[Translation of a lecture by an editor of GegenStandpunkt]
1. Market economy – a misnomer
At first glance, the topic sounds like the most self-evident thing in the world: our economic system is called “the market economy.” It seems to be clear that this is a name for a thing. But in fact the term market economy is already a whole ideological program. “Market economy” is a wrong name for the thing it identifies and already includes a whole interpretation. A first clue that this is a misnomer is the following point:
Other modes of production that once existed, or still exist, are named in a different way; for example, after their purpose. For example, the mode of production that intended to produce trade surpluses is called the “mercantile system.” A second example in which the purpose of production appears in the name is “the subsistence economy,” like that which engages large numbers of the people in the third world. Subsistence farmers support themselves through the farming they do. Other names for modes of production take their names from the typical position of the producers, the laborers, or the position of the masters, the bosses; for example, “the slave economy” or “the feudal mode of production.”
By contrast, our mode of production, “the market economy,” is not supposed to be distinguished from other modes of production either by a purpose or by a characteristic position of the bosses or the workers, but only by a method by which people deal with each other. Our mode of production is supposed to be characterized by the fact that “the market,” as it is now called, mediates the many thousands of economic subjects. Strange – does this mode of production have no purpose? Does it not have a characteristic position of those who do the work and those who are the bosses? No, it is supposed to differ from others only in that the division of labor is organized by the market.
2. Market economy – a name born in the comparison of systems
Of course, it’s not a big mystery where this name comes from: it has its historic basis in the comparison of systems that defined economic science, as well as political thought, in Europe and the whole world for fifty years. In this comparison of the western and the eastern economic systems (the Soviet Union and its satellites), the planned economy was supposed to be made to look bad and the market economy – which was suddenly no longer supposed to be called capitalism – was to be presented in a good light. The ideologists of the planned economy, of course, intended to do the opposite. But it was hard to say: in capitalism there are a lot of rich people, that’s a fine thing, and the socialist economy stands against it, and it shows that poor people are better off in it. The old system comparison was such that the two modes of production compared themselves as better methods of – absurdly enough – the same thing. To this, it must be said: that’s the way it is when you make a comparison. When two things are compared, they differ according to a common standard. Whether there is such a thing – a common basis in the matter – is irrelevant. The comparison itself asserts a common ground, because one can’t compare without a common basis. How can you compare beets and music? So where there is nothing in common, there are also no differences.
So when two modes of production enter into a competitive debate and initiate a comparison in order to decide which is better – the west clearly invented it with the intention of proving that ours is better – then the two assume they have a commonality, or the comparison assumes a commonality between the two. And if you say, for example: the western market economy is more efficient, then you assume – without talking about it – that efficiency is the common standard. But efficient in what respect? The socialists would never have disputed the market economy’s apologists who say that capitalism is more efficient at exploiting people. Of course, that is not what the supporters of the market economy meant. None of them wanted to say that we are better at impoverishing people, that we extricate more from them than you do in the east. That would not have been a very appealing system comparison.
In this system comparison staged between the socialist economic mode, which was made to look sinister, and the capitalist mode, which wanted to prove that it’s the better one, the two modes of production were not comparing themselves according to their purposes, but measuring themselves against each other as alternative methods. So now it’s no longer capitalism versus socialism, but market economy versus planned economy. And what is the commonality now? What is the postulated common standard by which they measure themselves against each other? In every lecture on economics, you immediately and always hear: the supply of the population with goods. However, it is very questionable whether this purpose even exists in our economic system – but never mind: the comparison of systems simply postulates that this purpose exists and compares itself to the other system according to this purpose. Both systems in principle exist to do the same thing and differ only in efficiency.
3. The market as “the best method of distribution”
Now I will read a quote from Paul Samuelson, a great American economics teacher who is one of the neoclassical authors (1970 Nobel Prize for Economics); he says:
The competitive system [i.e., the market mechanism] is an elaborate mechanism that unintentionally combines and coordinates the knowledge and actions of millions of different economic subjects by means of a set of markets and prices. Without a thinking and directing central brain, this economic system solves one of the most difficult arithmetical problems: a system comprised of several thousand unknown variables and equations. (Paul Samuelson, Political Economy 1)
Here it says that the market economy is an ingenious invention, the market coordinates millions of economic participants into a division of labor and coordinates their behavior and needs so that the best possible combination of production and need satisfaction, the best possible efficiency in production, is achieved.
Furthermore, Samuelson makes an almost explicit comparison with the planned economy, which has this “directing central brain” but – as we constantly hear – doesn’t get anything done. The sentence with the directing central brain is a nice confession. Samuelson observes that what he says the market allegedly does is actually done by nobody: nobody coordinates, nobody worries about the needs of others. He quite clearly says that this is the way it is, that we know market subjects have different concerns ...
