the founder of modern
economics, was also of the opinion that he could prove liberalism with
scientific methods. Nevertheless, the two authors have different scientific
aims. Adam Smith was concerned with proving scientifically that liberalism was
able to increase the welfare of the population in a much better way than
interventionist and mercantilist economic policies. His main scientific
interest was just not to prove, in a similar way as Karl Marx, that the
historical process by itself necessarily brings about the desired economic
order (socialist order for Karl Marx, liberal order for Adam Smith).
Karl Marx indeed thought also about why the future order: the
socialist society was so much better than the previous order: the capitalist
economic form. However, Karl Marx's reflections on the effectiveness and
superiority of a socialist order are only marginal. For example, he was
convinced that in a socialist society, in which the ownership of the means of
production is socialised, it succeeds to increase productivity in such a way
that the needs of all working people can be met optimally. But how a socialist
society works in fact, by which mechanisms the wishes of consumers are
communicated to the producers and become satisfied, about this Karl Marx
reflected only very little.
With the characterisation of his teaching as 'scientific'
socialism, he intentionally wanted to distinguish himself and his followers
from other directions of socialism. For example, he considered the early
socialists, who mainly became active in France at the time of of the French Revolution, to be unscientific and utopian.
In particular, he opposed Proudhon, who advocated an anarchism without any
state and who had developed his ideas in 1846 in his writing on 'Systèmes des contradictions économiques,
ou philosphie de la
misère'. The contempt that Karl Marx held against Proudhon is clearly expressed
in the title of the 1847 published treatise: 'Misère de la philosophie'.
However, Karl Marx had also contrasted his 'scientific' socialism with
the quite scientifically founded ideas of the representatives of the younger
historical school such as Gustav Schmoller and Adolf
Wagner, who actively advocated socio-political reforms with the founding of the
‘Verein für Socialpolitik’
in 1873. Karl Marx contemptuously described their efforts as 'catheter
socialists', who, averted from reality, presented their ideas in a scientific
manner but without any feeling for reality.
2nd
The different socialist directions
Before we begin with the presentation of the scientific socialism,
let us briefly introduce the main directions of socialism and their main
representatives.
In the context of the French Revolution of 1789 and the subsequent
period, there emerged early socialism, which was mainly limited to France and
was founded in particular by Henri de Saint Simon and Charles Fourier.
Henri de Saint Simon lived from 1772 to 1837 and was
the founder of the religiously based socialism. In his work on 'Nouveau Christianisme', published in 1825, he saw it as the task of
the classe industrielle to
create work and prosperity and to make it benefit everyone, especially the
poorest. He considered it inevitable both to curtail the ancestral privileges
of the nobility and to limit private property, in which he saw a reason for
exploitation.
Charles Fourier lived from 1772 to 1837 and in
his work on 'Nouveau Monde industriel et sociétaire' published in 1829 he developed the idea of
dividing the state into cooperatives; social regulations were to replace
marriage and family. Although private property was allowed, rich and poor were
supposed to live together.
A certain special role was played by Joseph Pierre Proudhon,
who lived from 1809 to 1856 and was called the father of anarchism. In his
already mentioned work published in 1846: 'Systèmes
des contradictions économiques, ou
philosophie de la misère', he was of the opinion that
the sense of moral responsibility of the individuals was developed to such an
extent that any form of government was redundant. He rejected the use of
violence to impose any system on people.
Among the representatives of scientific socialism were, as already
indicated, Karl Marx and Friedrich Engels as its founders, but also Karl Kautsky.
Karl Marx lived from 1818 to 1883, was a
German philosopher and publicist, co-founder of scientific socialism and
co-author of the Communist Manifesto. He developed his ideas particularly in
his major works in 1847, 'Misère de la philosophie',
in which he opposed Proudhon's ideas, as already mentioned, and in his work 'Zur Kritik der politischen Ökonomie' published
in 1859, as well as in his major work (1867) 'Das Kapital', although its third
and fourth volumes were published posthumously by his comrade Friedrich Engels.
In this four-volume work, his basic economic principles were developed.
Friedrich Engels lived from 1820 to 1895, was a
German social reformer and, as already mentioned, co-founder of the scientific
socialism. He developed his ideas particularly in his 1845 published work on ‚Die Lage der arbeitenden Klasse
in England‘
as well as in the 1882 published work on ‚Die Entwicklung des Sozialismus von
der Utopie zur Wissenschaft‘.
Karl Kautsky lived from 1854 to
1938 and was the German representative of Marxism in succession to Friedrich Engel
and leader of the Social Democracy. In his paper published in 1899 entitled
'Bernstein and the Social Democratic Program' he opposed Bernstein's
revisionism. In 1908 he published his work: 'The Social Revolution and on the
Morrow of the Social Revolution', in which he tried to mediate within the
Marxist crisis theory and imperialism debate.
The Socialist Workers' Party of Germany (SAP) was founded in
Germany in 1875, which gave itself the Gotha Programme and which arose from the
merger of the General German Workers' Association founded by Friedrich Lasalle
and the Social Democratic Workers' Party led by A. Bebel and W. Liebknecht.
