The subject sounds at first glance like the most natural thing in the world: Our economic system is called the free-market economy. Actually, however, the word free-market economy is already an entire ideological program. Free-market economy is a twisted name for the thing that it designates and already contains a whole interpretation.
Other modes of production that once existed, or still exist, are designated differently, e.g. after their purpose. The mode of production, for example, which depended on obtaining a surplus in trade is called the mercantile system. A second example, in which the purpose of what is produced appears in the name, is the subsistence economy, which occupies large parts of the population in the third world. Also, relations of production can give different names for economies, so that workers or bosses give their name to the mode of production, e.g. the slave economy or the feudal mode of production.
On the contrary, our mode of production, the free-market economy, is differentiated from other modes of production neither by a purpose nor by a characteristic position of the bosses or the workers, but only by a method of circulation. Our mode of production is to be characterized by the fact that the market is the means to mediate the many thousands of economic subjects. Funny – has this mode of production no purpose then? Does it have no characteristic position of those who do the work and those who are the bosses? No, it allegedly differs from others only by the fact that in it the market organizes the division of labor.
It is of course no big mystery where this name comes from: It has its historic reason in the comparison of systems that determined economic science for fifty years in Europe and the whole world, as well as political thought. With this comparison of the western with the eastern social mode (the Soviet Union and its satellites) the planned economy should be exposed as evil and the free-market economy (which should suddenly no longer be called capitalism) appear in a good light. The ideologists of the planned economy certainly once intended the reverse. But they could only weakly say: in capitalism there are many who are rich, that is a fine thing, but against it stands the socialist economy, and it shows that the poor are better off in it. The old system comparison went in such a way -– absurdly -- that the two modes of production mutually compared themselves as better methods for the same thing. In addition, one must say: So it is now, if one makes a comparison. If two compare themselves, then they differ according to a common standard. Comparisons maintain a commonality because without a commonality one cannot compare at all. Who can compare beets and music? Where there is nothing in common there are also no differences.
If now two modes of production enter into a competition debate and open a comparison to decide which is better -- the west clearly invented it with the intention of proving that ours is better -– then both assume a common characteristic or the comparison assumes a common characteristic of both. And if one says: e.g. the western free-market economy is more efficient,then one supposes -- without talking about it -- efficiency is the common criteria. Only: efficient in what respect? The socialists would never have denied to the apologists of the free-market economy that capitalism is more efficient at exploiting. Of course, the supporters of the free-market economy did not mean that. None of them wanted to say: we deplete people better, we get more out of them than in the east. That would not have been a particularly good system comparison to advertise.
With this system comparison between the socialist economy, which should be sinister, and the capitalist, which wanted to prove that it is better, the purpose of the two modes of production is not compared, but they are measured as alternative methods for the same thing. Now capitalism no longer stands against socialism, but free-market economy against planned economy. And what is now the common denominator? What is the postulated common criterion against which they both mutually measure themselves? In every economics lecture one hears immediately and always: it is the goods supply of a population. However, it is very much the question whether there actually is this purpose in our economy -– but nobody questions this. The system comparison simply postulates that there is this purpose and compares along these lines. Both systems are there in principle to carry out the same purpose and, besides, are only different in efficiency.
I read now a quote from Paul Samuelson, a highly prestigious American economics teacher who today belongs to the classical authors (1970 Nobel Prize for Economics); he says:
The order of competition [thus the market mechanism - note PD] is an artful mechanism, which deduces with the help of a structure of markets and prices unintentionally and coordinates the knowledge and actions of millions of different economic subjects. Without a thinking and steering central brain this economic system solves one of the most difficult arithmetical tasks: A system which covers several thousands of unknown variables and equations. (Paul Samuelson, Political Economy 1)
Here it is said that the free-market economy is a genial invention, the market coordinates millions of economic participants into a division of labor and coordinates their behavior and needs so that the best possible combination of production and need satisfaction, the best possible efficiency, results from production.
Furthermore, Samuelson nearly explicitly makes the comparison with the planned economy, which has this "steering central brain,” but, as one constantly hears, carries out nothing. The sentence with the steering central brain is a beautiful confession. Samuelson is reminded of it when he says that what the market allegedly carries out is actually done by nobody: Nobody coordinates, no one worries about the needs of others. He says, then, we know that it is completely clear that market subjects have other concerns.