In another place, Henrichsmeyer, another economics professor, says:
Although entrepreneurs act out of “selfish” motives and not to improve the supply of goods to the population, the entire production of goods is ultimately geared to the wishes of the consumers. (W. Henrichsmeyer, Introduction to Political Economy)
What strange achievement is attributed to the market here? It is an achievement that does not even exist in the market economy. Nobody coordinates. It is more the case that everyone offers something on the market and the whole coordination consists in whether the seller is successful or not. If the seller is successful, he is successful; if not, he goes home empty handed and can’t sell his goods. Where is there any coordination? One person finds a solvent need and happens to succeed; another person doesn’t find any and fails, possibly even going broke because of his failed attempt to produce and sell. Who has coordinated what here? Nothing at all was coordinated here! In reality, the alleged achievement of coordination does not take place because the need itself is not taken into account at all. Those who are selling look for a demand with purchasing power; needs that do not have money do not count as needs at all and are therefore not considered. The market does not coordinate existing needs and production, but rather the market shows the seller which solvent needs he can use. And vice versa, the need of the buyer is not the guide for his purchase decision, but what really counts is the commodity he can afford according to his wallet. Whether he buys the stuff he does, because he might not have the money to buy the quality product instead of the trashy one, or whether his need goes completely neglected – that’s the question. So with all this coordination, on one side, there is never any production that wants to adapt to needs and, on the other side, there are never needs, but purchasing power.
4. The “market equilibrium” is a pure tautology
More strictly: the idea that the market is a great coordinator between needs and production, that it does this much better than planning ever could, this idea is in fact a pure tautology. It claims as an achievement nothing more than the fact that all the goods that were sold found buyers. Again, to make the thought clear: in this great coordination achievement, if the market only accepts needs with the means to buy, and real needs, as long as they don’t have money or not enough money, don’t count; and if, on the other side of the coordination achievement, in the case of products, only those that are sold, that is, that found a buyer, and everything that is of poor quality or has too high a price or has been produced in too large a quantity for it to be sold on the market does not enter into the market equilibrium, then the famous market equilibrium is a pure tautology: everything that was sold has also found a buyer; for every good that was sold, a buyer had appeared – yes, that’s probably true.... But here the whole scam is to pretend that this is an achievement. This tautology applies at any time. It applies in the greatest economic crisis as well as in the worst famine, and it applies in boom times.
To complete the dialectic and return to the system comparison: The market economy claims to solve a problem that it does not at all deal with: the coordination of needs and production. And it claims to solve this problem better than the planned economy, which does not have this problem at all. Anyone who thinks that production and needs have to be coordinated thinks that both sides are separate things that function according to their own principles. But is this correct? Think of your own home: do you have to coordinate the need for clean dishes and the production of clean dishes? Here you notice that this is somehow nonsensical. Production is the means of producing what you have previously identified a need for. Period. There is no problem of coordinating two independent variables, of bringing them into a relation that somehow prevents the danger of the two self-perpetuating or diverging.
This also becomes clear: it is an idealistic construction to say that every economic system needs a mechanism that coordinates production and needs and this coordination can be satisfied in various ways, because one economic mode (the market economy) does not do this at all, as we have seen, but solves this “problem” better than the other, namely the planned economy, which even explicitly undertakes this and supposedly always fails. So a really fictional achievement is attributed to the market, and if you look closely at what this achievement consists of, then the tautology emerges: what was sold found a buyer; if something was sold, then obviously a need existed. No doubt – but is that really the same as saying that the existing needs and the existing production were brought into a relation, were coordinated?
5. The praise of the market for successfully combining freedom and constraint
When praising the market, three further arguments are made, some of which are something like sub-points to the coordination achievement, but also take a slightly different approach.
The first goes like this: the market deserves praise because it is a successful combination of freedom and constraint. Anyone who has ever talked in an economics class about the comparison of systems or about the merits of the market economy has also been confronted with the alternative: free consumer choice or planned needs! And here everyone knows exactly what’s supposed to be so bad about planned needs: some central authority in the capital city says what people need, as if they didn’t know this much better themselves, dictating what they can and can’t get. By contrast, the market is much better because it lets people freely decide what they want. Both statements include a slight supposition that is not expressed. The socialist method of production is reproached for depriving people, for dictating needs to people that they don’t have. And the market economy is praised for the fact that people are free to chose everything. But what can you really choose freely? Anyone who credits the market with free consumer choice because people are free to decide on their “optimal utility” with their wallet talks about the advantages of the market economy in such a way that they credit the fact that doing without, being excluded from the satisfaction of needs in the market economy, is regulated by the size of their wallet. Yes, the ability to consume is restricted in the market economy – they think – just as it is in the planned economy, but the good thing about the market economy is that everyone gets to decide for themselves what they access and what they deny themselves (because they have already spent their money). So the good thing about the market economy is not the satisfaction of needs, but the freedom of the individual to decide which needs to leave unsatisfied. And the planned economy is supposed to be so terrible because a) needs are not satisfied and b) one may not even decide which needs to leave unsatisfied.
