Socialists are at a minimum committed to economic planning that goes counter to the operation of an economy in which private firms predominate and profits are distributed among shareholders and managers. A system of this kind necessarily perpetuates the class division between a wealthy minority and a propertyless majority. A capitalist economy, moreover, can only respond to “effective demand” backed by actual purchasing power. It operates for the benefit of paying customers only and does not recognize the existence of other people. In consequence it normally fails to satisfy basic material needs except in a roundabout way that is not to everyone’s taste. To put it crudely, the logic of the system entails the production of luxury goods for the few, rather than the provision of food, clothing, and decent housing for the many.
This is not due to the bad will or imbecility of those in control: it follows logically from the operation of the market. In an egalitarian community this would not happen, since all customers would have approximately the same purchasing power, but bourgeois society is not egalitarian. The result is that social inequalities are constantly reproduced and even rendered more acute, even though society grows richer and there is some rise in real incomes. The built-in automatism is such that those who start off with material advantages (including advantages in skill, training, and education) secure a disproportionate share of the social product. “The price mechanism rewards people according to the scarcity of resources (labor and property) that they posses, but it does not itself contain any mechanism for equalizing the distribution of scarcities. For justice in distribution we clearly have to summon the forces of the state.” 1
Taken by itself this is a democratic rather than a socialist line of reasoning. The distinction is important, and its neglect leads to some confusion. The systematic correction of built-in social inequalities by appropriate public action is an aspect of what has come to be known as the welfare state. In its usual formulation the “welfare-state” doctrine leaves the wage relationship unaltered. Under optimal conditions, Social Democratic governments based on parliamentary majorities are able to make the welfare state a reality, the classic case being the Scandinavian countries. Under somewhat less favorable circumstances, as in post-1945 Britain, they can still correct the worst inequalities resulting from the unrestricted operation of a capitalist price system. The obvious means to this end are taxation of the rich and the expansion of the public sector (education, health, and housing).
However important and beneficial, such arrangements fall short of socialism inasmuch as they do not alter the status of wage and salary earners, not even if key industries and public services are nationalized or municipalized. The wage relationship is rooted in the fact that wage and salary earners do not own the means of production, i.e., the instruments of labor. If they owned them, they would still have to work, but the profits would no longer go to the owners…
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