Under the pressure of Bismarck's socialist laws, Marxist ideas prevailed in
this party. Already in 1899, however, E. Bernstein campaigned for a turn away
from the revolutionary ideas of Marxism.
In the further ideological development of socialism, the socialist
parties were then split very quickly after the First World War. This was due to
the fact that the moderate groups within socialism founded a social-democratic
party which differed from the revolutionary communist party mainly in its
recognition of the democratic constitution of the Weimar Republic and in its
attempt to realise socialist ideas only within the framework of the liberal
constitutional state.
At the beginning, the Social Democratic Party also assumed that
the social wrongs were caused by the capitalist system and that therefore the
social and economic problems could be solved by nationalising the working
capital.
In the following period, however, the Social Democratic Party
underwent a decisive change towards liberal socialism. Already during the
Weimar Republic, the Social Democrats tried to achieve this socialisation of
capital in that only the so-called key industries (coal, steel and banks) shoulf be nationalised. On the one hand, it was sufficient
to nationalise only these economic sectors, since almost every economic sector
needed the raw materials energy and steel as well as loans and could therefore
be sufficiently directed via the nationalised key industries. On the other
hand, it was feared that if the entire economy was nationalised, the state
bureaucracy would become so powerful that it could subjugate the parliament and
thereby also the population finally.
In the Godesberg Programme (1959), the
SPD took a further step towards market economy concepts by abandoning general nationalisation
aims and recognising that the market economy was the more efficient method of
production and could therefore be accepted provided that only the market was
corrected in terms of distribution policy and social security.
Simultaneously, the recognition of private property was affirmed
as defined in the Basic Law, albeit with social obligation. This marked the
beginning of the development of socialism into a liberal socialism. Alongside
the realisation of a fair distribution, the freedom of the individual,
including that of the entrepreneur, which is embedded in the social obligation
of the Basic Law, was to be affirmed entirely.
3rd
The deterministic approach
Karl Marx was the founder of the so-called 'scientific' socialism.
He thought he could prove that capitalist societies necessarily developed into
socialism (communism). In historico-philosophical
respect, he was a student of Hegel, who was convinced that history progressed
in a three-step process of thesis, antithesis and finally synthesis.
According to Hegel an idea is developed in a first step, the 't,
hesis'. However, this was
not accepted uncontradicted, but rather in a second step it provoced
a counter-thesis, the so-called antithesis. Finally, in a third step, by
discussing the thesis and the antithesis, a synthesis is reached which finally
contained elements of both the thesis and the antithesis.
In one crucial point, however, Karl Marx contradicted Georg
Friedrich Hegel. While Hegel was convinced that history ultimately progressed
through ideas, Karl Marx said that Hegel had turned the conditions upside down,
that the ideas reflected only the development in the material conditions, and
that it was therefore the development in these material conditions that drove
history forward. The ideas are only the ideological superstructure which the
respective powerful people use to defend their position.
The conception that people develop ideas, that these ideas
experience disagreement, and that from the confrontation of these opinions,
finally, conceptions are formed which contain elements of all the ideas
involved in the discussion, now certainly corresponds to the truth. What is
wrong here, however, is the view that this process occurs deterministic, in the
sense that there was always only one antithesis for a particular thesis and
that out of the confrontation of these two theses a synthesis was finally
formed that was determined from the outset.
The experience shows rather that, on the one hand, a certain
thesis can certainly give rise to several antitheses and that it is by no means
predetermined which elements of the most diverse theses will prevail finally.
On the other hand, it is a kind of creative process that gives rise to ideas
and antitheses, so that already for these reasons alone it is not determined
from the outset which antitheses are developed.
Furthermore, it is certainly also true that material interests
have a decisive influence on ideas and by means of them on historical
development. Again, it is wrong, however, to assume that these material
interests are the only determinants of historical development. Also in the
question of the relationship between material interests and the progression of
development it is true that certain material data by no means produce always
one and the same idea, but rather that the ideal answer to certain material
circumstances is mostly one among several possible answers.
Also here, a creative process is present, it depends on the
intellectual achievements of individual historical personalities which answers
to given questions are finally found and it depends to the same extent on the
assertiveness of these personalities which idea prevails in the end.
What can be scientifically ascertained of the historical process
lies in a completely different context. This question was discussed in detail
in the debate between neoclassical economics and historical school at the end
of the 19th century. While the representatives of the neoclassical school -
above all Karl Menger - were of the opinion that
economic circumstances could also be analysed with the same scientific methods
as the questions of natural science, the representatives of the historical
school - here above all Gustav von Schmoller -
promoted the idea that historical processes would escape from the scientific
analysis, that they could only be understood by methods of historical science,
but could not be explained causally.