6. The market as a useful tool for curbing excessive needs
So when market economists think about methods of access to the means of satisfying needs, they think about methods for restricting access to the means of satisfying needs. On this basis, they then compare the western and eastern economic modes. The premise here is scarcity, but this is not subject to much debate. The premise is: of course, people have to be restricted in satisfying their needs, what would the world be coming to if people could get everything they need? This is a basic dogma of economics! H.C. Recktenwald has endowed an entire professorship in order to beat the idea of inequality into people:
N > G !
Needs are always greater than the quantity of goods, needs can’t be satisfied in principle, ever. Hence, economics concludes that the rational mode of production is one that organizes the restriction of need satisfaction. And it is only now that the differences between the market economy and the planned economy enter their minds. But it is never considered that the planned economy could perhaps be something other than an unfree method of restricting needs. In the thought, “how is the Politburo supposed to know what is good for the people?” they always act as if needs are first of all a mystery and, secondly, as if they can’t be satisfied in principle. Yet in every society that now exists, the scope of existing needs is absolutely fixed and known. For example, it is known how many liters of beer were served in Germany last year, it is known how much has to be produced to reach at least the level of last year. It is known how many potatoes were eaten, how many people live in the country, how many apartments would be needed to give XY square meters to each person. These are not mysteries. The whole ideology is to act as if needs are a hard thing to figure out.
Question: But isn’t it true that needs are quite boundless, doesn’t everyone prefer a bigger apartment to a smaller one, doesn’t everyone want a more comfortable place than one with less furniture, etc.?
Yes, that’s a common objection. What does it tell us? First of all, it tells us that there are quite a lot of unmet needs. It says that these needs should be met. But nobody wants to hear it that way. Everyone wants to take this objection as proof that it’s not possible. The argument is supposed lead to the insight: yes, that’s true, if everyone would prefers not to live in such cramped quarters, it’s obviously not possible, so a method of restriction has to be found. This conclusion is supposed to pass by so quickly, and it always passes by too. But first I would demand: then build such houses, and build enough of them so that everyone can live decently, and that means that five people don’t have to live on 75 square meters, but everyone should get 30 square meters or so. Now, of course, it’s clear what someone who wants to prove that needs can never be satisfied is going to say to this. He will ask: why not give everyone 130 square meters? Why not give everyone a mansion?! Of course, this can be continued at will until one finally arrives at goods that really can’t be increased any more: what if everybody wants to own land, and so much of it that there’s not enough room left for the 80 million inhabitants of Germany? Then you finally have some kind of nature-given argument for the necessity of restriction.
What does this objection do? The appeal of the whole process is that it intentionally moves away from the needs that exist, that people really have. And just for the sake of principle, this is carried to an extreme until it seems to prove that one always finds a need that is greater than the possibilities of satisfying it. In the end, you end up with things like: Persian carpets that are hand-woven by children, manually assembled sports cars ... You have to agree: cars that are manually assembled and devour as much labor time as a human being needs to live a whole year – one certainly can’t make those for everybody because they would starve in the meantime. At this point, someone who wants to prove that needs are greater than the possibilities for satisfying them reaches for objects that are really direct products of exploitation, of which it must be said: they can only be made if other people are excluded from the satisfaction of needs. I like it when people are willing to provide this type of evidence because it almost proves my point.
Question: But aren’t there rational limits to the productivity of an economy? Is it possible to simply produce, for example, twice as much wheat beer as now? Aren’t those questions that have to be addressed?
On one hand, I think the example is useless. Nobody in the world would deny that you can produce twice as much wheat beer. On the other hand, it’s okay to ask how much production of a particular good is actually possible. But then one is getting away from the observation, how the justification of the market economy works at this point, namely when its advocates say: there must be a restriction of needs and it is good when the restriction is produced by money, because then everyone can choose for themselves how they want to restrict themselves. But there is an assumption here, namely that the restriction must exist.
I dislike the whole idea that “there’s no solution” because it acts as if the whole world is looking for ways to meet needs better – and then finds there is no solution. The idea wants to go somewhere else, it wants to say: complaining about our economic system is out of the question because it is the optimal way of reconciling the possibility of satisfying needs with limited resources.
