Is the System Bad?
Pasour, E. C.
or organization, the principle of authority, while Marx merely envisages the proletarian as the final victor in a competitive struggle. Hence, "'Marxism is the capitalism of the working...
...An example of this problem is cited by Abba P. Perner: "In Great Britian...
...Hence, a salary high enough to provide the desired number of postal employees in...
...In a competitive capitalist system, economic power is widely disperseff relative to a centrally directed economy...
...There seems little doubt, for example, that a graduated scale (or surcharge based on quantity used) in pricing water services would be much more effective than public admonitions to conserve water during periods of water "sborgage...
...Much advertising is competitive in the sense that substitute products are being advertised...
...Unequal incomes induce people to acquire useful skills through education and training, to undertake less pleasant or more dangerous work, and to postpone consumption which promotes investment...
...I n such cases, it is in the public's interest for the utility to be either owned or controlled by the government...
...Any real world institution will be imperfect...
...When the market is thwarted through governmental interference to assist certain groups through minimum wages, price supports in agriculture, etc., the effect is often different from that anticipated by the sponsors of the legislation...
...Indeed, many of them urge that it be replaced by a form of social organization in which production is "to satisfy needs and not for profits...
...If the "functional inequalities" of incomes are too small, they no longer will perform these functions...
...has become more equal since 1930...
...this led the Labour Government to reduce income tax on overtime pay...
...We no longer foresee the West settling into a centuries-long phase of imperial grandeur and decline...
...One reason the social value of the market is often held in low repute lies in its very nature...
...Setting pollution standards which are "too restrictive" involves costs just as surely as setting standards which are "too easy...
...Hence, it is not accidental that there is, as Milton Friedman says, "no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free markket to organize the bulk of economic activity...
...The paperback book developed and sold by men following the profit motive has made book collections previausly worth fortunes available to the masses in the Western World...
...The Hitler regime brought destruction to his hopes and his Die Jahre der Entscheidung, published in America as The Hour of Decision, was seized and burned...
...This is not to say that legislation may not be needed to control the use of materials posing hazards to the environment...
...At the beginning of the 1960s, young Americans had a choice of manifestoes: the Sharon Statement and the Port Huron Statement...
...Galbraith's book, Society...
...Brent Nelson T HERE IS widespread discontent today in the United States, especially on college campuses...
...In this sense, then, pollution problems are legal problems and should not be viewed as resulting from a breakdown in the market mechanism...
...Can we draw practical corollaries from Spengler's little tract...
...According to Smith, each individual in pursuing h~s own self-interest is led as if by an "invisible hand" to a course of action Portrait of Sen...
...Indeed, progress and development through technological innovation has made available to masses of people luxuries which where previously available in some form only to the truly wealthy...
...Blood-thinking is...
...Much more attention could also usefully be directed toward using the market system more extensively in connection with public expenditures...
...Is there a basic conflict between satisfying needs and the profit motive...
...Nevertheless, G.O.P...
...It is also interesting to observe that critics of advertising in the economic sphere are willing to subject others political advertising ("campaigning") and permit them to vote accordingly...
...It is possible for government through restrictive legislation such as taxing the polluting activity or setting ~ enforcing air purity standards to ensure that the market will operate efficiently...
...One can view the market as a cheap, impersonal way of resolving conflicts...
...In Decline, Spengler describes the advent of Faustian socialism, the final political form of the West, in terms of the revolt of the forces of Blood against obsolete state forms established during the reign of Money...
...MeGovern: The Thinker that promotes the general welfare of all...
...Yet the jobs provided and products manufactured in a market economy require that enterpreneurs realize a reasonable return on their investment...
...In a market economy, prices play the key role in channeling resources into the production of these goods and services...
...Although we hear much about the wastes of advertising in private enterprise, an equally persuasive argument can be made that there is a tendency to underestimate costs in assessing public expenditures...
...Since one must make a living before he can advocate anything, the burden of advocating a system of government directly contrary to official policy would indeed be great...
...The interest rate (price of credit) plays a key role in investment decisions...
...What is the role of the profit motive in a market economy...
...In a socialist society all jobs are under direct control of political authorities...
...P~ices also play a key role in-income distribution since the income any individual receives is determined by the quantity of resources he controls and the price he receives for them...