In another place, the economics professor Henrichsmeyer says:
Although the entrepreneurs act out of “egoistic” motives and not in order to improve the goods supply of the population, the entire goods production depends nevertheless in the long run on the desires of the consumers. (W. Henrichsmeyer, Introduction to Political Economy)
What strange service is attributed to the market here? A service that, one must say at once, does not exist at all in the free-market economy. Nobody coordinates. Nevertheless, it is fine that everyone offers something on the market and the whole coordination consists of whether the salesman has success or not. If the salesman has success, he has success; if not, then he takes his unsold things home again and cannot sell them. Where is there any coordination service? One hits on a solvent need and by chance has success, another hits none and has failure, possibly even becomes poor due to his failed production and sales attempt. Only: Who has coordinated what there? Nothing at all is coordinated there! In truth, the alleged service of coordination does not take place because needs are actually not respected at all. A seller looks for a solvent demand; needs that do not dispose of money do not count as needs and therefore are not met. The market does not coordinate existing needs and production, but in the market the salesman sees which solvent need can be useful. And also, conversely, the need of the buyer in itself did not guide his purchase decision, but what he actually gets from the excursion is the commodity he can afford in keeping with his wallet. Whether he buys those things that he then buys because he perhaps can’t afford better, so that instead of the quality product he buys trash, or whether his need went completely neglected -– nevertheless, this is very much the question. With the whole coordination, on one side stands production, which never wants to adapt to needs, and on the other, there stands not needs, but purchasing power.
The idea that the market is a big coordinator between needs and production, that it does this much better than a plan ever could, this idea is in truth a pure tautology. It asserts as a service nothing more than the fact that all goods that are sold find a buyer. Again, to make clear the thought: If the great coordination service of the market is that only those needs that are backed by money enter into the magnificent coordination service, and those which have no real money or not enough money count for nothing; and if on the other side of the coordination service, the products are only those that are marketable, that are saleable products, thus that find a buyer, and everything that has bad quality or too high a price or has been produced in too high an amount so that it could not be sold at the market equilibrium, then the famous market equilibrium is a pure tautology: Everything has been sold that also found a buyer, for every commodity that was sold, a buyer appeared -- yes, that is probably correct.... But here the whole scam is to act as if this is a service. This tautology always applies. It applies in the largest economic crisis just like in the biggest famine and it applies in a boom.
The free-market economy maintains there is a problem to solve that it actually does not take care of at all, i.e. the co-ordination of needs and production. And it maintains that it solves this problem better than the planned economy, which does not have this problem at all. Anyone who thinks that production and needs must be coordinated imagines both sides to be separate and functioning according to autonomous principles. But is this correct? Think of one’s own home: Does one have to coordinate the need to have rinsed off tableware and the production of washing dishes? Yes, there one notices that this is somehow unreasonable. Production is the means to produce what one determined beforehand to be needed. Here there is no problem at all of coordinating two independent quantities and bringing them into relation to an extent that prevents the threatened failure of both or the threatened divergence of both.
Thus it becomes clear: An idealistic construction is made that every economic system requires a mechanism to coordinate production and needs, and this coordination can be satisfied in different ways because one economic method (free-market economy) accomplishes this not at all like we see, but solves this "problem” better than the other, namely the planned economy which plans for this explicitly and, besides, always fails, allegedly. Thus, a really fictional service is attributed to the market, and if one looks exactly wherein this service exists then the tautology emerges: what was sold has also found a buyer, if something was sold then obviously there was a need. Without doubt -- only is it really brought about like in the assertion, that existent needs and the existent production were brought into relation, were coordinated?
In the praise for the market there are three further arguments, which are something like sub-points to the coordination service, which take other directions of attack.
One reads: the market deserves praise because it is a successful combination of freedom and constraint. Anyone who ever talked in political economy about the system comparison, or about the advantages of the free-market economy, has also been confronted with the alternative: free consumer choice or planned needs! And there one knows exactly what the reproach to the planned need should be: no central authority in capitalism tells people what they need, as if they themselves don't know that much better, or prescribes to them what they may get and what not. The market is much better because people can freely decide what they want to have.