Once again, two assumptions are being made. On the one hand, there is the assumption that needs are boundless. This idea is wrong. Needs are not boundless; every need has its own measure. Example: it is nonsense to assume that the need for beer is unlimited; it might be that somebody wants to have six wheat beers per evening, but then he is underneath the table and doesn’t want twelve more on top of that. In principle, this also applies to other needs; there are certainly many that are unsatisfied, but each one is not unlimited in itself, but has its own measure.
The second side is that production has its means and is measured by the level of productivity and the labor available. But this free market “argument” does not intend to ask how great really are the productive possibilities, this is not what they are asking, nor do they intend to ask what needs really exist so they can then be satisfied. It’s very different. They say that the current system is a quite optimal coordination of these two variables that are fundamentally impossible to bring into line. That’s its appeal, and also why it’s so ideologically bogus: the claim isn’t that needs come into play. Rather, the claim is that needs come into play in the best possible way, nothing more is possible.
Question: Again in regards to technical facts, it is said that in any economic system, given the current state of technology, productivity and available resources, there can be conflicts between needs that can’t be satisfied simultaneously; for example, if the total area of land used for agriculture is given, and more potatoes are grown, then you have to accept that less wheat will be grown.
Yes, the problem you raise is a variant of the equation N > S. And the idea is not good. For the following reason: an individual or a society must simply make the effort required for the needs that it wants to satisfy. If you want more, you just have to work more. If the working day is longer, you can also produce more. If you want more leisure time, then you have to be content with less. That applies to the individual as well as to the society. In this respect, the claim that you always have more needs to be satisfied than you can satisfy is wrong. For those needs you want to satisfy, you have to be prepared to make the necessary effort. And perhaps the effort also gives a measure of the importance of the need! :
Question: Yes, for the goods/needs you are talking about, that’s ok. But then take something like raw materials, which can be really limited...
Then you just have to deal with these limitations. It’s important to see how it differs from the claim of economics, which says that I always have more needs than I can satisfy, and then I’m doing fine when my self-restraint is done through the market. Once again: every need has its own measure within itself, so needs are not endless; in the other half of the objections along these lines, you end up day-dreaming: you are deliberately looking for examples of things that are so unrealizable that everyone immediately notices that an example of non-feasibility has been found, so that you can then say: see, you don’t have the time for it. Well, if you don’t have the time for it, then don’t do it! In other words: a planned economy consists of planning for the needs that it wants to satisfy, that are to be satisfied collectively, and then it organizes the necessary effort. A planned economy does not consist of finding a method of first envisaging more needs than can be satisfied and then achieving the best possible trade-off. That, however, is the image that the market economy wants to have of itself.:
7. The market as a prevention of the monoply power of the producers
New point: the praise of the market as a praise of the constraints which are connected with freedom on the side of production. Conversely, there is a discrediting name for the planned economy: command economy. In this name, everyone immediately hears that it must be something very bad, something that makes you think of barracks or something similar. What, by contrast, is our market economy? In the first instance, it is a free economy. In the market economy, everyone is free to produce what they want and to spend whatever resources they consider worthwhile. But that’s only the first half. No sooner is this freedom praised than a praise of constraint is added to it: thank God we have the constraint of the market which saves us from a producer dictatorship! In the command economy, shoddy production was forced by the Politburo. The next thought introduces the free producer in the market economy, who one thinks could rule over the society. Then the market is introduced as a fine remedy against this, because it prevents the producer from dictatorially ruling over the consumers.
Again, there is an assumption here that is made about both types of economic system, the command economy as well as the producer dictatorship. The assumption is that people who are involved in a division of labor, which is generally considered beneficial, want to do something different than satisfy the needs of those for whose needs they produce. It is feared that the producers, if not compelled, would do something other than produce useful things for demand. The idea is also found in the image of an unfree economy, the command economy, and is then branded as wrong, namely that a central office dictates to the producers what they have to do. A conflict of interests is assumed on both sides, but it is not made explicit.
Why would producers prefer not to produce what people need? Why do we have to thank the market for forcing production to be driven by demand? Why do we have to thank the market for forcing the producers to be efficient? It’s as if it was completely obvious that producers who are not forced to produce would never contribute to the division of labor. But the reverse is supposed to be true: producers who are forced by a central office are oppressed. In other words: producers must be forced, but not by a central office – that would be wrong!
To put it the other way around again: If one really thinks of a division of labor, a division of the necessary work, i.e. one person does this, the other person does that, so that in the end a large range of products comes out of it and a large range of needs is satisfied. If there is a central office that says: you make boots and you make sandals, what wrong has been done to these producers? It’s not worse to make sandals than to make boots or vice versa. The idea of a politburo oppressing the producers is just as wrong as the other way around, the idea that you have to force the producers to make sandals. Yes, what else should they do but make sandals? Do you see the trick? It has long figured into the assumption in the private economy, remember, that the supplier of a product prefers to produce trash and get millions for it. So the conflict of interests in the private economy has long been assumed but not talked about, because if it were talked about, a criticism of the market economy would follow. So now a conflict of interests in the private economy has been assumed, but it is assumed to apply to any form of division of labor like a natural characteristic, in order to then introduce the compulsion of the market as the beneficial remedy against the bad person who, as a producer, screws the consumer and, as a consumer, takes advantage of the producer.