...Can one justify a person being permitted to bequeath large sums to heirs so that the heirs' livelihood does not depend on their own contribution...
...Much of it seems narrow and even distasteful to us, but in the opinion of this reviewer, it has the educative power to draw us out of our present perspective and force us to ask basic and radical questions about our future action...
...Hence, it is much easier to advocate and finance unpopular causes under free enterprise...
...Asked about the purpose of SDS 'revolution,' Tom Hayden replies: 'We haven't any...
...On the other hand, although the Marxists started the idea of abolishing all income inequality, Lerner contends that income inequalities in the Soviet Union are as great as those in the U.S...
...To say that a desire is not important because it is not innate is to say the whole cultural achievement of man is not important...
...A minimum wage, for example, has been shown to harm individuals it was designed to help by putting them out of work...
...Instead they only see the flaws in the system and these are contrasted with an idealized utopia where producers and consumers hold public interest to be paramount...
...Only his early death in 1936 saved him from the hostile attentions of the Gestapo...
...Then we will find out what it is for.' " The view expressed is undoubtedly held by a relatively small number of people...
...However, there appears to be a great deal of casual evidence that the market responds to consumers' desires whether their tastes are elevated or depraved...
...There is no alternative...except democratization...
...is too unequal, there is no justification for concluding that incomes in the U.S...
...This in its simplest form is the familiar guns 14 The A l t e r n a t i v e ; March, 1972 versus butter problem...
...high-cost areas causes a rationing problem with respect to postal jobs in lower-cost areas...
...Some activities such as many public utilities are "natural monopolies...
...Even if one feels strongly against the market system on the basis of its reliance on the profit motive, what are the alternatives...
...Competitive markets impose costs on the racially prejudiced...
...and in controlling monopolies and oligopolies, will involve using public powers more extensively...
...The sum of all costs resulting from the fire in the home fireplace may be viewed as the social cost or the cost to society...
...Spengler foresees the expansion of Marxism into "'the colored world," i.e., today's Third World...
...This means that government must enforce this "rule of the game" and control monopoly power through antitrust activity, The problem of "externalities" will also cause a misallocation of resources in the absence of governmental intervention in a market economy...
...Government is necessary to determine, interpret, and enforce the "rules of the game...
...The major contrasting system of organizing economic activity is that of central direction...
...Spengler's emphasis on the state's role marks him off from the National Socialist ideologues whose racialism forces them to exalt "the Aryan fold community" above constitutionallyprescribed state-forms...
...Hence, public expenditures in higher education have an impact much different from that envisaged by many of its strongest proponents...
...However, the West, like republican Rome, will pass into a final phase of imperial lordship which will endure for centuries...
...If there is a divergence between the private costs and the costs to society of using chemicals, then too many chemicals will he applied unless legal action is taken to raise their private costs...
...Gailbraith in The Affluent Society also asserts that many of the wants still unsatisfied are not innate wants but wants which are created by the process by which they are satisfied...
...This in externality problems (reducing pollution, etc...
...Since resources or productive inputs are limited relative to the desire for their services, all desires cannot be satisfied and priorities in their use must be established...
...Perhaps the greatest impetus of this view in recent years came from Professor J.K...
...If the market economy promotes economic and political freedom, why is it so often criticized by responsible intellectuals as well as by New Left nihilists...
...If he attempts to sacrifice his own interests to some supposedly higher social responsibility, the result is likely to be different from that anticipated...
...While it is true that a market economy is based on self-interest and the profit motive, changing the form of economic organization will not eliminate the conflicts of interest between individuals...
...However, although America was delayed in following the lead of European social democracy, due to its colonial isolation, it was also delayed in developing a potential for fascist reaction...
...The same principle holds in the relationship between men of different religions or race within a country...
...Historically, there has been a direct link between economic freedom and political freedom...
...Although few people would deny the information aspect of advertising, there has been no conclusive empirical work showing the relationship of advertising to "forced" consumption...
...Yet both sets of families pay taxes...
...There are two appropriate points which should be made in reply to this charge...
...In order for a market economy to achieve the desired results, competition must prevail in input and product markets...
...Furthermore, it is not clear how one could institute a system in which men are working only for the betterment of other men and are not concerned with material goods since few men have been able to emulate the life of Christ...
