Socialist Economic Theories
4.2.1. Sismondi, Proudhon, Rodbertus
In the field of economics the socialists of the first half of the nineteenth century made important contributions, producing a series of fairly homogenous doctrines, in spite of the diversity of approaches and cultural backgrounds.
The unifying element was provided by the influence of Ricardian economic theory, which, in different ways and at different levels, was felt by all the socialist economists of the period, from Sismondi to Rodbertus, from Proudhon to the Ricardian socialists.Jean-Charles-Leonard Simonde de Sismondi was a theorist of the anarchy of capitalist production and a critic of Say’s Law. Besides this, he considered laissez-faire as a capitalist weapon against the workers, who, due to competition and technical progress, were forced to accept subsistence wages and to undergo progressive impoverishment. However, the low level of workers’ consumption would hamper the realization of the surplus. Sismondi was the first economist to develop a theory of underconsumption based on the unequal distribution of income. Thus Say’s Law does not work precisely because of the unequal distribution of income. This argument is similar to that put forward by Malthus. Sismondi, however, proposed to solve the problem by redistributing wealth, not from the capitalists to the landowners, but rather from the capitalists to the workers—an objective that could have been realized through State intervention. Without advocating violent revolutions and without demanding the abolition of private property, Sismondi’s socialism aspired to construct a society dominated by small agricultural and craft producers, with an industry which distributed its profits also to the workers, land divided up into small plots, an efficient and extensive social-security system, and sharply progressive death duties. For these reasons Sismondi is considered the founder of the current of thought which is to-day known as ‘social economy’.
A few years later Pierre-Joseph Proudhon was to follow similar lines. He was closer to Fourier than to Saint-Simon. He argued for the abolition, not of private property, but only of its excesses, and he exalted individual liberty against any form of State control. His socialism presupposed the ability of individuals to spontaneously organize themselves, and aimed at constructing an economy made up of artisan and industrial co-operatives. He rejected class struggle, and proposed free credit as the main instrument for the construction of socialism: by this means the workers would be able to accumulate their own capital.
A contemporary of Proudhon, but professing quite different political and economic ideas, was Johann Karl Rodbertus. He was a Romantic and conservative critic of capitalism, and professed a reformist and statist socialism in which the inequality in the distribution of income could be, if not eliminated, at least reduced to decent limits. The instruments to be used to reach such a goal were, basically, taxation and the State regulation of prices. Rodbertus used the labour theory of value to demonstrate that the existence of incomes other than wages implies the exploitation of workers. Besides, he maintained that, owing to the tendency of wages to settle at subsistence level, technical progress would lead, on one side, to an increasing relative impoverishment of the workers and, on the other, towards a chronic predisposition of the capitalist system to under-consumption crises.
4.2.2. Godwin and Owen
In England the polarity between organicist and libertarian socialism was represented by the contrasting positions of Owen and Godwin.
William Godwin, in Enquiry Concerning Political Justice (1793), tried to construct his socialist theoretical system on utilitarian foundations, and arrived at a criticism of Locke’s justification of private property with arguments not dissimilar to those with which Rousseau had criticized seventeenthcentury natural-law philosophy.
According to Godwin, each individual has only the right to possess the goods necessary to his own satisfaction; and nobody has the right to maximize his own pleasure by impairing that of others. Private property, to the degree to which it contradicts this principle of justice, is illegitimate. At its base there is only the property right and the sanction given to it by the State. Godwin maintained that individual liberty and social justice are two sides of the same coin, and that the liberation of man from oppression requires the abolition of both private property and the State. He assumed that man is rational, basically good, and in possession of the means of realizing his objectives by persuasion rather than violence.On the contrary, the philosophy of Robert Owen was inspired by a pessimistic view of man. He did not recognize in humankind any natural aspiration to liberty. On the other hand, he thought that the character of man could be moulded simply by modifying his living conditions. Charged by the House of Commons to co-ordinate the works of a Committee of investigation into the state of application of the Poor Laws, Owen exposed his radical views in a report which was obviously rejected by the House itself. Then he developed a system of social organization inspired by educational objectives, and tried to put this into practice in his own factory. He considered the factory as the nucleus around which society should be built. The factory should be co-operatively managed; production should be increased by using the most up-to-date machines; the goods should be exchanged on the basis of embodied labour (‘equitable labour exchanges’); and society should provide not only for the production planning but also for the spiritual education of the producers. The ruling functions should be a prerogative of the old, and the whole hierarchy of social relations should be based on age differences. Gerontocracy is a common element of a great many of the Utopias of order; as it seemed impossible to do without a principle of authority, a power distribution based on age seemed to be the most natural and the least unjust.