8. Commitment to efficiency and a balance of interests between consumers and producers – entirely without commands
The market – thank God it exists and not a tyranny of the producers! – thus allegedly forces efficiency, cost-saving production, quality. Is this true? What purpose does the market actually serve? Well, a production that is successful on the market, namely in terms of the purpose that is important in the market economy. That’s what the market actually forces. Each supplier is in competition with all the other suppliers, and he has to assert himself with his market share against the other suppliers, otherwise he will be quasi-expropriated, he will quickly have nothing, he will not be successful on the market. But what is it that he is forced to do? He is forced, firstly, to pursue his own goal, namely, to earn money on the market, and secondly, to do what is necessary for this. And that has nothing whatsoever to do with efficiency, quality, or a demand-oriented production. It has to do with efficiency in making money. What does efficiency mean? By the way, this is an important point: one is often intellectually tricked when efficiency is talked about, because when talking about efficiency one always has to specify what the criterion is for achieving efficiency. Efficiency means: an activity that is done in accord with its purpose, and indeed accords well with its purpose. But the purpose that corresponds with it is no longer mentioned. Nowadays, everyone joins the chorus of those who say everything has to be run as efficiently as possible. But the market, what you should be efficient at, is no longer mentioned. So its true: of course, market producers have to produce efficiently. But efficient in what sense? In the sense that their costs must be low so that a profit is included in the selling price. Is there any other criterion for efficiency in a market economy? That is very doubtful, and I will show later that efficiency in our society is something completely different than working sensibly. It can be said in another way: the market does not force efficiency, but in this society the market defines what efficiency is.
Take, for example, the topic of quality. Does the market force quality production? The hell it does! The market forces a production that corresponds to demand, that is capable of taking advantage of demand, that is capable of attracting the money in the citizens’ wallets. And for that end, trash is just as good if it fits the poverty of the customers – so it’s not true that the market forces quality! Our country is currently obsessed with the issue of Mad Cow Disease – yes, the market has once again worked perfectly, by the way. Everyone involved swears that it was the market that forced them to do what they did. The media is looking for culprits and they have found some: the farmers are swine because they fed their animals the wrong stuff; the meal producers are the culprit because they mixed poisonous meat-and-bone meal into their feed; the European Union is the malefactor because it lowered the import prices for beef so terribly, and so on. And in the end even the consumers are to blame because they always wanted cheap meat. This is funny. Now the farmer says that he only did what is economically rational according to the market: he only tried to produce beef as cheaply as he could in order to offer it at a price that would sell on the European market, and he became increasingly efficient at the process. That’s true, he had to put less and less cost into a kilo of beef. Well, then something like Mad Cow Disease is the result. The consumers also behaved perfectly in terms of the market economy, they compared the prices and then took the cheapest, that is indeed their role. Now they get to hear it as an accusation, that they always only wanted the cheapest meat. Here we have a wonderful case showing that, of course, in a market economy the falsification of a use value is a means to make money! In an economy where there is a conflict of interests between producer and consumer. That, however, doe not exist in nature, it does not exist in every mode of production in world history, but only in the one with private production. And when the buyer notices some of the falsification of the use value that is constantly being attempted, he has to decide whether to buy the cheap trash because he can’t afford any better, or whether to pay more to buy a better quality grade. But the fact that in our developed economic system there are 100 levels of quality and price for every product, that there is an always an offer to poor people, even if a bad one, shows that production is perfectly adapted to the market. As suppliers, there are specialists on every wallet. There are also luxury sellers, for meat too, and there are also customers who buy luxury meat, this just depends on their wallet and how much money they have.
The claim that the market ensures quality is one of the most beautiful fairy tales about the market economy. The market forces only two things: first, a comparable deal and, second, a deal that is adapted to the poverty or wealth of the customers. Turned around: the desire to make money encourages producers to constantly experiment with quality, to constantly try to lower the quality without the buyers noticing. If the buyers notice, then it is price-damaging, but until they do, the reduction in quality is one technique, as in the case of food falsification, which has been around for hundreds of years and now takes the modern form of Mad Cow Disease. Next year, perhaps a salmonella scandal, or in the form of chickens being fed sewage, or or – it just goes on and on. And this is all free market, because everyone involved behaved perfectly in line with the market.
Conclusion to this point: The market forces efficiency, but not an efficiency in concrete work or in the production of goods in general, but efficiency in the question of costs; it forces ever less expenses for a given sales price. And I very much doubt that this is a rational way to produce.