Walter Eucken tried to mediate in this dispute. He was also of the
opinion that in the field of social, but especially the economic processes,
there were no generally valid laws in the sense that each individual event was
predetermined by the historical processes. Every economic situation was of
unique nature and precisely for these reasons Walter Eucken rejected the
justification of a business cycle theory, since the concrete course of an
economic cycle was always of unique nature.
This finding does not mean, however, that there are no generally
valid connections in the sector of economy and society. Walter Eucken rather
started from the idea that there is a limited number of economic regulatory
elements and that these regulatory elements have very specific effects on the
solution of economic problems. Therefore, every concrete situation was unique
in the sense that there exist very different, and in this sense unique,
mixtures of the individual elements of order. Nevertheless, general laws can be
examined by economic theory, e.g. it can be stated that competitive markets are
better able to orientate production towards consumer wishes than monopolistic
or oligopolistic markets.
Back to the theses of Karl Marx. Applied to the historical course of
economic systems, the threefold step of thesis, antithesis and synthesis states
that in a first step, as a thesis in the Middle Ages, had emerged the feudal
society with the supremacy of the nobility and the clergy. This form of society
led to contradictions, to an antithesis, which finally led to capitalist
society, in which the decisions would lie now with the owners of capital, the
capitalists. In the further course of the historical process, however,
capitalist society would necessarily lead to a social revolution, which would
bring about a socialist society in which the ownership of the means of
production would lie in the hands of the national community.
Karl Marx was thus convinced that the socialist society would
automatically and necessarily emerge from the collapse of the capitalist
societies. Historical experience has shown, however, that the general
historical development has just not followed this scheme and is therefore not
deterministically predetermined. The leading communist country in the past was
the Soviet Union. However, the Soviet Union did not emerge just from an
industrialised capitalist economy; Russia was still in a preindustrial phase in
the time of the communist revolution. Similar considerations apply to China,
also a leading communist system.
Only for the former GDR it can be said that an already
industrialised and predominantly capitalist economic system was replaced by a
socialistically regulated system. But it was precisely here that the transition
to communist society did not correspond to the path of development sketched out
by Karl Marx. The former GDR did precisely not become a socialist society
because of the capitalist contradictions, but only because the Soviet occupying
power compelled the socialist revolution by force of arms. The three western
zones, just like the eastern zone, had emerged from an industrialised and
capitalistically regulated economic system - the share of the industrial sector
was even higher in the western zones than in the eastern zone - and yet a
communist economy was not established here.
4th The
labour theory of value
Just as Karl Marx was a student of Georg Friedrich Hegel regarding
his philosophical views, Karl Marx followed - as Joseph Alois Schumpeter has
shown in particular - the teachings of David Ricardo in his economic
considerations. Most of all, Karl Marx based his economic-analytical trains of
thought on the classical labour theory of values, which had been developed
mainly by David Ricardo. According to this theory, the value of a good can be
determined according to how many working hours are required socially for the
production of one unit of goods.
According to the common sense of the time, one should have
expected actually that in line with the objective value theory prevailing at
the time, the value of a good (and this is the long-term valid price of goods)
would be determined by the level of all cost factors. And the factors of
production included not only labour, but also the scarce land and the capital.
An objective theory of value can therefore only be convincing if it is
successfully proven that neither land nor capital co-determine the value.
This was precisely the task David Ricardo had set himself. In the
previous chapter we showed that David Ricardo tried to prove that a soil rent
is only paid because more and more soil that is less productive has to be used
as production increases and because the free market ensured that an equal price
is paid for the end products, regardless of how productive the individual soils
were. The consequence is that the owners of more productive soils would receive
a differential rent. Thus, the rent was a consequence of the increased scarcity
and the associated price increases for agricultural products and thus - for
logical reasons - cannot simultaneously be the cause of the increased prices.
In David Ricardo's view, the soil had thus been eliminated as determining
factor in the value of a good.
In the previous chapter, we were also able to observe how David
Ricardo now succeeded in eliminating capital as the determinant of the
accumulation of value of goods. Herefore, it is
important to remember that the primary task of any classical value theory was
not to determine the absolute price level, but the relation between the
individual prices of goods. According to David Ricardo, however, the price
structure is not determined by the capital employed in production. A uniform
interest rate was valid for economically invested capital, and that the
interest costs co-determined the absolute level of goods prices, but not the
value - the relative price level. An equal percentage for the cost of capital,
depending on the interest rate, was respectively added to the labour costs; the
relation between the individual long-term valid prices of goods was thus not
affected by changes in interest rates. In this way, capital was also excluded
as the second possible determinant of the value of goods.
Finally, we have seen in the previous chapter that David Ricardo
attempted to reduce even the multitude of different qualities of work to
finally one single normal quality of work. Ricardo did this by starting from
the assumption that the wage structure was determined technically in the long
term and not by economic factors such as scarcity or productivity.
Karl Marx adopted this labour theory of values developed by
Ricardo. But just as he thought he had to put Hegel's doctrine on its feet,
Karl Marx also modified Ricardo's labour theory of value in at least two points
and thus developed it further. On the one hand, he tried to apply the labour
theory of value also for the explanation of the value of labour. In the next
section we will examine this attempt in more detail. On the other hand, he saw
the labour value not only as a measure and a control parameter and thus as a
relative variable, but the labour value served him as a measure for the
absolute value of a good.
