Socialism embodies a belief that a central democratically elected authority can encourage a better production and distribution of wealth than a market in which private entities are left to operate freely. It is an economic and political phenomenon rather than a social phenomenon (for example, it has little to say about family life, religion etc.). Socialism proposes that social control of economic life is desirable, including the social control of the means of production but excluding the social ownership of consumer goods (quoting A. I. Mannan). It recommends: a) abolition of the private ownership of the means of production, but not all private property b) production to be determined by social requirements not the availability of profit, c) social service to replace profit as the motive behind economic activity (Joad, quoted by A. I. Mannan).
State ownership of the means of production indicates that profit and rent can continue to be taken, but that they go to the state for distribution on a socially equitable basis. Hence price and profit signals continue to work. But Socialism requires central planning of production, therefore it is criticised for a bureaucratic tendency, political bickerings etc. Socialists reply that competitive industry is much less successful than its adherents believe, citing inequality of wealth distribution, speculative booms and busts, etc.
Other features of Socialist thought include the following:
~ Income distribution to be more equal, often within limits defined by incomes policy and taxation policy. There should be no necessary connection between the amount of the wage paid to labour and the value produced by that labour.
~ Elimination of large property incomes and unearned incomes, thus encouraging more even wealth distribution.
Two schools, one French and one English, developed the early Socialist ideas. The French school arose from liberal philosophers who criticised classical arguments. The English school arose from a polarisation of capitalists and workers in the new industrial environment of England, and is revolutionary in approach. Many early English Socialist ideas are based on the Ricardian school but point to revolutionary implications (e.g. conflict of classes following Smith and Ricardo), and highlight the "class struggle". All Socialist schools accept the Ricardian labour theory of value (that the exchange value of a commodity represents the amount of labour embodied in it), all accept the productive and unproductive labour theory, and all accept the surplus value theory. Thus all Socialist schools see exploitation and misery as a result of capitalist economic activity. There is also a widespread belief in the Benthamite proposal that the greatest happiness of the greatest number should be the goal of state policy. State apparatus and social organisation can be altered to provide this utilitarian goal.
SOCIALIST THINKERS OF THE FRENCH SCHOOL
1773-1842. La Richesse Commerciale 1803 follows Smithian doctrines closely, Nouveaux Principes de l'Economie Poltitique 1819 shows dramatic rejection of classicism and earlier interpretation of Smithian doctrine. His work is quoted by Marx and Engels in The Communist Manifesto. Sismondi like Ricardo stresses distribution and holds like Malthus that political economy is a wide subject that can only be addressed with a wide knowledge of history and social trends. Wealth is not the sole object of analysis, rather wealth should be analysed in its relation to man. Sismondi sees workers and capitalists in opposition, and sees expansion of production without betterment of the standard of living of the workers. He holds that capitalists are powerful and can exploit the workers. The outlook for man is bleak unless preventative action is taken, thus Sismondi does not believe in the common interest of all being served by a self-adjusting capitalist structure. He agrees with Malthus that workers cannot absorb the full amount of their produce with the wages they are paid, but disagrees with Malthus's idea that unproductive consumers will act as a safety-valve here.
His main idea is that over-production and crises arise from separation of labour and ownership. Labour is entirely dependent on the capitalist and must accept whatever conditions the capitalists apply to them. Since ownership is separate from labour, revenue accrues to the capitalist. Revenue for the workers then depends upon their being employed by capitalists, but employment does not depend upon needs of the workers to pay their way, rather it depends upon the capitalists' need to produce. Capital is obliged to seek continued increase of production in order to generate a return. Ricardo's self adjusting mechanism (capital eventually cannot be employed profitably and is therefore spent) does not apply because it is difficult to withdraw capital from employment (heavy machinery and buildings for example). Competition then forces capitalists to increase workers' hours of work and reduce other costs making the day's work less well paid and more burdensome. Production then continues, at lower cost, and over-production results. Unemployment eventually arises in a crises of over-production. Competition is thus condemned as a force for continually reducing workers' revenue. Capital, not want, determines production. Competition leads to worsening conditions of work, and the capitalists monopolise revenue from workers' effort. These three factors cause a disequilibrium. Demand grows unevenly. Workers cannot satisfy basic needs, capitalist can satisfy luxury requirements but demand from this source is insufficient to employ all workers and leaves them lacking in basic requirements all the same. In other words, a disparity of demand arises. Thus the capitalist system has an in-built tendency to widen the gulf between production and consumption. Sismondi's theory forces economists to address the idea of disequilibrium.
Sismondi's remedies are ambivalent. He is against laissez-faire, but rejects communism because he still believes in private interests. He toys with the idea of limiting capitalists' activity (invention, production) by law so as to limit their growth in power, or establishing new social order. He defines the aim of policy as the reunion of property and labour, and re-establishment of equilibrium between production and consumption. The revival of the small producer and artisan is seen as a means of attaining such a goal.