Within both statements a small assumption is contained that is not expressed. The reproach is made of the socialist method of production that it withholds from the people and dictates to them needs that they do not have at all. And the free market economy is certified with the praise that in it one can chose everything freely. But what can one chose for oneself really freely? Anyone who gives the market credit that free consumer choice takes place, that people with their purse can freely decide on "optimal utility,” who talks about the advantage of the free-market economy in this way, holds that the sacrifice or exclusion of need satisfaction in the free-market economy is only regulated by the size of one’s wallet. Yes, ability to consume in the free-market economy is limited -– they think -– just like in the planned economy, but the good of the free-market economy is that everyone gets to decide for themselves what they access and what they deny themselves (because they have already spent their money). The good of the free-market economy is not the satisfaction of needs, but the freedom of the individual to decide which needs remain unsatisfied. And the planned economy is so terrible because a) needs may not be satisfied and b) one may not even decide which needs remain unsatisfied.
If free market economists think about methods of access to the means of need satisfaction, they think about methods for limiting access to the means of need satisfaction. On this basis they then compare the western with the eastern economic mode. The premise is thereby scarcity, which, however, is not at all debated. The premise is: of course one must limit people when satisfying needs, what would the world come to if people should be able to get everything that they need? This is a basic dogma of political economy! Needs are much bigger than the amount of goods, needs cannot be satisfied in principle, ever.
Thus the conclusion of economics is that the rational method of production is the one that organizes the limitation of need satisfaction. And only now do the differences in their ideas of the market and the planned economy come up for discussion. But it is not at all considered that the planned economy could perhaps be something other than an unfree method of need restriction. In the thought, how should the Politburo know what is good for the people, it is always as if needs are a mystery and, secondly, can’t be satisfied in principle. However, there is in every existing society a definitely fixed and well-known amount of existent needs. One knows, for example, how many liters of beer were poured in Germany last year, one knows how much one must produce to reach at least the conditions of last year again. One also knows how many potatoes were eaten, how many live in the country, how many dwellings are needed if one wants to give XY square meters to each person. These are not mysteries. To act as if needs are a difficult matter to find out is already the whole ideology.
Question: But is it not true that needs are quite unlimited, everyone wants to live in a larger than a smaller house, does not everyone want a more comfortable than a less well furnished place, etc.?
Yes, a common objection. What is to be said to it? First of all, it is a document of the fact that there is a considerable degree of unsatisfied needs. It is expressed in the fact that these needs should be satisfied. But nobody wants to hear it this way. Everyone wants to regard this objection as proof of the fact that it cannot be done. The argument should lead to the insight: Yes, that is correct, if everyone did not want to live so restrained, it can’t work, that is clear, therefore one must find a method of limitation. This conclusion happens so quickly, and it happens always this way and everywhere. But first I plead: then nevertheless build such dwellings and in a number so that all people live decently, and then so that 5 people do not have to live on 30 square meters, but on every 75 square meters. Now it is of course clear what comes next against it, with the intention of proving that needs are never satisfied. He will ask: Why not every 130 square meters? Why not a mansion for everyone?! Of course this can be continued arbitrarily until there can actually be no more increasable number of goods: What if everyone wants landed property so extensively that there would be no more room for the 80 million inhabitants of Germany any more? Then one finally has some kind of proof from nature for the necessary limitation.
What does this objection submit? The attractiveness of the whole procedure consists of the fact that one intentionally abstracts from the needs that are there, which the people really have. And only for the principle one takes this to extremes, which seems to prove that one always finds a need that is larger than the possibilities for its satisfaction. Then at the conclusion one ends up with such things: Persian carpets hand-woven by children, sports cars made from scratch ... Here one must agree: fancy cars that are put together by hand and devour from each individual as much labor time as a person needs for a whole year for their living -- one certainly cannot make those for everybody, they would starve in the meantime. If at this point those who want to prove that needs are greater than the possibilities for their satisfaction seize on objects that are really directly products of exploitation, one must say: They can be made only if one excludes other people from their need satisfaction. If one presumes from such evidence, then that pleases me, because that is already nearly the proof that I want to have.
Question: But are there not also rational barriers regarding the efficiency of a national economy? Can one simply produce, for example, twice as much wheat beer as now? Are those not also questions that should be treated with this topic?
On the one hand, I find the example useless. Nobody in the world would deny that one could produce twice as much wheat beer. On the other hand, it is to be asked: ok, how much production of a certain item is actually possible. Then, however, leaping from this consideration, the justification of the free-market economy by its advocates says at this point: The restriction of needs must be good if the restriction is produced by money, because then everyone can select for himself how he would like to economize. There is, however, an assumption there, i.e. that there must be restriction.