The points of criticism against the labour theory of value
developed by David Ricardo that where mentioned in the last chapter naturally also
apply to Karl Marx. Just as David Ricardo did not succeed in developing a
convincing concept for a logically faultless objective theory of value, it must
be stated also for Karl Marx that his economic theory, just because it is based
on the classical and disproved labour theory of value, is subject to criticism
just as much as David Ricardo's theory of value.
In the following, we want to put these concerns aside and follow
the train of thought of Karl Marx.
5th Application of the labour theory of
value to the labour power itself
An essential continuation of Ricardo's labour theory of value is
that, according to Karl Marx, not only goods are valued according to the number
of hours worked, but also labour itself is valued since for thereproduction
and maintenance of the labour force itself again labour must be used. The
worker remains able to work only by feeding himself and regenerating his labour
power in the leisure time remaining to him. Since the value of a good,
according to classical ideas, does not primarily depend on how many working
hours were actually spent on the production of a good, but only on how many
working hours are necessary to produce a good, for Marx the minimum subsistence
level (of goods and leisure time) is valid as a measure of the value of labour.
This transmission of the labour theory of value to the production
factor labour is found in Ricardo's work just as little as in the other classics.
The labour theory of value of the classicists was solely an attempt to
understand the value of goods, whereby the interest in the value of goods was
justified by the fact that the control of production, i.e. the allocation of
scarce resources to the individual possible types of use, was decisively
controlled by the value relations. This approach is limited to the goods that
are to be produced; the question of how labour or other resources are formed is
not the subject of discussion among the classicists. The resources always
represent a stock, which for science is regarded as a date, i.e. as a quantity,
which is not necessary to be explained at least in terms of economic sciences.
However, it is true that even parts of the classicists, primarily
David Ricardo and Robert Malthus, were convinced that the wage rate actually
would have the tendency to decline to the subsistence level. We have also seen
in the previous chapter how Ricardo and mainly Malthus came to these
conclusions within the framework of their dynamic model. At the heart of this
model there is the law of the diminishing marginal revenue of the soil. Based
on the population theory developed by Malthus, we can expect a strong - in the
sense of a geometric series - unfolding population growth.
The food demand of the growing population can only be met the way
that more and more soil of inferior quality must be cultivated. However, the
necessary food will only be produced and offered on the markets if also those
landowners who cultivate the poorest soil still cover their expenses in the
price of goods. But as now on free markets for the same products an equally
high price is achieved regardless of the costs incurred, the owners of the
qualitatively better soils receive a rent.
The more soil of inferior quality has to be cultivated, the ever
larger is the part of the proceeds from the sale of the soil products that will
go to the landowners with the consequence that less and less is left for
interest and profits as well as for wages. Thus, it seems to be clarified that
with increasing development the wages have the tendency to fall to the
subsistence level or to remain there and the profit rate decreases steadily.
The teachings of Ricardo and Malthus are therefore with reason declared as pessimistic
late classicism.
Just in this question Karl Marx did not follow Ricardo. He
rejected that the tendency of wages to correspond to the subsistence minimum is
derived from the law of diminishing marginal return of the soil. This is also
correct in a certain sense, since Marx developed his theories at a time when
industrial production was increasingly displacing agriculture. Thus, one can
hardly trace back the laws of wage formation to a law that refers to
agriculture (to soil production). To justify the Ricardian theses we have
pointed out, however, that even in industrial production it was possible to
prove a law of decreasing marginal return of arbitrary production factors.
Concerning the attempt to apply the labour theory of value to the
labour power itself, it must of course be pointed out that, at least in a free
society, which does not know slavery any more, the procreation of human beings
follows other laws than the production of goods. So, there is not much sense in
saying that the wage rate is formed in the same way as the price of a good.
While the producer of a good will only produce this if the return is at least
equal to the value of the costs incurred, quite different considerations and
actions might be at the forefront in the procreation of human beings.
6th
The creation of added value
Now let us follow the further thought steps of the Marxist theory.
The employed workers will now receive a wage at the level of the subsistence
minimum. As shown in the previous section, the value of the labour power
corresponds just to the subsistence level, that is, the goods needed to
regenerate the labour.
Now since the workers can produce more goods during their entire
working time than it is needed to regenerate the labour power, the
entrepreneurs make a profit, which Karl Marx calls added value. The word added
value expresses that the value of the goods produced by the employees is
greater than the value of the labour.
Let us illustrate this connection with an example. The workers
would be employed for 8 hours a day. However, only 5 hours are needed to
produce the goods necessary for the reproduction of the labour power.
Consequently, the value of 3 working hours is allocated to the entrepreneurs as
added value.