...Production activities under socialism are not as likely to be responsive to profits as in a capitalist economy...
...a few years ago there was insufficient incentive for workers to work overtime or to move to more useful occupations...
...Gore Vidal one vote" rule adhered to in some areas of political democracy is violated...
...Thus, we have a paradox...
...Hence, conservatives will find in the coming years that keeping socialism out of the American region" of the West will be as fatuous a struggle as keeping racial integration out of the Southern region of America...
...If the market mechanism were used in pricing water, some of the shortage would be observed not to be genuine...
...Thus, the effect of his attempting to follow what he conceives as his "social responsibility" results in a large decrease in net returns, a loss of his competitive postition in production and, in many cases, bankruptcy...
...A main indictment of a market economy is that it operates on the profit motive which is often described as greed and viewed as an anti-social element of man's behavior...
...The rapid increase in productivity in agriculture, for example, has not been achieved by farmers "in order to provide consumers with a stable, high quality supply of food at low prices...
...Under democratic socialism the activities of society are carried on under the mandatory direction of agencies selected by majorities...
...Whether it exists inside the West or outside the West, Marxism is a destructive assault on the West, the spirit of Mephistophelean negation...
...There are certain economic tasks which must be performed in any society...
...However, few people would hold that spending power should be independent of an individual's skill, effort, ability, training, kind of work, etc...
...In some cases, these costs have been avoided by imposing official legal discrimination (as in the South following the Civil War...
...the ethic of rank, while Money-thinking is the ethic of class...
...Uniform salary scales throughout the country mean that the real salary is lower in areas where costs of living are higher...
...Spengler, believing that biology, the logic of life, precedes ideology, wished to become a man of action directing ~.he political public...
...These votes for various products are reflected back to the producers of the different products through the pricing system...
...Thus...
...This is the one system which best characterizes the U.S., although it is more properly call a "mixed system" as will be explained below...
...He would have been a very amiable bartender except for the wealth and power of his family...
...A less obvious example of the civilizing influence of the market system pertains to its way of ameliorating the frictions which arise between men of different religion, race, or political viewpoint...
...Families whose children go go college have higher incomes than those whose children do not...
...Since a college education improves earning power, a persuasive argument can be made that students should be required to pay the full cost of their college education and that government should only provide student loans...
...The whole world knows how the workers were superficially won back to a national consciousness...
...The conslusion, then, is that such wants cannot be urgent or important...
...however, that there is a direct link between profits and the satisfying of wants or needs...
...First, inequality of incomes is justifiable and socially useful...
...The results of their choices are now obvious, not to be gainsaid by even the most libertarian" of conservatives...
...There seems little doubt that the view holding that advertising has emasculated consumer sovereignty is held most strongly by individuals who would not agree with consumer sovereignty in sovereignty in resource allocation with or without advertising...
...It should be recognized that under a free enterprise system more goods will be obtained by those who have more dollars to spend...
...Today, for example, we find individuals advocating revolution and an end to the free enterprise system in the U.S...
...Thus, at least some of the criticism of advertising is likely caused by the fact that consumer tastes are not what those voicing the criticism feel they should be...
...At least part of the shortage is caused by the price being set below the equilibrium price for water during dry periods, Likewise, if a subsidy is to be provided, government by subsidizing students directly instead of by subsidizing public education institutions 'could widen their freedom of choice and alleviate the financial problems facing many private colleges and universities today...
...On the other hand, there has been a movement in recent years to restrict the role of the price system in some areas includng medicine and public welfare...
...Is Galbraith's view correct that consumer wants are in large measure determined by producers, through advertising...
...Before heeding the advice of those calling for radical changes, one should first consider the alternative being proposed or, indeed, whether an alternative is being proposed...
...For example, it is often feasible to have only one company in a particular area providing electric power, bus service, etc...
...After explaining that Marxism and Manchesterism were obsolete theories, he hoped that true conservatives and true socialists, freed of partisan cant, would recognize their great common task...
...The effect of using organic ternnzers and only mechanical means of controlling weeds, pests, and diseases results in increased costs and lower yields...
...the "one man - - "Nature designed him for an humbler job...
