What is the Market Economy? Ruthless Criticism

What is the market economy?

[Translation of a lecture by Peter Decker (co-editor of GegenStandpunkt)]

1. Market economy – a false name for the thing

The subject sounds at first glance like the most self-evident thing in the world: our economic system is called the market economy. Actually, however, the term market economy is already an entire ideological program. Market economy is a twisted name for the thing that it designates and already contains a whole construction.

Other modes of production that once existed, or still exist, are designated differently; for example, according to 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, such as 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; for example, the slave economy or the feudal mode of production.

By contrast, our mode of production, the 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 commerce. Our mode of production is to be characterized by the fact that the means to mediate the many thousands of economic subjects is the market. 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 the market organizes the division of labor.

2. Market economy – a name born in the comparison of systems

Of course, it is no big mystery where this name comes from: it has its historic reason in the comparison of systems that defined economic science, as well as political thought, for fifty years in Europe and the whole world. This comparison of the western with the eastern social mode (the Soviet Union and its satellites) should expose the planned economy as evil and show the market economy – which should suddenly no longer be called capitalism – in a good light. Certainly, the ideologists of the planned economy once had the reverse. But there one could only say badly: in capitalism there are many who are rich, that is a fine thing, and in comparison stands the socialist economy, and it shows that in it the poor are better off. The old system comparison went in such an absurd way that the two modes of production mutually compared themselves as the better method for the same thing. In addition, one must say: it is the same now, when someone makes a comparison. If two things are compared, then they differ according to a common standard. Comparisons maintain a commonality, because one cannot compare without a commonality. Who can compare beets and music? Where there is nothing in common, there are also no differences.

Now, if 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, for example: the western market economy is more efficient, then one presupposes – without talking about it – efficiency is the common criterion. Only: efficient in what respect? The socialists would never have denied to the apologists of the market economy that capitalism is more efficient at exploiting. Of course, the supporters of the market economy did not mean that. None of them wanted to say: we impoverish 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 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, ones immediately and always hears: it is the supply of a population with goods. 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 exist in principle to carry out the same purpose and differ only in efficiency.

3. The market as “the best method of distribution”

I'll 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, without planning and with the help of a structure of markets and prices, deduces and coordinates the knowledge and actions of millions of different economic subjects. Without a thinking and steering central organ, 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 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 organ,” but – as one constantly hears – accomplishes nothing. The sentence with the steering central organ 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 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 with him and cannot sell them. Where is there any coordination? One hits on a solvent need and by chance has success; another strikes out and fails, possibly even becomes destitute due to his failed attempt to produce and sell. Only: what is coordinated here? Nothing at all is coordinated here! 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 are not backed up by money do not count as needs and therefore go unmet. The market does not coordinate existing needs and production, but the salesman in the market sees what solvent needs can be taken advantage of. And also, the other way around, for the buyer on a trip to the market, the need itself does not guide his decision to purchase, but what he actually gets 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 goes completely neglected – this is very much the question. With the whole coordination, on one side stands production, which never wants to meet needs, and on the other hand stands not needs at such, but purchasing power.

4. The “market equilibrium” is a pure tautology

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 an achievement nothing more than the fact that all the goods that were sold found buyers. Again, to make the thought clear: if the great coordination achievement of the market is that only those needs that are backed by money enter into the magnificent coordination achievement, and those which have no real money or not enough money count for nothing; and if, on the other side of the coordination achievement, generally only those products that were marketable enter, thus those that found a buyer, and everything else that was of poor quality or had too high a price or was produced in too high an amount could not be sold at the market equilibrium, then the famous market equilibrium is a pure tautology: everything that was sold 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 an achievement. This tautology always applies. It applies in the greatest economic crisis, like the worst famine, and it applies in a boom.

The 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 washed dishes? Yes, here 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.

So it becomes clear: it is an idealistic construction to say that every economic system requires a mechanism to coordinate production and needs, and this coordination can be satisfied in different ways, because one economic mode (the market economy) does not do this at all, as we have seen, but allegedly it solves this “problem” better than the other, namely the planned economy, which plans for this explicitly and, besides, always fails. So a really fictional achievement is attributed to the market, and if one looks at exactly what this achievement consists of, then the tautology emerges: what was sold also found a buyer; if something was sold, then obviously a need existed. Without doubt – only, is it really brought about like in the assertion, that existing needs and the existing production were brought into relation, were coordinated?

5. The praise of the market for successfully combining freedom and constraint

In praise for the market, there are three further arguments, which are something like sub-points to the coordination achievement, taking other directions of attack.