9. The market as a spontaneous and self-regulating organization of production
There is a further opposition between the market and the planned economies. The planned and therefore inflexible division of labor in the planned economy is contrasted with the spontaneous and self-regulating division of labor in the market economy. This is also one of the views of economics, which anyone has dealt with it has heard. The claim is: In the east, there was a planned division of labor in which a political authority specified how large the steel sector had to be, how large the car industry had to be, etc. All sectors of national production were politically regulated in terms of quality and quantity. By contrast, the free market economy regulates itself, always much better than if it were planned, because the central office can’t know what is needed in society, it can’t react quickly and flexibly if there is a change in demand.
There are two things to be said about this claim. I have already said half of it earlier under the heading, “Coordination achievement, my ass.” The unplanned, self-regulating division of labor in the market economy, which is praised, is nothing other than thousands of people trying to find a niche in the division of labor where they can make money. Some make it and others ruin themselves in the process, working half their lives and then finding they are broke. A lot of people go into business for themselves, try to find a niche in the division of labor, and if that is the rational, spontaneous, self-regulating division of labour, then at this point it is really striking: the human victims in this division of labor simply don’t count.
The other half is this: It is also clear that in a market economy, society does not divide the labor. It is not at all the case that some people say: we need so much of this and so much of that, but rather all sorts of contestants try to push their way into the supply, often enough by displacing others. And what comes out in the end is called a division of a labor, although the labor was never divided. The real meaning of the term “division of labor,” cooperation, the interrelation of the qualitatively and quantitatively determined sectors of production in a society, never happens at all in the market economy. The whole thing is rather the result of a struggle in which there are winners and losers.
There’s another funny aspect to the claim that production can’t be planned: as if the market would supplant the entrepreneurs’ knowledge of the concrete division of labor. It’s not as if the entrepreneur stumbles blindly in the market and says, “Now I will see what I will get.” Anyone who makes a car knows how much plastic he needs, how many prefabricated plastic parts he needs, how many wires he needs, how much sheet steel he needs, and so on. And he knows all that qualitatively and quantitatively. And not only that. He also knows his suppliers. He also knows whether his suppliers are able to cope with an increase in demand or whether he has to find others. It is not true that in a planned economy, planning is done and doesn’t work, and in a market economy, everyone tries it out and sees, and that works much better. In a market economy, planning is done no matter what! But simply for a different purpose. In the factory, planning is meticulous, an assembly line is a total planning of work, and when there are no more assembly lines and instead group work is introduced, then even more planning is done; in “just-in-time,” a thoroughly clocked process, there is really no lack of planning. But not only in the factory. A lot of planning also takes place between the factories and the suppliers, now as an electronic link between two productions. And in our society they even plan for what can’t be planned at all: they conduct market research and try to plan their sales! You can read today how many cars Mercedes, VW, Ford will sell next year. And then they say: Planning is not possible – somehow they have totally lost their marbles!
The comparison of the two production systems, market economy and planned economy, is wrong, as I said earlier. Now here comes a new version of the error: planned economy defines much less than socialism; the fact that a national economy is centrally planned is far from being socialism. It still depends on the purpose which it is planned for. Every war economy is a planned economy. The Kaiser and Hitler also established planned economies, at least in part. So a planned economy would fall short for us, it would still depend on the purpose the planning is for, what the rewards are supposed to be. And there are many more aspects to rewards than simply producing the greatest possible output; for example, how the work is done, whether one is treated well, whether one isn’t completely exhausted after work, but still has energy to get something from life apart from work, and so on. All these aspects of reward exist. And on the other hand market economy defines much more than a method of coordination. Market economy economy already includes – unspokenly but very definitely – the purpose of the whole mode of production. I am now getting to that.
10. The market – not a place, but the circulation of capital
Market economy – what does it say about production and its purpose? Well, a market is not a location (marketplace), but a state of affairs where all products are commodities, where anyone who produces something makes the thing into an economically meaningful operation for himself only by finding a buyer who gives him money for it. That’s what a market is. In this respect, a market economy presupposes a form of division of labor: without each one producing something different, there would be no market economy. The illustrious subsistence farmers have no need for a market, they simply have nothing to do with each other. In a market economy, each produces for the other, but satisfying the needs of the other is not a purpose. This is a very strange form of division of labour: everyone produces for the needs of others and only for themselves. The need of the other is necessary, but it is not the purpose of production. It is not that one produces the shoes that another needs, so that he then has the shoes, but: the need of the other is the weakness by which he is gotten hold of. The fact that the consumer needs my goods is my lever to get money out of his pocket. And everybody has the need to collect as much money as possible with the goods he produces or which he has to sell (for many people, it is the case that they sell themselves or their working hours). And now one must recall the statements of the economists which claim that the purpose of every economic system is the production of useful goods... The very first and most abstract discovery about our economic system is that the production of useful goods is not the end but the means. For every member of the economic community, the production of useful goods is not the end, but making money; the goods are merely the instrument for this. And what is money in the first instance? Money is the command over the world of commodities, the instrument with which I can always make what all the others have produced accessible to myself.
