Sunday, November 08, 2015

Strict equality: A world of abundance

Consider an "ideal" (in the sense of theoretically "perfect") world, a world of abundance, a world where everyone has as much ordinary stuff as they want; if someone wants something extraordinary, we would have some democratic process to decide if they should get it. This ideal world has perfect equality of income: everyone has the same demand on the social product — at least the ordinary product — as everyone else, i.e. as much as they want. There are some technical and philosophical problems: we would have to ensure we didn't have over- or under-population, and a lot of people might choose to sit around doing nothing, but I think it would be a stretch to find a specifically ethical problem with such a society. We would have to say that there is enough physical stuff that people can have as much as they want, but it is good that we deny some people what they want.* Why would we do that?

*I am excluding wanting "bad" things, e.g. wanting slaves or the enforced subordination of other people.

Contrast the above ideal world with ideal capitalism. Ignoring the considerable philosophical and practical problems with free markets, what happens with capitalism when we have a lot of stuff?

By ideal capitalism, I mean a political-economic system with the following characteristics. First, all markets for all commodities are perfect: there are perfectly competitive markets for all commodities (no monopolies, monopsonies, or oligarchies), free entry and exit in the production of all commodities, no externalities in the production or consumption of all commodities, and everyone has perfect information about all prices, costs, and benefits. Second labor power is a commodity with a perfect market. Third, capital, whether in its direct physical form as machines, buildings, etc. or its indirect, financial, form as a demand on the product produced by physical capital, is privately, individually owned.

Note that capital is not a commodity-by-definition above. Capital cannot be a commodity-by-definition; if it were, then no one would have a demand on the surplus social product (the amount of production in excess of the needs of survival and reproduction): there would not be any market at all for the social surplus, and we would produce only as much as everyone needed to survive and reproduce.

I'll discuss later the question of whether capitalism is or is not (it's not) a pragmatic way to grow society's productive forces to the point where there is enough stuff that people can just have what they want. I want to ask here whether or not ideal capitalism is compatible with a world of abundance.

The problem of labor is sufficient to show that capitalism is not compatible with abundance. Either there is labor or there is not (all production is by capital). If there is labor, and labor power is a commodity with a perfect market, then the price of labor power is equal to its marginal cost. Furthermore, competition ensures that the marginal cost would be as low as possible. Thus, people who labor would receive for their labor just enough to survive and reproduce. Even if there were enough that everyone could have as much as they want, people who labor would not have as much as they want.

Furthermore, there is no opportunity for people who labor to acquire capital. If they received enough for their labor to acquire capital, then the price of labor power would be above its marginal cost, and we would conclude that the market for labor power was imperfect.

If there were no labor, if all production is only by physical capital, then the private ownership of capital becomes the problem. If capital is privately owned, then an individual's consumption is limited by the amount of capital they own. Again, there is enough (or the potential to produce enough) that everyone can have as much as they want, but some people's consumption is limited by what is nothing more than an arbitrary social convention. If we were to redistribute the social ownership of capital, we would not have private ownership.

Thus, regardless of its utility as an intermediate mode of production, capitalism cannot be a universal mode of production. This result should not be surprising: capitalism is a social response to scarcity, specifically scarcity of capital. We should not expect it to be robust to abundance.

We could relax the assumptions of capitalism, perhaps specifically the assumption of labor power as a commodity. And, of course, at some point we must relax them, unless we want to deliberately impose scarcity just to keep the system intact.

In later posts, I'll take up the issue of capitalism as an intermediate mode of production, and why it begins to fail far short of an abundance of production.

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