The whole consideration that this "does not allow for a solution" pleases me because it is done in such a way as if the whole world looked for possibilities to better satisfy needs -- and then there is no solution for it. The thought wants something else completely, it wants to say: A complaint against our economic system is forbidden because it is the optimal way of reconciling the possibility of need satisfaction with limited resources.
Again, two assumptions are made. On the one hand, the assumption is that needs are unlimited. But needs are not limitless; each need has its measure. Example: It is accepted imbecility that the need for beer would be boundless; maybe that someone wants to have 12 wheat beers per evening, but then he just lies under the table and does not want to pour another. This applies also in principle to all other needs; there are certainly many that are unsatisfied, but every one is not boundless, but has its limit.
The second side is: Production has its means and is measured in the conditions of productivity and the available labor. But this free market "argument” wants to ask neither how large the productive possibilities are, it does not ask that at all, nor does it ask what needs are really there so that one can then satisfy them. It is completely different. It says the current state is a quite optimal coordination of these two fundamentals which can’t be brought to cover their domensions. This is the attraction and also the ideologically fraud: That it is not stated at all that needs nevertheless exist. The assertion is rather: needs do not exist in the best possible way, anything more is not possible.
Question: Again in regard to technical circumstances, it is said that each economy comes with a given state of technology, productivity and available resources that conflicts with needs that cannot be satisfied at the same time; soif on a given land surface used for agriculture, one cultivates more potatoes, then one must accept in turn less wheat.
Yes, the problem that you raise is a variant of the equation needs are not equal to goods. And the point is no good. For the following reason: an individual or a society must exert the necessary expenditure to then satisfy the needs that it wants to fulfill. If one wants more, one must expend more. If the working day is longer, one can also manufacture more. If one wants more spare time, then one must be content with less. That applies to the individual just like the society. In this respect, the assertion is: one has more and more needs than one can satisfy. One must be ready to apply the necessary expenditure for what one plans. And in the effort one has perhaps also a measure for the importance of the need!
Question: Yes, for the goods/needs, of which you speak, o.k. But then take raw materials, which can actually be limited...
Yes, correct, one must get around these limitations. It is merely necessary to recognize the difference to the assertion of the economists that says: I always have more needs than I can satisfy and I am fine if I experience my self-restraint in the market. Again: If every need has its measure in itself, then they are not at all endless, and with the other half of the sample of these objections, one ends up dreaming: One deliberately looks for examples so far out of reach that everyone notices immediately that there is now an example of non-feasibility, so that one can then say, see, you don’t have time for it. Well, if one does not have the time for it, then one should not plan for it! Thus: A planned economy consists in the fact that one plans for the needs that one wants to satisfy, which are to be satisfied collectively, and then organizes the expenditure necessary for it. A planned economy does not consist of finding a method for how to begin condensing more needs than one can satisfy, and then reaching it with the optimal deficient method. The latter is however the picture that the free-market economy wants to have of itself.
New point: there is the praise of the market for combining constraint with freedom on the side of production. Turned around, there is a discrediting name for the planned economy: Command economy. With this designation everyone hears immediately that this must be something very bad, something which makes one think of barracks or the like. How is our free-market economy different? In the first instance, it is a free economy. In the free-market economy everyone is free to produce what he pleases with whatever resources he judges worthwhile to spend on it. However, this is only the first half. The freedom is hardly praised before a praise of constraint is added to it: thank God we have the constraint of the market to protect us from a producer dictatorship! In the command economy the Politburo forced poor production. In the next thought a free producer is introduced in the free-market economy who one thinks could rule over the society. Then the market is introduced as a fine remedy against it because it prevents the producer from ruling dictatorially over the consumer.
Again there is an assumption here, with both economic systems, the command economy just like the producer dictatorship. The assumption insists on assuming that the people who are integrated into one useful division of labor want to do something totally different than produce for the satisfaction of the needs of those for whom they produce. It is feared that without constraints the producers would do something other than produce useful things for needs. The thought also orients itself by the image of an unfree economy, the command economy, which is then branded as an injustice, i.e. that a center prescribes to the producer what he has to do. Here a conflict of interest is assumed on both sides, but is not explained.