...The poll "revealed that two-thirds of the students feel that "our troubles stem from making economic ~mpetition the basis of our way of life...
...Self-interest and benevolence are often interwoven...
...are becoming less equal or that incomes are less equal in market economies than in centrally directed economies...
...To illustrate this point, consider the case of an individual farmer...
...Why should an 16 The A l t e r n a t i v e ; March, 1972 individual not be permitted to increase the income of his heirs through an inheritance just the same as he c ~ increase their income through investing in their education, setting them up in business, etc...
...Indoor plumbing, central heating and electric dishwashers along with tetevislon and radio are examples of household conveniences and entertainment available to the masses today which were always available in some form to the wealth through the use of servants, entertainers, etc John Jewkes holds that "the most potent of all civilizing forces is the uncensored and easy acces~ to the written word...
...It is shown later in this paper...
...All of the tasks are rooted in the basic problem of input scarcity...
...On the issue of income distribution over time, Daniel Orr presents evidence to show that income distribution in the U.S...
...Furthermore, if consumer sovereignty is to prevail, the level of profits for various producers mus vary such that the production of some products is being discontinued while that of other products is increased...
...The argument that too little is being spent on public goods and services isn't very persuasive in a democracy so long as society is aware of the potential costs and returns from expenditures in each sector...
...Spengler's metaphor is in no sense racialist...
...Thus, if restrictive legislation increases private costs of any input so that producer cost reflects the real cost, the market will properly allocate the input...
...If the government does not actively and adequately define and enforce the rules of the game, resources will be misallocated under capitalism...
...conservatives dreamed of restoring the glories of~ Kaiserreich while the workers turned to Marxism...
...A second point is that while many (if not most) people feel that income distribution in the U.S...
...More attention, however, should be directed toward developing the potential of the market system...
...Yet, the fate of the Amerindian culture fell outside the usual pattern of history, was an unnecessary accident...
...The first step in attempting to shed some light on these questions is to discuss the economic tasks which must be performed in any economy and the possible ways of achieving these functions...
...Hence, "'Marxism is the capitalism of the working class" and Lenin's "dictatorship of the proletariat" is a tacit admission that Marxists aim at nothing more than the displacement of one minority's proprietorship by that of another...
...It is impersonal and has no agency or government bureau to extol its virtures...
...An educator such as Spengler can lead us to school ourselves in that radical conservatism which alone can win a future for our civilization...
...The Viking expansiveness of Anglo-American laissez-/aire has transformed the entire world, brought it under the sway of Faustian technics...
...Consequently, the U.S...
...A second task is to efficiently organize the production of these products...
...Many critics have no understanding of the complexities of a modern economic system...
...There seems little doubt that these individuals would not have this freedom under any other economic system...
...Thus, by following the profit motive, production becomes more efficient and consumers obtain food at a lower cost...
...Many people take for granted public expenditures for education, postal service, public libraries, etc., without considering the opportunity costs of these expeditures, i.e., what they would do with the money if these were not "free" public services...
...Total collapse of the West in the coming decades, once only a nightmare, is an evermore threatening possibility in our waking world...
...This problem arises when there is a divergence between private costs and social costs as is the case with air and water pollution problems...
...The A l t e r n a t i v e ; March, 1972 17...
...Would another economic arrangement be more consistent with our social .and political objectives...
...The task of economic policy in a limited democracy is to provide institutions which cause men to freely behave in ways that will increase the The A l t e r n a t i v e ; March, 1972 15 opportunities for all individuals...
...Even in the case of pollution and other externality problems, the market will still induce people to act in the interest of society so long as the law properly defines property rights so that private costs and social costs are equal...
...Instead, producers adopt new technology because it is in their own self-interest and most of the gains from the new technology are passed on to the community at large as a result of the competitive process...
...The most virulent attacks come from the "New Leftists," including members of the Students for a Democratic Society (SDS...
...Innovators--those who adopt early-often yieM handsome profits for a time, but the pressure of competition soon drives prices down so that no producer is receiving excess profits...
...Finally, if any economy is to grow or even maintain itself, provision must be made for replacing the inputs used in production...
...European mtegrauon is being ted by social democrats, and Europe and America constitute one cultural unit...
...The disenchantment is so pronounced that many are calling for a '~-evolution" without concern for the consequences...