One reads: the market deserves praise because it is a successful combination of freedom and constraint. Anyone in an economics lesson who has ever talked about the system comparison, or about the advantages of the 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 don't know that much better themselves, or prescribes to them what they may get and what not. The market is much better, by contrast, because people can freely decide what they want to have. A small insinuation is made in both statements that is not expressed. The reproach is made of the socialist method of production that people are deprived, that needs are dictated to them that they do not at all have. And the market economy is certified with the praise that one can chose everything freely. But what can one really freely chose for oneself? Anyone who gives the market credit because free consumer choice takes place, that people can freely decide “optimal utility” with their purse, who talks about the advantage of the market economy in this way, holds that sacrifice or exclusion from need satisfaction in the market economy is only regulated by the size of one’s wallet. Yes, the ability to consume in the market economy is limited – they think – just like in the planned economy, but the advantage of the market economy is that everyone gets to decide for themselves what to access and what to deny themselves (because they have already spent their money). The benefit of the market economy is not the satisfaction of needs, but the freedom of the individual to decide which needs to leave unsatisfied. And the planned economy is so terrible because a) needs may not be satisfied and b) one may not even decide which needs to leave unsatisfied.

6. The market as an expedient means for restricting excessive needs

If 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 economic mode with the eastern one. The premise is thereby scarcity, which, however, is not at all debated. The premise is: of course, one must restrict 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.

Hence the conclusion of economics is that the rational mode of production is the one that organizes the restriction of need satisfaction. And only now do the differences in their ideas about 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 to produce to reach at least the conditions of last year again. One also knows how many potatoes were eaten, how many people live in the country, how many dwellings are needed if one wants to give XY square meters to each person. These are not mysteries. The whole ideology is to act as if finding out needs is a difficult matter.

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 documents 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 a proof that it cannot be done. The argument is supposed lead to the insight: yes, that is correct, it can't work if everyone does not want to live restrained this way, that is clear; therefore, one must find a method of restriction. This conclusion happens so quickly, and it always happens this way, 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, of course, it is clear what comes next in opposition to this, 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 the number of goods can really no longer be increased: what if everybody wants such extensive landed property that there would not be enough room for the 80 million inhabitants of Germany any more? Then one finally has some kind of proof from nature for the necessary restriction.

What does this objection submit? The attractiveness of the whole procedure consists of intentionally abstracting from the needs that exist, that people really have. And just for the sake of the principle, one carries this to extremes until one seems to prove that needs are always greater than the possibilities of satisfying them. Then, at the conclusion, one ends up with things like: 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 livelihood – 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 satisying them seize on objects that are really direct products of exploitation, one must say: they can be made only if one excludes other people from their need satisfaction. If one goes so far to such proofs, then that pleases me, because that is the proof that I want.

Question: But are there not also reasonable obstacles to 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 dealt with?

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 should be asked: ok, how much production of a certain item is actually possible. Then, however, jumping off from this consideration, the advocates of the market economy at this point make their justification: 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 here, i.e. that there must be restriction.

I do not like the whole thought that this “does not allow a solution” because it acts as if the whole world looked for possibilities of better satisfying needs – and then there is no solution for it. The thought wants a completely different direction; it wants to say: a complaint against our economic system is impossible 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 an accepted imbecility that the need for beer is boundless; maybe somebody wants to have 12 wheat beers per evening; but then he just lies under the table and doesn't want to pour another. This also applies in principle to all other needs; there are certainly many that are unsatisfied, but each one is not boundless, but has its limit. The second side is: production has its means and is measured by the conditions of productivity and the available labor. But this market “argument” wants to ask neither how large the productive possibilities are, it doesn't 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 system is a quite optimal coordination between both these two fundamentally insufficient magnitudes. This is its charm and also the ideological scam: it is not at all maintained that needs nevertheless come to bear. Rather, the assertion is: needs do not come to bear in the best possible way, you can't get more.

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; so if 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 greater than 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 that one has more and more needs than one can satisfy is backwards. One must be willing to exert the necessary effort for what one plans. And so, in the effort one also has perhaps 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, which says: I always have more needs than I can satisfy, and I am okay 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 in the other half of these examples of objections, one ends up dreaming: one deliberately looks for examples of things so far out of reach that everyone immediately notices 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 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 one to start by envisioning more needs than can be satisfied, in order to then reach for it in the best unreachable way. The latter is, however, the image that the market economy wants to have of itself.

7. The market as preventer of the monopoly power of the producers

New point: the market is praised for constraints associated with freedom on the side of production. Conversely, there is a discrediting name for the planned economy: command economy. In this designation, everyone immediately hears that this must be something very bad, something which makes one think of barracks and the like. How is our market economy different? In the first instance, it is a free economy. In the market economy, everyone is free to produce what he pleases, with whatever resources he thinks worthwhile to spend. However, this is only the first half. This freedom is hardly praised before a praise of constraint is added to it: thank God we have market constraints to protect us from a producer dictatorship! In the command economy, shoddy production was impelled by the Politburo. The next thought introduces the free producer in the market economy, who one thinks could rule over the society. Then the market is introduced as a fine remedy against this, because it prevents the producer from ruling dictatorially over the consumer.