Why is it then that the producers do not produce what the people need? Also, why must one thank the market for forcing a need-equitable production? Why does one have to thank the market that it forces the producers to efficiency? As if it would be so clear that producers who are not forced would never make a contribution to the division of labor. But in reverse: producers who are forced by a center are subjugated. Thus: the producers must be forced, but if from a center -- that would be an injustice!
Again, the other way around: Think of a division of labor, a division of the necessary work, i.e. one person makes this, another that, so that in the end a large amount of products results and appropriately satisfies a large amount of needs. If there is a center that says: you make boots, and you make sandals, what injustice is done to these producers? They did not in return make bad sandals or boots or ... There the thought of the oppression of the producer by a Politburo functions like the reverse of the thought that one must force the producers to make sandals. Yes, what should they make otherwise, except sandals. Do you notice the trick? Remember the assumption of the private sector that the seller of a commodity produces the cheapest trash but cashes in millions. Long ago this meant the interest conflict of the private sector, but this is not talked about because if one talked about it a criticism of the free-market economy would follow. Now the interest conflict of the private sector is assumed, which applies to any form of division of labor like a natural law, in order to then introduce the constraint of the market as the beneficial cure against the bad person who as a producer screws the consumer and as a consumer takes advantage of the producer.
Completely without command, the market -– thank God we have that and not a producer dictatorship! -– allegedly forces efficiency, reasonable production, quality. Is this true? To what end does the market really serve? Now, production that is successful on the market, and in terms of the purpose that is the point of the free-market economy. The market really coerces. Each seller stands in competition with all other sellers and he must assert his share of the market against the other sellers, otherwise he is expropriated, otherwise he quickly possesses nothing. But what is it, for what he is forced there? He is forced, firstly, to earn money for himself, i.e. to make money in the market, and secondly to do it out of necessity. And that actually has nothing at all to do with efficiency, with quality or with production meeting needs. It has to do with efficiency in making money. Now what is efficiency called? This is by the way an important point: One is often intellectually bamboozled if efficiency is talked about, because with efficiency one must always specify what the criterion is whereby efficiency is to be reached. Efficiency in itself is actually defined as an activity performed appropriately to its goal, made well for its purpose. But according to what purpose is no longer mentioned. Everyone nowadays joins the choir of those who say that everything must run as efficiently as possible. But the question whereby one should be efficient does not occur as well. This is also correct: of course free market producers must produce efficiently. But efficient in what sense? In the sense that their costs must be small so that the selling price contains a profit. Is there another criterion for efficiency in the free-market economy? That is very much the question. I will show later that efficiency in our society is something completely different than working appropriately. One can also express it differently: The market does not demand efficiency, but the market defines what efficiency is in this society.
Take, for example, the subject of quality. Does the market demand quality production? It does like shit! The market coerces production that corresponds to the demand that is suitable for pulling money from the purses of the citizens. And trash is exactly correct if it fits the poverty of the customers -- it is thus not true that the market forces quality! Our country is currently preoccupied with the subject of Mad Cow Disease -– yes, here the market functioned perfectly yet again. All involved swore that it was the market that forced them to their actions. The media looked for guilty parties and soon found: the farmers are the culprits because they fed their animals the wrong things; the animal flour producers are the culprits because they mixed poisonous animal flour in the fodder; the European Union is the malefactor because it lowered the import prices for beef so terribly, etc., and in the end even the consumers are responsible because they always wanted cheap meat. That is funny. Now the farmer says but he only did what is rational according to the free market, he only looked to produce cattle as economically as he could to offer it at a reasonable price which would sell on the European market, and besides, he has become ever more efficient. That is true, he had to put ever fewer costs into a kilo of beef. Well, then, out comes crap like Mad Cow Disease. Also the consumer behaved perfectly according to the free market, they compared the prices and then took the more economical, that is their task. Now they get to hear it as a reproach for always wanting only the cheapest meat. Here we have a marvelous case that in the free-market economy the falsification of a use value is naturally a means of acquisition! In an economy where there is only conflict of interest between producer and consumer. But that is not in nature, it is not in any method of production in world history, but only in one where production is private. And only if the buyers of the constantly attempted falsification of the use value notice something, they must then decide whether to buy the cheap crap because they cannot afford any better, or whether to put down more money in order to buy a better quality grade. But that there are 100 levels of quality and price for every product in our developed society so that an offer always exists for the poor, even if a bad one, provides evidence for the fact that production is perfectly adapted to real market conditions. For every purse a seller specializes. There are the luxury sellers, for meat too, and there are also the customers who buy luxury meat, which just depends on their purse and how much money they have.
