A History of Economic Doctrines / from the time of the physiocrats to the present day

by Charles Gide; Charles Rist

But the opposition between social need and effective demand by no means disposes of his argument. The opposition needs some proving, and some explanation of the producers’ preference for demand rather than need ought to be offered. The explanation must be sought in the fact that the capitalistic producer of to-day manages his business in accordance with the dictates of personal interest, and personal interest compels him to apply his instruments to produce whatever will yield him the largest net product. He is more concerned about the amount of profit made than about the amount of produce raised. He produces, not with a view to satisfying any social need, but simply because it yields him rent or profit.[900]

This contrast between profit-making and productivity deserves some attention. Sismondi had already called attention to it by distinguishing between the net and the gross product. A number of writers have treated of it since, and it holds a by no means insignificant place in the history of economic doctrines.[901]

The opposition is dwelt upon in no equivocal fashion by Rodbertus. This pursuit of the maximum net product is clearly the producer’s only guide, but the conclusions which he proceeds to draw from it are somewhat more questionable. If we accept his opinion that the satisfaction of social need and not of individual demand is the determining factor in production, we are driven to the conclusion that modern society, actuated as it is by this one motive, cannot possibly satisfy every individual demand. But we have already shown that the phrase “social need” has no precise connotation; neither has the term “productivity,” which is so intimately connected with it. Further, if society has no desire to impose upon its members an arbitrary scale of wants that must be satisfied—in other words, if demand and consumption are to remain free—it can only be by adopting that system which recognises a difference between the present and the future “rentability” of the product. This difference between the sale price and the real cost of production of any commodity must, it seems to us, be recognised even by a collectivist society as the only method of knowing whether the satisfaction which a commodity gives is in any way commensurate with the labour involved in its production.[902] Pareto has given an excellent demonstration of this by showing how collectivist society will have to take account of price indications if social demand is to be at all adequately supplied.

2. Turning to the other desideratum, namely, a fuller utilisation of the means of production, Rodbertus contents himself with quoting the criticisms of the Saint-Simonians concerning the absence of conscious direction which characterises the present régime and the hereditary element which is such a common feature of economic administration. He is in full agreement with Sismondi when the latter declares that production is entirely at the option of the capitalist proprietor.[903] In this matter he is content merely to follow his leaders, without making any contribution of his own to the subject.

3. There still remains a third economic function which society ought to perform, and which Rodbertus considered the most important of all, namely, the distribution of the social product. An analysis of the present system of distribution was one of the tasks he had set himself to accomplish, believing with Sismondi and other socialists that a solution of the problem of distribution and the explanation of such phenomena as economic crises and pauperism constitute the most vital problems which face the science at the present moment.

A just distribution, in Rodbertus’s opinion, should secure to everyone the product of his labour.[904] But does not the present régime of free competition and private property accomplish this?

Let us watch the mechanism of distribution as we find it operating at the present time. Rodbertus’s description of it is not very different from J. B. Say’s, and it tallies pretty closely with the Classical scheme. On the one hand we have the entrepreneur who purchases the services of labour, land, and capital, and sells the product which results from this collaboration. The prices which he pays for these services and the price he himself receives from the consumer are determined by the interaction of demand and supply. What remains after paying wages, interest, and rent constitutes his profits.[905]

The distribution of the product is effected through the mechanism of exchange, and the result of its operation is to secure to the owner of every productive service the approximate market value of that service. Could anything be juster? Apparently not. But if we examine the social and economic hinterland behind this mechanism what we do find is the callous exploitation of the worker by every capitalist and landlord. The various commodities which are distributed among the different beneficiaries are really the products of labour. They are begotten of effort and toil—largely mechanical. Rodbertus did not under-value intellectual work or under-estimate the importance of directive energy. But intelligent effort seemed to him an almost inexhaustible force, and its employment should cost nothing, just as the forces of nature may be got for nothing. Only manual labour implies loss of time and energy—the sacrifice of something that cannot be replaced.[906] Consequently he does not recognise the intellectual or moral effort (the name is immaterial) involved in the postponement of consumption, whereby a present good is withheld with a view to contributing to the sum total of future good.[907] And he proceeds to define and to develop the opening paragraph of Smith’s Wealth of Nations: “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour or in what is purchased with that produce from other nations.”

The difference between his attitude and Marx’s is also interesting. Marx was thoroughly well versed in political economy, and had made a special study of the English socialists. His one object was to set up a new theory of exchange, with labour as the source of all value. Rodbertus, who drew his inspiration from the Saint-Simonians, focused attention upon production, and treated labour as the real source of every product—a simpler, a truer, but a still incomplete proposition. Rodbertus never definitely commits himself to saying that labour by itself creates value, but, on the other hand, he never denies it.[908] Social progress, he always maintained, must consist in the greater degree of coincidence[909] between the value of a product and the quantity of labour contained in it. But this is a task which the future must take in hand.[910] Again, if it be true that the worker creates the product, but that the proprietors of the soil and the capitalists who have had no share in its production are able to manipulate exchange in such a way as to retain a portion of it for themselves, it is clear that our judgment concerning the equity of the present system needs some revision. This secret embezzlement for the profit of the non-worker and to the injury of the diligent proceeds without any outward display of violence through the free play of exchange operating within a system of private property. Its sole cause lies in the present social system, “which recognises the claim of private landowners and capitalists to a share of the wealth distributed, although they have contributed nothing towards its production.”[911]