4.2.3. The Ricardian socialists and related theorists
In England, Owen’s thought inspired a strong co-operative movement and, in the 1820s, a militant trade union movement which was later to converge in the Chartist party.
Three economists, followers of the Owenist movement, were known as ‘Ricardian socialists’: William Thompson, John Gray, and John Francis Bray. Two more economists, Thomas Hodgskin and ‘Piercy Ravenston', can be loosely placed in the same group, although they differ from the preceding three above all in their political beliefs, the former being an anarchist and libertarian and the latter a conservative.
These economists were directly linked to the classical tradition, especially Ricardian. They accepted the labour theory of value and, combining it with a special interpretation of the natural-law doctrine of ownership, tried to use it to support a theory of labour exploitation. From Locke they took up the argument that the source of value is labour. They then built a model of a ‘natural’ society and compared it to the real society. From Locke’s arguments about private property, they accepted those derived from the thesis of the natural right of each individual to possess the products of his own labour, but not those that aimed at justifying a particular historical structure of wealth distribution with the theory of social consensus and monetary convention. The Ricardian socialists did not believe that the capitalist system possesses any of those ‘natural’ characteristics Locke and Smith attributed to it. On the contrary, they considered it to be an artificial system, opposed to a natural-law right of fundamental importance—that of the worker to own the product of his own labour.
The Ricardian socialists also emphasized the role played by competition in the labour market in lowering wages. Competition pushed wages towards the subsistence level and, above all, forced them to remain at a level below the ‘value of labour’.
In regard to the theory of value and distribution, these economists were not so ingenuous as one might believe from Marx’s criticism of them.
Hodgskin in particular had a deep understanding of how the problem arose with Smith and the reasons for his analytical difficulties, and proposed a solution which could be considered as beyond criticism. He distinguished the ‘natural price’, defined as that prevailing in an economy regulated by natural law, and which can be expressed in terms of embodied labour, from the ‘social price’, defined as the one which prevails in real society. In real capitalist societies workers do not obtain the whole produce of their labour: they can obtain a good only if they provide a quantity of labour which is higher than that required for producing it. They buy commodities at ‘social’ prices while producing them at ‘natural’ values. The ‘social price’ is the production price expressed in terms of labour commanded; and it is true that in a capitalist economy it is always higher than that expressed in embodied labour.Finally, to show that the Ricardian socialists were not only concerned with ‘metaphysical’ problems, we should like to mention an anonymous work, published in 1821 and entitled An Inquiry into Those Principles Respecting the Nature of Demand and the Necessity of Consumption. The author of this paper intended to intervene in the controversy between Malthus and Ricardo about the possibility of general gluts, to demonstrate that the acceptance by Malthus of the argument that ‘savings’ never means ‘hoarding’ undermined his theory of the lack of effective demand.
He also denied, however, that Ricardo was right about the impossibility of general gluts. In fact, the author argued that the adjustment processes by which competition would have corrected the sudden changes of the channels of commerce was neither automatic nor painless in terms of profits and employment: they would require a long period of inactivity and a consequent loss of jobs at the macroeconomic level. Even worse, they would greatly reduce the scale of activity of the whole economy. The author was not very clear about the cause of the problem, but he put forward an interesting argument according to which the credit system contributes to worsen all the great fluctuations.
The essay gives the impression that the author had direct knowledge, and not only theoretical, of the workings of the crisis when he argues that the reductions in bank credit cause a decrease in investment, production, and employment.Finally, we will mention here a contemporary of the Ricardian socialists, Richard Jones—although he should not really be included in this section, as he was neither a socialist nor a Ricardian. But as this section actually deals with the English forerunners of Marx, Jones does deserve to be included in it. He criticized Ricardo for his deductive and a priori method of reasoning, suggesting the necessity of basing theoretical generalizations, in order to make them really useful, on the observation of historical facts. He also criticized Ricardo for having constructed general laws, and presenting them as natural, when in fact they were historically limited. Jones believed that political economy should be a form of ‘economic anatomy’ of society, and should study the class structures and the institutional patterns that influence the production and the distribution of income in a given society in a given historical context. Therefore, the laws formulated by Ricardo were valid only in a capitalist society, especially those concerned with the formation of rent. Capitalist society represents only one phase in the historical development of humanity and is characterized by the fact that the workers are dependent on the entrepreneurial class. Jones, who was more of a conservative than a socialist, did not, however, exclude the possibility that capitalism is a phase of an economic evolution towards a more desirable state of affairs, such as one in which workers are themselves the owners of capital. It is not surprising that Marx, in his Theories of Surplus Value, dedicated an entire chapter to Jones.
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