For Karl Marx, the fact that an added value is created is
certainly not the result of an exploitation, as this term is used by communist
agitators on the street. This group of communists understands exploitation to
mean that the capitalists predatorily extort the workers and cheat them out of
their fair wages due to their supremacy. Karl Marx has always rejected such an
interpretation of the term exploitation. According to his interpretation, the
entrepreneur pays his workers with the full value of the labour power.
According to Karl Marx, it is neither the entrepreneur who
exploits. He only follows the laws of the capitalist society. Exploitative, in
Karl Marx's opinion, is the system of the capitalist society itself. It is
thanks to the system that the value of the labour power and the value of the
products produced with labour power diverge, meaning that the workers, although
they are the only ones who produce a value, do not receive the entire value of
the goods produced by workers.
Here is where the criticism must start. Of course, values do not
only arise from the activities of employees; those who provide entrepreneurial
services or advance capital do contribute to the creation of value, too. Just
as it is wrong that goods can be produced without the help of workers, it is
just as wrong that goods can be produced with the help of workers alone.
For the workers to be paid out before the products are sold, a
lender is needed who advances a loan and thus, as a rule, takes the risk that
parts of his assets cannot be repaid any more. Either the goods are not bought
by consumers at all, or a competitor is able to produce these goods more
cheaply, or high costs are incurred during production due to accidents, which
are not covered by the sales revenues.
Any successful production requires that the entrepreneurs identify
the most favourable conditions of supply for the raw materials and
semi-finished products used in production, that they coordinate the individual
production steps in such a way that the unit costs are not too high and that
also sales markets are explored on which the products can be sold at prices at
least equal to the incurred unit costs. Of course, these contributions are
efforts that are essential for a successful production and therefore contribute
to value creation just as much as the commitment of the employees.
7th
Compulsion for accumulation
Now what do the capitalists do with the added value they receive?
According to Karl Marx, the capitalists cannot consume this added value, the
relentless competition struggle forces them to immediately invest this added
value again in their own enterprises, or - as Karl Marx calls it - to
accumulate it.
Here it is not only important that the added value is accumulated,
but that the competition also forces the enterprises to spend more and more
parts of this added value on machines and thus to provide a smaller and smaller
share for the wage fund, which serves to pay the workers. Karl Marx says that
in this way the organic composition of capital deteriorates. And the reduction
of the wage fund then also means that fewer workers can be employed, thus
unemployment increases, and a reserve army of labour is created. We will come
back to the importance of this reserve army later.
Karl Marx speaks of a deterioration in the composition of the
capital appropriation because, according to his theory, only the labour power
would create value. As a result, only that part of the invested capital (added
value) can be expected to cause an increase in value, which is used to pay
workers. But as the share of the wage fund in the total invested capital
decreases, also the value of the total production decreases.
This reasoning does not seem valid to me. The part of the added
value that is used for the purchase of machines is also used - even if only
indirectly - to pay employees, namely those workers who produced the machines.
In a thought experiment, one could imagine an enterprise in which
a machine is produced in the first two periods and in which the same workers
produce the end products in the third period by use of the machine produced in
the previous periods. Instead of one part of the added value being used for the
purchase of machines, in this example the entire added value (the entire
capital) would be used for the payment of the employees, because we have to
assume that the production will only yield sales revenues for the entrepreneur
after the end of the third period, but the employees have to be paid from the
first period on.
Now Joseph Alois Schumpeter has drawn attention to the fact that
individual parts of Marx's reasoning are quite contradictory and also wrong,
but that the results are nevertheless correct, since other determinants, which
were not considered by Marx, come to the desired result.
In this sense, it can be pointed out that also David Ricardo has
already addressed the question of whether the introduction of machines would
not also lead to unemployment. In the first two editions of his major work: 'On
the Principles of Political Economy and taxation', Ricardo was optimistic that
mechanisation would not lead to a significant increase in unemployment. It was
true that one had to expect that in the factories where machines were
introduced, workers would be made redundant (redundancy effect). At the same
time, however, new workers would be recruited in the sectors of the economy in
which these machines were produced (compensation effect). Thus, on balance, no
significant reduction in employment needed to be feared.
In his third edition, Ricardo corrected this position by
admitting, in the famous chapter on machinery annexed to this edition, that in
certain cases unemployment can increase also on balance, and he tries to show
this with an example.
In today's economic theory it is assumed that it depends on the
kind of technical progress whether unemployment occurs or not. Modern growth
theory distinguishes between neutral, capital-saving and labour-saving
progress. Only if a labour-saving progress is present, it is possible that the
redundancy effect will be greater than the compensation effect. Roy F. Harrod
and other growth theorists assumed that technical progress is neutral in total,
that there were no compelling reasons why technical progress in total would
unilaterally save labour or capital. Nicholas Kaldor even tried to prove that
market processes worked towards a neutral progress.
Indeed, if a labour-saving progress would take place and therefore
workers were made redundant, then the excess supply on the labour markets would
lead to a reduction in wages and thus also to a lowering of the wage-interest
ratio, which in turn would induce entrepreneurs to invest more in
capital-saving progress.