Question: The market economy is so successful because it suits the evil of human nature or…?
Let’s look at the essentials of this point. Much has been written suggesting that other economic systems, and especially a planned economy, overestimate the rationality of human beings. The first counter-argument to this is: What does successful mean here? The real comparison between the market economy and really existing socialism was not a non-violent comparison of economic performances, but always involved violence, which is connotated by the Cold War. There are even those who relate the question of the “better” economic system to this violence comparison and ask: yes, who built the better weapons? Who was able to kill whom? So capitalism is the better system after all! The second point is this: You have come up with an answer, and this is the last answer that is possible in such debates, and this is the argument: I know that humans are bad. This is also the case, by the way, in the other social sciences. At the end of every debate, the following is claimed: this does not make sense, but unfortunately humans are irrational, and under this premise, that’s the way it has to be. Main counterargument: How do you know that humans are so bad, so stupid, so irrational? How do you know the nature of humanity? This counter-question aims at the following point: Well, you know it from the society that you have before you, how else would you know? In the society here, people are actually forced to have hostile, conflicting interests. If you are a private owner and want to be successful on the market – your character or your imagination, what you want and what you think, doesn’t matter at all – then you have to prevail against the other suppliers. This is not a question of what you want but of what you have to do. Now you have turned it around and said: the fact that he stands in the market, and that he has to do that, comes from the fact that he has wants and has always wanted this in his inner being. And then it’s fortunate that this takes place in the form of the market and not in the form of a fight of “all against all.” You have no other proof than the fact that in our society people are in a hostile opposition to each other. Then, of course, there are – you have already hinted at it – clues or evidence going back to other societies and Cain and Abel and anthropology. The whole joke of anthropology is that somebody wants to declare what he sees here in this society to be necessary without further argument. To prove this he starts studying primitive peoples, although they are actually completely irrelevant ...
Question: Are you saying that man is evil only because of the system ...
I don’t want to say that. However, I want to hold on to the idea that this is a circular process: from the observation of this society and the conflicts that exist here, it declares these to be humanly inevitable without any further argument, simply by declaring that the conflicts between people are in their nature or flow out of their nature. That’s what I want to say. And the even stronger argument against the claim that human beings are inevitably evil has already been hinted at: this claim has an inherent contradiction in it. When someone says that people are stupid, the first thing I always want to ask is: does that apply to you too? Are you stupid? And if you are, wouldn’t you stop yourself from being stupid? When I find out that I have done something stupid, I stop doing it. But part of our bourgeois worldview, part of our society’s worldview, is that humans consider themselves to be idiots, that is, they know better (!), and at the same time they believe that they can’t change this. And that’s a stupidity that isn’t necessary. Anyone who says humans are stupid says he knows better, otherwise he wouldn’t say it.
In discussions of this worldview, there is also often this contradictory pair of terms: egoism/altruism. In capitalism, all people are egoists and if they were altruists, then they would be in favor of socialism. One always thinks in these alternatives. My rebuttal, however, is hardly that people are egoists and that they should stop being egoists and become altruists instead. One can hear this sermon in any church. My argument is: people are bad egoists, they do not organize the appropriate supply for themselves in a sensible way, so they have to work a lot more than they need to, they get much less from it than they could.
11. Success on the market aims against the source of income of those who have to live off the sale of their labor-power
So far, we have noticed that the market economy is not a method, but that it already defines a significant amount of economic activity. It’s an economic system about making money, in which the production of goods is not a purpose but a means of making money. At this point, another step is still missing. If it is about making money, then producing and selling by oneself to get money would be a bad way of doing it, because one would always have to put in the work oneself that one withdraws afterwards from the market in money. And that’s not the way its done either. A much better way of making money is to pay people to have them work, i.e. to organize other people’s work and sell what they produce. If you can only take out as much money from the market as you have put into it through your own work, then no great riches will ever come about. Great riches come about when you have other people work and sell what they produce. And then the efficiency of this production process, which we have talked about, gets completely different characteristics than one generally thinks of when talking so casually about efficiency. It would be efficient in the sense of the purpose to then perhaps increase productivity, for example, to buy better machines. What’s that efficient for? For saving on paid labor. Isn’t that lucky? It is for the employer; for the employee, it means a layoff. Then his source of income is gone. Efficiency in our society aims against the source of income of those who have to sell their labor-power. But efficiency in production can be achieved just as well if you don’t increase productivity, but simply pay people less. Because if efficiency means capital efficiency and capital productivity, then it is just as good to pay people less, to make them work faster and work more productively. It’s all the same. So at this point, we should not join those who praise efficiency as something great, or even consider it sensible. Efficiency in our society consists in the fact that the less the wage workers get from their work, the greater the market success. It is noticeable that when it is not a question of the efficiency of concrete work, that is, of concrete purposeful production with the aim of useful goods, suddenly completely different aspects of efficiency come into play.