The assertion that the market provides for quality is one of the most beautiful fairy tales about the free-market economy. The market demands only two different kinds of sale: Firstly, to a comparable seller and, secondly, one conforming to the poverty or wealth of the customers. Turned around: the desire for acquisition encourages producers to make continuing experiments in poor quality, to try to constantly lower the quality without the buyers noticing it. If the buyers notice it, it is price-damaging, but the reduction in quality is only one work of art, e.g. food falsification, existing for hundreds of years and with us just taking the quite modern form of mad cow disease. Next year then perhaps a salmonella scandal, or in the form that chickens are fed with sewage, or … or … -- it does not stop. And all that is the free-market economy, because all involved behaved perfectly according to real market conditions.
The market forces efficiency, but not efficiency in the concrete work of producing goods, but forces efficiency in the question of costs, it forces with a given retail price ever less expenses. And whether this is a rational way to produce, I doubt very much.
There is another opposition between market economy and planned economy. There the planned and therefore inflexible division of labor of the planned economy stands against the spontaneous and self-regulating division of labor of the free-market economy. This also belongs to the basic views of economics, which everyone who has concerned themselves a little bit with has heard in principle once already. The assertion is: In the east there was a planned division of labor in which a political authority decided how large the steel sector must be, the automobile industry must be so large, etc… All departments of national production were politically regulated in quality and quantity. On the contrary, the free-market economy regulates itself, always much better than it would if it were planned, because the center cannot know everything that is needed in the society, it cannot react fast and flexibly if the needs change.
Two different things can be said to this statement. A while ago I said part of it under the heading, "because of the coordination service." The unplanned, self-regulating division of labor of the free-market economy that is so praised is nothing other than thousands of people trying to find a niche in the division of labor in which they can make money. And some make it and others ruin themselves, work half their lives and then find out that they are broke. Everybody tries to find a niche in the division of labor, and if that is the rational, spontaneously self-regulating division of labor, then it is remarkable: the human victims in this division of labor are simply not counted.
The other half is: It also becomes clear that the society does not divide the work in a free-market economy. It is not at all that we say we need this much from him and this much from her, but every possible applicant tries to find a buyer for themselves, frequently enough edging out somebody else. And one then calls what results the division of labor, although the labor was never divided. The cooperation that should actually be meant by the term division of labor, i.e. the coordination of qualitatively and quantitatively determined departments of production in a society, actually never happens at all in the free-market economy. The whole is rather the result of a fight in which there are winners and losers.
There is still a comic aspect to the assertion that one cannot plan production: As if the market replaces the entrepreneurs’ knowledge of the specific division of labor. It is not so that the entrepreneur stumbles blindly into the market, looking for what he gets. Someone who produces a car knows from experience how many prefabricated plastic parts he needs, how much wire he needs, how much sheet steel he needs, etc., and all this he definitely knows qualitatively and quantitatively. And not only that. He also knows whether his supplier is able to take part in an expansion of demand or whether he must look for still another. Planning in the free-market economy takes place everywhere! But for another purpose. In the factory minutiae is planned, an assembly-line is a total planning of labor, and if instead there is group work and no more assembly-lines, then that only means one plans even more; "just in time," a thoroughly timed process, does not lack planning. But not only in the factory. Also between the factories and the suppliers a huge amount of planning takes place as electronic linkages between different producers. And they even plan for what cannot be planned for at all in our society: They try to study the market and thereby plan their profit! You read today how many cars Mercedes, Honda, or Ford will sell next year. And then they say: Planning does not work!
The comparison of the two production systems, free market economy and planned economy, already served its purpose. Now still another version of the inversion comes: Planned economy specifies much less than socialism; that a national economy is centrally planned is still far from socialism. It depends on what purpose it is planned for. Every wartime economy is a planned economy. The emperor and Hitler also drew up planned economies, partly at least. That an economy is planned, that is not enough. And there are still many more viewpoints for what is worthwhile than only producing as large an output as possible; e.g. how the work is experienced, whether one is spared a little bit, whether a person is not completely leached out after work, but still has a life apart from work, etc. There are also all these sides of being worthwhile. And free-market economy, on the other hand, specifies much more than a method of co-ordination. There is an unexpressed but very definite purpose to the free-market economy -- the whole way of production.