Furthermore, Erich Streißler has shown
that technical progress was indeed capital-saving and not labour-saving in the
long run, labour-saving was only the relatively small part of investments in
machines; in the long run, however, the capital-saving effects had an impact on
inventory investments, which in turn were themselves made possible by technical
progress in transportation. Thus, actually we have had mainly technical
progress that has saved capital and just not labour.
Thirdly and finally, is the question, as to which technical progress
will ultimately prevail on average, by no means unchangeably predetermined, but
itself depends on how the wage-interest ratio develops. If the wage rate rises
more than the interest rate, capital-intensive production processes will become
more advantageous for enterprises and they will indeed cut jobs by means of
mechanisation. If macroeconomic unemployment rises in this way, then this is
only an indication that a technical progress has been triggered, which is not
desirable at all from a social point of view. It could have been avoided if the
wage-interest ratio had developed in line with the scarcity conditions.
From a social point of view, labour-saving technical progress is
only desirable if there is a shortage of labour force, if due to this shortage
technically possible increases in production and thus increases in welfare
would have to remain undone. In this case, it means a welfare gain if
production can be increased by means of mechanisation without creating
unemployment. It is crucial that precisely Keynesian theory - contrary to its
political intentions - has contributed to the fact that the recommendations
which originate from the same do not always increase employment, but sometimes
even destroy jobs.
According to the ideas of some Keynesians, in times of economic
downturn wages on the one hand should just be raised more strongly than labour
productivity increases (demand for expansive wage policy). On the other hand,
interest rates should decline in order to increase the investment volume. Both
measures together, however, lead to an increase in the wage-interest ratio,
with the consequence that more capital-intensive production processes are
chosen. Although the investment volume is rising, it is mainly not expansion
investments but rationalisation investments that are carried out, which tend to
destroy jobs (in the case of job-saving technical progress) rather than to
create new ones.
In conclusion, I consider the Marxist idea, that only labour
generates value and that therefore, with labour-saving technical progress, the
total value of production decreases, to be unconvincing. As a result of
mechanisation, the per capita income of the population increases, the total
population can afford an ever higher standard of consumption, yet Karl Marx
speaks of a decline in the total value of production, instead of recognising
that households derive an increase in utility not primarily from the fact that
the amount of labour required to produce consumer goods has increased, but from
the fact that they can consume more and qualitatively better goods.
8th
Tendency to concentration
We like to continue in the Marxist chain of evidence. The mutual,
merciless competitive struggle between entrepreneurs does not only lead to the
fact that the entrepreneurs are forced to reinvest all their profits into the
enterprise and that the organic composition of the capital deteriorates which
accrues unemployment. The competitive struggle also entails that smaller
enterprises are going bankrupt or are absorbed by larger enterprises. As a
result of this concentration process, the number of enterprises is becoming
smaller and smaller and the size of the remaining enterprises is increasing.
It can hardly be doubted that an unprecedented process of
concentration has taken place and is taking place throughout the world in the
last hundred years. Schumpeter speaks in his 'Capitalism, Socialism and
Democracy' of a great and correct vision.
However, we must also get clear about the role that this
concentration process plays in Marx's argumentation and the extent to which
this building block effectively contributes to the confirmation of his theses.
Karl Marx's sole concern is to prove that the course of capitalist society
necessarily leads to its collapse and to the transition to a socialist society.
But it remains questionable whether the concentration process
effectively advances or perhaps even delays the collapse of capitalist
enterprises. At least it is said that it is precisely due to concentration that
the enterprises have gained in stability. And this also makes sense in cases
where the concentration process has led to so-called conglomerates. The
distinguishing feature of conglomerates is that they offer quite different
product ranges. One intentionally does not concentrate on a few products and
hopes in this way to reduce the risk of failure through diversification. If the
production of a certain good was a total failure, then the conglomerate can
still hope that the other products will keep it afloat. It is also known that
different products boom or decline also at very different times. By including
products with peaks and drops at very different times in the range of a
conglomerate, one contributes to ensuring that at least with one product at
each phase it is possible to score.
But these advantages certainly do not apply to all groups. We must
also consider that, for several reasons, it is precisely the economies with
mayor corporations that have been brought to the brink of ruin.
First of all, there is probably also something like an optimal
enterprise size for the executive board as well as for the supervisory board.
If this is exceeded, the overview is lost, there are more and more wrong
decisions, and the corporation becomes immovable, since a large part of the
decisions must initially be coordinated between the individual departments in a
time-consuming manner.
Secondly, the risk of a wrong decision increases with the size of
an enterprise. Let us take the example of two economic sectors, where sector A consists
of merely one mega-corporation, while sector B still consists of 100 concurrent
smaller enterprises. It must always be expected that at the top of the mayor
corporation, a fundamentally wrong decision will also be made once in a while.
This affects the whole sector. Of course, one must expect that also in area B
fundamentally wrong decisions will be taken in some enterprises. But it is
highly unlikely that wrong decisions of this kind will be made in almost all
enterprises. In other words: if a mega-corporation is given incompetent
management, the entire sector is affected, whereas in the case of a large
number of enterprises weak managers are certainly not present in all smaller
enterprises.