...The motives of individuals are complex and one's actions taken to promote the public interest cannot be readily separated from those taken to promote his self-interest...
...Hence the supporting institutions of a market economy must be constantly evaluated and strengthened...
...There are other activities such as the postal system and public education in which many people feel the market should play an expanded role...
...In higher education, for example, Friedman has pointed out that the present use of tax revenues represents "a major tax on the poor to subsidize the not-so-poor...
...A third task is to distribute the product or to determine the income received by the various productive inputs...
...If the divergence between private and social costs is large, as when a factory emits smoke and other pollutants, too much smoke will be emitted unless action is taken to ensure that the factory's private costs reflect the real cost (cost to society...
...As much as one may regret the way some inheritances are used,-a ban or confiscation of inheritances would seriously restrict the freedom of a person to aid his heirs in the way he desired...
...Today the social value of the market system is widely questioned...
...However, there are many people, especially in the intellectual community, who are highly critical of the market system which relies to a great extent upon the profit motive...
...The individuals proposing to abolish the free enterprise system would not be as free to criticize the system under any other form of economic arrangement...
...Also, there is a large number of defense and space activities which are quasi-market activities although they are privately owned...
...lost in their dream of undoing the New Deal, they will simply wither away as, year by year, their new recruits appear in ever-diminishing numbers...
...In all probability, conservatives will continue to confuse socialism with Marxism, will continue to construe equal opportunity" in terms of the class ethic...
...conservatives will forget nothing and they will learn nothing...
...Thus, political conflicts between countries arise in spite of the fact that individuals in each country find it advantageous to trade with individuals in the other country...
...Mishan contends that the inequalities of income arising from inherited wealth is no longer the most serious problem...
...How about unequal inheritances...
...provide an illustration of the problem posed by central direction which does not rely on the price signals of the market...
...In many other areas, it will mean reducing governmental restrictions to permit an increased reliance on market forces...
...However, working for a more effective system is fundamentally different from working to abolish the system...
...In the opinion of the Labour Government and, indeed, of almost everybody in Great Britain, the previously existing inequalities of pay were insufficient to perform their function...
...Instead, he holds that in the future men who inherit talent will occupy the fortunate positions in society which were formerly occupied by men who inherited wealth...
...While much of it pertains to the Indochina War, there is also a great deal of discontent pertaining to our social and economic system...
...But much more has gone awry than just one man's political mission...
...The pervasiveness of this view on the college campus was reflected in a recent (1970) Harris poll of a cross section of undergraduate students in U.S...
...Also, there is often heard a closely related charge that we, the public, no longer have control over our tastes due to the persuasive influence of advertising...
...The principle of organization that Spengler envisages seems to be more like that of Italian corporatism than any other system...
...In the U.S., the postal system, streets and highways, the central bank and a large number of schools and public utilities are owned and operated by government...
...Hence, one task is to determine what goods get produced...
...Yet, there is much evidence the free market is exercising a strong civilizing influence...
...Indeed the market economy hinges on the institutions of private and corporate property along with the rule of law which provides security to property and freedom of individuals to move and trade...
...Inequality of incomes is caused both by unequal incomes and unequal endowments or inheritances...
...Post Office salaries in the U.S...
...The historic task of laissez-/aire has reached its fulfillment and the future belongs to Prussian socialism...
...In the market, people associate voluntarily because each expects to gain from the transaction...
...Furthermore, Spengler, for all his authoritarianism, recognizes that "'Democracy, whatever one may think of it, is the political form of this century, which cannot fail to assert itself with success...
...Recently made aware of the harmful effects of chemical fertilizers, pesticides, insecticides and herbicides, he decides to discontinue their use...
...This type system can be viewed as economic democracy or as a way to distribute goods and services among different people democratically, i.e.,, in accordance with their individual preferences as reflected by their willingness to "vote" for them by spending money on them: The economic "voter" can choose between hundreds of different items including many kinds of clothing, housing, recreation, etc...
...The profit motive has provided many of the material goods which have improved living conditions and cultural standards...
...Marxism in its social democratic guise brought about the disastrous German revolution of 1918, while revolutionary Marxism (Bolshevism) is simply a weapon employed by Russia's new rulers in their war against the hated and alien Faustian culture...