1809-1865. Son of a small brewer. Active part in revolutionary movement 1848, friend then foe of Marx. Critic of other Socialist thinkers too. Much more important than Sismondi in influencing Socialist thought. He is a main inspiration behind the anarchist doctrine. More important as a political theorist than economist. Marx says he is a petit-bourgeois. Moral idea of justice as supreme principle of human life underlies his work. Justice is an equilibrium between opposing forces, since the contradictions between such forces cannot be removed but can be balanced.
Writes Qu'est-ce Que La Propriete Ou Recherches Sur La Principe Du Droit et du Gouvernment 1840 saying property is theft where it gives the owner the right to derive an unearned income, but he admits the right to private property for those who have worked for it (i.e. not the capitalists). He holds that the main form of abuse of property is interest and therefore believes in gratuitous loans. Rent, interest and profit should be abolished but private property remain. Proudhon never advocated common ownership of the means of production, and was against communism because of its antagonism toward private property.
In Contradictions Economiques ou Philosophie de la Misere 1846, he argues that the state should be abolished, that anarchy is the ideal form of living with voluntary association as the replacement for administration of affairs. Thus he is against Socialist theories which he felt involved a coercive state. He believed in society of artisans and small farmers. Groups of workers should take over the running of larger industry with interest-free loans. Money is a commodity to be bought or sold at cost. Lending at interest enables the owner of money to sell the same thing several times over at greater than cost without losing ownership. Thus confuses capital in a monetary form and money as a medium of exchange. Nature provides man free of charge with raw materials, thus labour not capital is productive. Proudhon therefore advocates an exchange bank for lending inconvertible paper money without interest. Notes would be issued against commercial bills representing a sale made or agreed. Such bills would be presented to the bank and discounted at zero interest. No risk would arise here since monetisation of such bills would only expand money supply in line with economic activity (Proudhon thus repeats the 'Real bills' fallacy promoted by the Bank of England following the 1810 Bullion Report). Interest free loans help workers to produce for themselves and thus reunites capital and labour as proposed by Sismondi. This policy was regarded highly by various fringe groups in reaction to the oppression of the financier at that time.
Jean Baptiste Say
(see neo-classical school)
SOCIALIST THINKERS OF THE ENGLISH SCHOOL
1783 - 1833. In An Inquiry into the Principles of the Distribution of Wealth Most Conducive to Human Happiness 1824, Thompson argues that labour is the sole source of value and that by appropriating some of it through rent and interest, capitalists deprived labour of part of its fairly earned value. Thus he explains the unjust outcome of poverty existing despite plentiful resources, and the failure to satisfy the Benthamite objectives. Thompson's solution was to abolish the capitalist's tribute, such that workers no longer had to rely on the capitalist to produce surplus value for the benefit of the capitalists (Labour Rewarded 1827).
1799 - 1850? In A Lecture on Human Happiness 1825 Gray proposes that the unproductive classes are parasitical and that labour creates the only valid title to property. Exploitation through rent, interest and profit causes social ills. He authors The Social System : A Treatise on the Principle of Exchange 1831, and Lectures on the Nature and Use of Money 1848. He proposes ideas similar to Proudhon's Exchange Bank but avoids Proudhon's inconsistency by applying a labour theory of value throughout. A national bank would organise exchange of commodities and ensure that production and consumption were matched. A labourer would receive a coupon from the national bank giving him the right to a commodity that took an equal amount of labour to produce. Thus labour-time becomes the only true measure of value, not money. Gray wants to abolish private exchange but maintain capitalist conditions of production. Some historians criticise Gray for an incomplete analysis of money and too great a focus on monetary reform as a solution to economic problems.
John Frances Bray
1809-1895. Labour's Wrongs and Labour's Remedies or the Age of Might and the Age of Right 1839. Proposes similar ideas to Gray. A source of evil is in unjust exchange, and labour time is the true measure of value. Bray advocates universal exchange and abolition of private property and production.
1878-1869. In Labour Defended Against the Claims of Capital 1825 he aims to prove that combinations of working men can succeed in combating capitalists. He tries to prove that capital is unproductive, and analyses capital's function in the process of production. He says that capital is used indiscriminately as a word to describe two things: a) stored up labour (e.g. machines and materials) and; b) a command over current labour. If productivity of capital means the power to create exchange-value, then capital itself is not productive. Capital accumulation is the storing up of labour. Without the energy of current labour, stored up labour would be useless. Stored up labour must be used by current labour. If stored up labour was unused it would simply decay. Thus capital derives utility from current labour and brings a profit to the owner because it enables him to command present labour. Accumulated capital is unproductive without current labour. The natural order abolishes the capitalist middleman who intermediates stored up labour with current labour, in favour of the current labour that gives value to stored up labour. Hodgskin believes that as workers unions gather strength, government will no longer be necessary because class divisions will disappear.