12. The theory of the “invisible hand” – the metaphysics of economics and its utility for a watertight praise of capitalism
I would like to make one more point. If you sit in an economics seminar at the university and tell the lecturer something like I have said here with a critical tone – will he then say that this is nonsense, that the world is not the way I have maintained? No, he will not do that. He says that’s the way it is, but that’s the joke of the market economy, that there are all kinds of selfish interests at play, everyone thinks only of themselves, and the success of one person is directly limited by the success of the other, often enough the failure of the other, because they are competitors. And then a big “but” comes along and they quote Adam Smith: there is this all-around egoism, but thanks to the invisible hand of the market, the “greatest common good” is created. At this point, I will only explain one thing: economists criticize their classics, the early political economists (Marx as well as Ricardo or John Stuart Mill) because they talked about value, not only the left but also the right, which is the basis for the laws regulating exchange and competition. The economists can’t perceive this and accuse the early economists of being metaphysical because they talked about value, about something behind the facts. I don't want to get involved in whether this is justified or not, I just want to judge the standard. If you can’t under any circumstances talk about something behind the facts, what’s with the “invisible hand”? What kind of an invitation is that anyway – don’t look at market events on the level on which they occur, where the success of one is the damage of the other, but step back a bit and look at things from another level, and then you will see that behind the fact of conflicting egoists, there is a great general good. This is an invitation to metaphysics, to not analyzing things as they are, but to take a different view of them, such as the view that the market is the great coordinator.
At this point, the following is important: the praise of the market (the great coordinator, bringing the greatest general prosperity) is not the same as the claim that everything is for the best, e.g. the situation of the goods supply. This methodological concept of the market economy, that this type of economy has a great mechanism, this idea frees itself from the claim that it is all for the best, it doesn’t deny the fact that there all kinds of deficiencies in the midst of the most glorious market economy. The claim about this great mechanism is rather a way to respond to critical objections without giving up the idea of the greatest general good. Example: the housing shortage. Would the existence of a housing shortage be evidence that the market does not function well after all? What does the economics community say about this? They say that it is not the market but the market participants who are are to blame. The market participants did not behave in line with the market, they were not ready to pay the right price for housing. As a result, less housing was made available. When rents rise because of the shortage of housing, this is a natural reaction of the market. This is often accompanied by the small promise that the basis has been laid so that the number of dwellings will (soon) increase again, because when rental incomes are high, investment in housing construction increases again. Whether that actually happens remains to be seen.
Another example: unemployment. What do those who are always upholding the coordination achievement say about this? Again, they say it is not the market’s fault, the workers are too expensive, and if they were cheaper, then a market-clearing of their product would take place. In this respect, the theory is funny. It doesn’t claim that it’s good, but it’s a theory for distributing blame for anything anyone any time finds bad. If something’s wrong, if there’s any nationally recognized disgrace, then the market economy ideologists say: yes, it can’t be any other way if you don’t act in conformity with the market. That’s a funny idea, because the first half was: people are stupid, it’s a good thing that the market exists to coordinate them, it establishes objective reason, which is good because humans are so subjective and weak in the knees. In short: the market will do what humans can’t. And now on the second level they say: yes, if people don’t do it right, the market won’t be able to either. And now take a look at financial journalism and read how the criticism of all kinds of things is formulated. Whether it’s the housing shortage, Mad Cow Disease, or environmental pollution, the message is always: yes, it’s all because the actors don’t behave in line with the market. Now it’s up to the people again to make sure the market works. First, the market was supposed to be an assistance device for the weak and stupid humans, now suddenly the humans have to ensure that the market functions properly. And whenever there is something to criticize, people are told: you have violated the market. And with that, the theory is finally immune. No fact can be used as proof that the market is bad, because every acknowledged bad thing is automatically proof that people have violated the market. It’s funny: in the end, nobody claims that everything is well coordinated anymore, but free market economists say: everything would be good if people weren’t constantly violating the market.
Maybe one more note: everything that the government does for the society, i.e. building schools, organizing a retirement fund, building infrastructure, i.e. those things that are necessities for the functioning of a society, is a proof that the market isn’t be able to do such things. As if the market provides for the common good...!