...is often referred to as a "mixed economy" since some of the activities in our society are publicly owned and operated while others are in private hands...
...The main thrust of this book is that in our affluent society the Wnportant private needs have already been satisfied and that the urgent need is to increase those services supplied by government...
...Even they now admit that the students are largely lost...
...Thus, unless the entrepreneur follows the profit motive, i.e., his self interest, there will be a breakdown in the system of transmitting information from consumers to producers...
...First we will make the revolution...
...In Spengler's Germany, the D.N.V.P...
...The market is an instution which induces people under competitive conditions to do what is in the interest of society...
...The fourth task is to provide for growth or economic progress...
...The distinguishing feature of this form of economic organization is that resources or productive inputs are privately owned and the owners may either use the resources themselves or sell the resources to others to use...
...Thus, it seems apparent that the presence of advertising does not negate the problem of choosing between alternative products...
...If a man on horseback rides into our midst, he will come, like Pizarro, as a foreign conqueror alien to our culture, and, like the Incas, we will meet death in the midsummer of our lives...
...If the smoke pollutes the air and affects other people, there are costs imposed upon others...
...There is also a problem of knowing what "social responsibility" requires where one assumes that he shouM not follow the profit motive...
...Socialism is not public ownership but aims "to bring under legislative control the formal structure of the whole national productive force, at the same time carefully preserving the right of property and inheritance, and leaving scope for the kind of personal enterprise, talent, energy, and intellect displayed by an experienced chess player, playing within the rules of the game and enjoying that sort of freedom which the very sway of the rules affords...
...Closely related to the charge that the market is materialistic is the charge that a market economy leads to an unequal distribution of incomes...
...In practice, however, we usually do not know the correct level of treatment or tax (i.e., the proper legal response...
...If restrictive legislation is enacted (to increase private costs) which reflects the real cost of using chemicals, all users will be affected and will reduce their use of these inputs...
...Adam Smith, the father of modern economics, recognized this apparent paradox in 1776 with his "invisible hand" doctrine...
...The private costs of a fire in a home fireplace, for example, consist of the costs associated with the fireplace and the wood used...
...Next, the workers of America will follow...
...Socialization means the slow transformation -- taking centuries to complete -- of the worker into an economic functionary, and the employer into a responsible supervisory official...
...In either case, capitalism will predictably misallocate resources in the sense that too few or too many resources will be used in the polluting activity...
...How about the contention that there is a misallocation of resources between the public and private sectors in the U.S...
...If the entrepreneur doesn't follow the profit motive as reflected through the price system, th~ allocation of resources and distribution of output will be distorted...
...There are two alternative ways of achieving these tasks ~. The first involves the free enterprise or market economy which is based on voluntary cooperation of individuals...
...Furthermore, income equality in the Soviet Union is no longer an official goal...
...However, part of the confusion between self-interest and public interest results because the motives of certain economic interests are often clearly not what they are purported to be...
...The price system of a free enterprise or market economy has been described as impersonal and non-authoriturian...
...Price supports designed to improve farm incomes actually have widened the gap between incomes of small and large farmers...
...Frederic yon Hayek points out this conclusion is a complete non sequitur...
...colleges...
...Inequality of incomes arising from differences in the quality or quantity of an individual's input is justifiable and socially useful as illustrated above...
...Indeed, reliance on the market would suggest that a higher price should prevail during periods when costs are higher (periods of "shortage...
...His failure was partly attributable to the fact that his seemingly-idiosyncratic theory rosd above party platforms and their clienteles...
...In fact, it is not at all clear that institutional arrangements to preserve freedom are possible in a socialist society since it usually involves public monpoly which is at least as pernicious as private monpoly...
...This suggests that where one producer or consumer acting unilaterally attempts to follow his social responsibility rather than his private interest, neither private nor public interest is likely to be served...
...Costs will then he increased for all producers, product prices will rise and the consumer will be induced to economize on the use of the product...
...This involves channeling resources into the production of the various goods and services which are being produced...
...Hence, one can defend the view that the market in the absence of monopoly or externality problems operates to bring about adjustments which are in the public's best interest...
...It should be emphasized that reliance on the price system does not eliminate the need for government...
Vol. 5 • March 1972 • No. 6