If mega-corporations are threatened with bankruptcy, the effects
on the entire economy are usually of such a magnitude that a crisis can only be
averted by the state by means of saving the enterprise with subsidies. It is
precisely the fact that a mega-corporation brings these dangers with it and
will therefore be supported by the state in any case, this in turn means that
the top management is no longer under pressure to implement every possible cost
reduction. The enterprises become unprofitable here and yet remain intact.
9th
The impoverishment thesis
We had seen above that the deterioration in the organic
composition of capital leads to the dismissal of workers. This reserve army of
labour which has been created in this way is now leading in two ways to the
impoverishment of the employees. On the one hand, the unemployed worker is
without work and therefore without aim, and on the other hand, just because he
is desperately in need of a new job, he is also willing to work for a wage that
is even lower than the wage that has been valid until now.
Now, growing unemployment does not seem to be necessary at all for
the validity of the impoverishment thesis. Since according to the labour theory
of value - applied to the labour power - the worker receives in any case only a
wage which corresponds to the subsistence minimum, and this would also apply if
all workers were employed. However, it seems to me that this conclusion would
only be valid if one could prove that in the procreation of children (of labour
force) as well as in the regeneration of labour power a profit calculation
would be as decisive as it is in the production of goods. But exactly this
cannot be assumed.
The thesis that the value of labour corresponds to the subsistence
level would perhaps be correct if the entrepreneurs were to base the payment of
the workers on moral principles and proceeded on the idea that the worker would
be fairly paid if he was granted a wage income in the amount of the subsistence
level. However, the entrepreneur's actions are based on a profit calculation in
reality, and according to this calculation, it is appropriate for the
entrepreneur to align the wage rate with the scarcity of labour force.
But this prophesied impoverishment of the entire labour force did
not occur in real life. It is true that the transition to industrialisation in
the late 18th and early 19th century led to a severe impoverishment of
industrial workers.
However, this impoverishment did not continue at all, as the
economic and social situation of the workers improved decisively during the
further development of the industrialised society. In the subsequent course of
industrialisation, however, there was an enormous increase in the production on
one side, but at the same time the growth rate of the population declined again
with the consequence that the per capita income of the population increased.
This, however, also created the conditions for an increase in the average
income of the employees finally.
This development should have resulted actually in the abandonment
of the Marxist theory of impoverishment. But since this theory was an important
building block of the Marxist theory of the necessary collapse of the
capitalist society, and since with this thesis also the theory of the automatic
transition to socialist society had to collapse, the Marxism held on to the
theory of impoverishment. But since one could finally not deny the facts,
Marxist theorists tried to reinterpret the thesis of impoverishment.
Thus, it came about initially that Marxism no longer assumed that
the workers were impoverished in the absolute sense - i.e. their real per
capita income was declining more and more in absolute terms - but rather that
only a 'relative' impoverishment would be expected, meaning that the growth of
production would be directed primarily to the capitalists (the self-employed)
with the necessary consequence that the share of the employees in the domestic
product (the so-called wage ratio) would be declining permanently.
But even this reinterpretation of the theory of impoverishment is
not satisfactory for two reasons. Firstly, a theory of the relative
impoverishment of employees can hardly explain the necessary collapse of the
capitalist society. The willingness of the workers to overthrow the capitalist
system in a revolution could only be justified by the fact that masses of
employees are impoverished in an absolute sense. A decline in the wage share
cannot sufficiently explain such revolutionary behaviour, especially when - as
shown - the absolute average income of the employees has risen strongly.
Secondly, however, this thesis also does not correspond to
reality. It is indeed true that there has been a temporary decline in the wage
share in the past - as has been the case, for example, especially in recent
years - and that the wage share takes primarily an anti-cyclical course, i.e.
the wage share declines in times of economic upswing. But the wage ratio rises
again in times of economic downturn. This countercyclical behaviour of the wage
share is explained, among other things, by the fact that the trade unions show
much greater success in the aim of preventing wages from declining during the
downturn than in the aim of increasing the wage share during the upswing.
In the longer term, however, no decline in the wage ratio has been
observed so far. On the contrary, it has been repeatedly argued that the wage
ratio has a remarkable tendency to remain remarkably constant over a longer
period of time. There are several theories in the literature that try to
explain this constancy of the wage ratio.
However, if we look at an even longer period of time and ask
ourselves how the wage share has behaved over a century or more, it is clear
that the wage share has risen significantly in comparison to the beginnings of
industrial society at the beginning of the 19th century. This does not mean
that there is no serious poverty at all in our society; there have always been
certain sub-groups in the past that have fallen into poverty. But the thesis
that the entire labour force was not involved in economic growth and that the
average level of the income of the labour force increased less than the per
capita income of the entire population and that therefore the wage ratio
declined in the very long term is not consistent with the facts.