Free-market economy – what do they say now about production and its purpose? The market is not a place (market place), but the market is the circumstance that all products are made economically meaningful for the producer only by the fact that he finds a buyer who gives him money for it. That is the market. In this respect, a form of division of labor is assumed with the free-market economy: without everyone producing something for someone else, there would be no free-market economy. The famous subsistence economy does not need a market -- they simply provide for themselves and have nothing to do with one another. In the free-market economy everyone produces for the others, but the satisfaction of the needs of the others is not the purpose. This is a very strange form of division of labor: Everyone produces for the need of the other and only for oneself. The need of the other is necessary, but it is not the purpose of production. It is not that one produces the shoes that another needs so that he then has shoes, but: the need of the other is a weakness. That the consumer needs my commodity is my lever to pull money from his wallet. And everyone with a commodity to sell (and many only have themselves and their labor time to sell) needs to make as much money as possible. And now one must recall the statements of the economists who state that the purpose of every economy is the production of useful goods... The very first and most abstract discovery about our economic mode is: the production of useful goods is not the purpose but the means. For each member of the exchange relationship, the production of useful goods is not the purpose but the acquisition of money; the goods are only a means for it. And what is money in the first place? Money is command over the commodity world, the means with which I can get access to the products of all the others for myself.
Question: The free-market economy is so successful because it comes from the bad nature of humans, or…?
Look at the substance of this point. Much is written to the effect that other economic modes, and particularly the planned economy, overrated human reason. The first counterargument is: What is here called successful? The real comparison between the free-market economy and really existing socialism was no economic efficiency comparison free of force, but force was always in play, for which the cold war is the symbol. There are even those who ask the question about the "better" economic system, then refer to this force comparison: yes, and who built the better weapons? Who could prepare more deaths? Thus capitalism is the better system! The second one is the following: You get an answer with the last question, which goes during such debates, and this is the argument: I know, humans are bad. This is, by the way, also the case with the other social sciences. At the conclusion of every debate it is held: that is not sensible, but humans are unfortunately senseless, and under this premise it must just be. Main counterargument: From where do you know that humans are so senseless and so bad as that? From where do you know the nature of humans? This counter-question aims at the following point: No, you know it from the society that you have here in front of you, from which you want to know otherwise. In the immediate society, people are actually hostile and forced to opposing interests. Anyone who is a private owner and wants to have market success -- and it does not at all depend on his character or his imagination, on what he wishes and thinks -– then he must assert himself against other sellers. That is not a question of desires but of necessities.
I grant that one should not say a person is hostile only because of the system. The thought makes a circular procedure I would not like to repeat, i.e.: from the view of this society and the conflicts that there are here, simply explaining the conflicts of people from their nature or the exercise of their nature. And the still stronger argument against the assertion that humans by nature are necessarily bad was already suggested: this statement actually has an immanent contradiction. If someone says, humans are stupid, then I always want to ask in response: this applies to you also? You are stupid? And if you are then, then you do not refrain from stupidities? But in our bourgeois worldview, that people are held to be idiots but also know better (!), at the same time maintains the belief that they cannot change it. And that is a stupidity that does not have to be. Everyone says, people are stupid but I know better, otherwise they would not say it.
With this worldview there is also frequently this contradictory pair of ideas: egoism/altruism. In capitalism all people would be egoists and if they would be altruists, then they would go for socialism. This is what these alternatives always mean. My reproach, however, is not that people are egoists and that they should stop being egoists and become altruists instead. One can hear this sermon in every church. My argument is: people are bad egoists, they do not organize the appropriate care of themselves appropriately, therefore they must work much more than they have to, therefore they get much less than they could.