This last statement, too, had to be accepted finally by Marxism. A
second attempt was now made to reinterpret the thesis of the impoverishment of
the labour force. It was no longer claimed that the labour force was
impoverished in absolute or even relative terms, but only that it would
actually have been impoverished if the highly developed states had not had the
opportunity, in the course of the colonialism of the 19th and 20th centuries,
to transfer the actually due exploitation of the employees in the highly
developed states to the working population in the colonial countries.
According to this thesis, the exploitation of the former colonies
was carried out by exporting raw materials at reduced prices on the one hand
and on the other hand by importing industrial goods at excessive prices, which
contained added value that flowed to the capitalists. In this way, employees
from the countries of the colonial powers could share in the added value at the
expense of the population in the colonies. Exploitation was therefore still taking
place, but not of the local workers, but of the workers from the colonies.
This exploitation would have continued even after the former
colonies had become independent states in the period after the Second World
War. As especially Raul Prebish (not necessarily a
socialist!) tried to prove, the terms of trade had developed to the
disadvantage of the developing countries. In Prebish's
opinion, free trade had led to a systematic discrimination of the developing
countries. The starting point was the empirical finding that the terms of trade
had deteriorated to the detriment of developing countries in the period from
1876 to 1938.
As especially Gottfried von Haberler and
Jakob Viner have shown, do those statistics draw a false picture of the
distribution of wealth between highly developed economies and developing
countries, since in those statistics import prices were calculated in CIF
(cost, insurance, freight). However, the CIF calculation also includes
transport costs, but these were mainly at the expense of the highly developed
economies and fell sharply during this period of time.
Furthermore, the welfare of an economy depends not only on the
development of the terms of trade but also on the foreign trade volume. It
should also be considered that the low per capita income in developing
countries had to be partly explained by the fact that the growth rate of the
population in these countries was very high and exceeded the growth rate of
production.
The important thing to note in our context is, however, that a
collapse of the capitalist system in the highly developed countries presupposes
that domestic employees are exploited, so that if this exploitation is shifted
to the employees in the developing countries, a revolution is not to be
expected, at least not a revolution within the industrialised countries.
The actual observable impoverishment of industrial workers at the
beginning of industrialisation had nothing to do with industrialisation and the
capitalist economic order as such; it occurred because in the course of
industrialisation the social system of the medieval order broke down and an
internal migration to the cities took place on the largest scale, and thus,
among other things, the control of the birth rate that existed in the medieval
society was lost. An immense population growth took place, whereby the growth
rate of the population initially exceeded that of the production of goods and
thus necessarily had to lead to a decline in the per capita income of the
population and thus also of the industrial workers, although industrialisation
as such did indeed contribute in the long term to an increase in the growth
rate of the domestic product.
The fact that the impoverishment of industrial workers did not
increase- in contrast to what Karl Marx said - with increasing development, but
even decreased, was precisely because capitalist methods allowed the growth
rate of production to be increased so much that it rose above the growth rate
of the population and thus also allowed an increase in the per capita income of
employees.
10th
The collapse of the capitalist society
In a final step, the results of both the impoverishment thesis and
the concentration thesis are combined. The increasing impoverishment of the
workers leads now to the fact that the workers tend more and more to radical
ideas, which aim at an overthrow of the existing society and the proclamation
of a socialist society.
Now we have seen already that the impoverishment of the entire
labour force has not occurred in the sense of Karl Marx, so that the social
revolution does neither have to be expected. It is true that the new Left has
succeeded in gaining entry into the parliaments, but there is certainly no
danger that this Left will manage to achieve an absolute majority in the near
future. Such an absolute majority is, however, necessary for a social
revolution, as none of the other parties would agree to initiate a revolution
in a coalition with the Left.
Karl Marx's second thesis, which was to bring about the collapse
of capitalist society, was also disproved by historical experience. Although it
is true that free entrepreneurs consider competition as inconvenient and that
they try to overcome competition by means of monopolistic mergers. And in fact,
the history of industrialisation around the world is marked by processes of
concentration.
But history has also shown that this monopolisation tendency is
repeatedly broken by the emergence of new competition, at least where it is not
impeded by state measures. Where monopoly situations have been able to
establish themselves over a longer period of time, it was primarily due to the
fact that the states have prevented otherwise possible competition by
foreclosing their economies (mainly by means of import duties and other
impediments to foreign trade). Furthermore, Walter Eucken and others pointed
out that a functioning competition can only be maintained by an active
competition policy and that the state has the task of counteracting
monopolisation tendencies in the national economy either by means of a
legislation which prohibits cartels or at least by abuse control.
It is precisely the globalisation process which has taken place
during the last decades that has repeatedly led to renewed worldwide
competition. Although the size of the enterprises increased steadily, this did
not generally lead to an increase in concentration, since particularly the
major corporations had to face increasing international competition.
For Karl Marx's thesis of the collapse of the capitalist society
it is essential, however, that this process of concentration continues until
finally only a small number of enterprises remains, which can then be
socialised relatively easily and transferred into state ownership.