So far we have held: The free-market economy is not a method, but in it a substantial amount of the economic mode is already defined. It is an economic mode that concerns money acquisition, in which the production of goods is not a purpose but a means of money acquisition. At this point a transition is still missing. If it is about money acquisition, then producing and selling would be a bad way to gain money because one would always have to put back to work what one just extracted from the market as money. And so that is not it then. A much better way to acquire money is to buy people and to invest, to organize others’ work and sell the products. If one can take away from the market only as much money as one put into it by individual work, then no great wealth results. Great wealth results if one invests in other people whose products one sells. And then the efficiency of this production process gets a completely different quality than commonly imagined if one talks so loosely about efficiency. Efficiency is to be increased, in the sense of the purpose, perhaps by higher productivity, by buying better machines. For what is that efficient? In order to save on paid labor. Is that beneficial? For the entrepreneur it is; for the employee it is dismissal. Then his source of income is lost. Efficiency in our society is directed against the source of income of those who must sell their labor. However, efficiency in production can be achieved just as well if one does not increase productivity, but if one simply pays the people less. If by “efficiency” is meant capital efficiency and capital productivity, then it can be accomplished just as well by paying worse and working faster as by investing in more productive machines. Everything is the same. At this point one may not join the praise of those who consider efficiency -- something insane – reasonable. Efficiency in our society consists of the fact that market success is greater the less the wage laborers get from their work. One notices: If it does not concern the efficiency of the concrete work, thus the appropriate production directed toward useful goods, a completely different criteria of efficiency suddenly comes into play.
Now, I still want to make a point. If one sits in on an economics seminar at the university and tells the lecturer the criticisms I have here -– does he then say that its all rubbish, the world is not as I maintained? No, he will not do that. They say: but it is the joke of the free-market economy that egoistic interests are at play, everyone thinks only of himself and the success of one limits the success of another, frequently enough the failure of the other because they are competitors. And then they quote Adam Smith: There is this general egoism, but the "largest general prosperity develops” thanks to the "invisible hand" of the market. The economists criticize the early political economists (Marx the same as Ricardo or John Stuart Mill) because they talked about value, not only the left but also the right, which is the basis for the regulating laws of exchange and competition. The economists cannot recognize this and reproach the early economists, calling them metaphysical because they talked with value about something behind the facts. I do not want to ask here whether it is justified or not, I only want to judge the criteria. About something that is behind the facts, one may not talk about that, but what is it then with the "invisible hand"? It is actually a demand to regard market events not on the level on which they happen, in which the success of one is the damage of the other, but to step back a bit and show from another level that behind the fact of the egoists against each other there is this larger general prosperity. That is the challenge to the metaphysic, the challenge to analyze things not like they are but to add an opinion about it, e.g. the opinion that the market is the great coordinator.
At this point the following is important: The praise of the market (the great coordinator, bringing the largest general prosperity) is not identical to the assertion that everything is for the best, e.g. the goods supply situation. This methodical idea of the free-market economy, that this social economics has an insane mechanism, this thought frees itself from the assertion that it is all for the best, one must not deny that there are in the midst of the most wonderful market economy glaring symptoms of deficiency. The assertion of this insane mechanism is rather a method for how one can react to critical objections without giving up the thought of the larger general prosperity. Example: Housing shortage. Would the presence of a housing shortage be a proof for the fact that the market does not function well? What say the economists about this? They say that it is not due to the market but the market participants are responsible. The market participants did not behave in conformity to market trends by being ready to pay the appropriate prices for housing. Consequently, less housing is made available. If then rents rise because of the scarcity of housing, this is a completely natural reaction of the market. The small promise is then provided that thereby the basis is laid for the number of dwellings to (soon) rise again, because with high rents the investments in house building will increase again. Whether that actually happens, is undecided.
Another example: Unemployment. What do those who always uphold the coordination service say about that? Again they say it is not the market’s fault, the workers are too expensive and if they would be cheaper, then a market evacuation of their product would take place. In this respect, the theory is funny. It does not state who gains from it, but is a theory of the distribution of responsibility for everything that could possibly be found bad. If something does not work, if any nationally recognized disgrace appears, then the free-market economy ideologists say it cannot be different if one does not behave in conformity with the market. This is a funny thought because the first half was: people are stupid, it’s a good thing that there is the market to coordinate and introduce objective reason because humans are so weakly subjective. Read how criticism of any possible thing is formulated. If there is a housing shortage, if it is Mad Cow Disease or environmental pollution, the message always reads: Yes, big subjects, which do not behave in conformity with the market. Nevertheless, the market is supposed to be the aid for the weakness and stupidity of people, now suddenly people must ensure that the market functions reasonably. The market should be the aid for the weakness and stupidity of humans, but now suddenly humans must ensure that the market functions reasonably. And every time there is a reason to criticize the damages done to the people they say: you have offended against the market. And thus the theory is finally immune. No fact can be suitable to prove that the market is bad because every recognized evil is automatically a proof that the people offended against the market. That is already funny: In the end nobody states any more that everything is well coordinated, but the free market economists say: everything would be good if people would not continuously offend the market.