Here, again, there is an assumption about the economic system, the command economy as well as the producer dictatorship. The assumption consists of accepting that 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 economy that is not free, the command economy, which is then branded an injustice, i.e. a center prescribes to the producer what he has to do. Here an antagonism of interests is assumed on both sides, but it is not explained.

Why is it then, that the producers do not best produce what people need? Also, why must one thank the market for impelling production to a corresponding demand? Why does one have to thank the market for forcing the producers to be efficient? As if it is so obvious that unless producers are forced they would never make a contribution to the division of labor. But in reverse: producers who are forced by a center are suppressed. Thus: 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 necessary work, i.e. one person makes this, another that, so that in the end a large amount of products results and correspondingly 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? It is not worse to make sandals than to make boots or vice versa. Here the thought of the suppression of the producer by a Politburo is just as wrong as the reverse of the thought, that one must force the producer to make sandals. Yes, they should make something else, aside from 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 conflict of interests in the private sector, but this is not talked about now, because if one talked about it a criticism of the market economy would follow. Now the conflict of interests in the private sector is assumed, it is applied to any form of division of labor like a natural law, in order to then introduce the constraint of the market as the beneficial remedy for the evil human who, as a producer, screws the consumer and, as a consumer, takes advantage of the producer.

8. The obligation to be efficient and the equilibrium of interests between consumers and producers – completely without command

The market, completely without command – thank God we have this and not a producer dictatorship! – allegedly forces efficiency, cost-saving production, quality. Is this true? Then, to what end does the market serve in reality? Now, to a production that is successful on the market, namely in regard to the purpose that really matters in the market economy. The market really does force. Each seller stands in competition with all the other sellers, and he must assert his share of the market against the other sellers, otherwise he is expropriated, otherwise he soon possesses nothing. But what is it that he is forced to do here? He is forced, firstly, to pursue his own goal, i.e to make money in the market, and secondly, to do what is necessary for this. 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 does efficiency mean? This is, by the way, an important point: one is often intellectually bamboozled when efficiency is talked about, because with efficiency one must always specify what the criterion is whereby the efficiency is to be reached. Efficiency in itself means: an activity done according to its purpose, and indeed done well according to its purpose. But it is no longer mentioned what the purpose is. Everyone nowadays joins the choir of those who say that everything must run as efficiently as possible. But the question what one should be efficient at does not occur as well. Hence its true: of course, market producers must produce efficiently. But efficiently in what sense? In the sense that their costs must be low so that the selling price contains a profit. Is there another criterion for efficiency in the 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 this another way: the market does not force efficiency, but the market defines what efficiency is in this society.

Take, for example, the subject of quality. Does the market demand high quality production? Like shit it does! The market forces a production that corresponds to demand, whatever is suitable for taking advantage of the demand that corresponds to the money in the checkbooks of the citizens. And trash is just as good, if it fits the poverty of the customers – hence, it is 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. Everyone 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 to blame, because they always want cheap meat. This is funny. Now the farmer says: but he only did what is rational according to the market, he only tried to produce cattle as economically as he could in order 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 consumers behaved perfectly in keeping with the market, they compared the prices and then went for what was cheapest, that is their task. Now they get to hear the reproach that they always want only the cheapest meat. Here we have a marvelous case, that in the market economy the falsification of a use value is naturally a means of acquisition! In an economy where there are only conflicts of interests between producers and consumers. But that is not in nature, it is not in any mode of production in world history, but only in one where production is private. And even 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 anything better, or whether to put down more money in order to buy a better grade of quality. There are 100 levels of quality and price for every product in our developed society, so an offer always exists for the poor, even if a bad one – this provides evidence that production is perfectly adapted to real market conditions. A seller specializes on every pocketbook. There are also luxury sellers of meat, and there are also customers who buy luxury meat, which just depends on their wallet and how much money they have.

The assertion that the market ensures quality is one of the most beautiful fairy tales about the market economy. The market forces only two things: first, a comparable supply and, second, a supply appropriate to the poverty or wealth of the customers. Turned around: the desire to make money encourages producers to constantly perform experiments in poor quality, to constantly try to lower the quality without the buyers noticing. If the buyers notice, it is price-damaging, but the reduction in quality is only one technique, e.g. food falsification, which has existed for hundreds of years and with us just takes the quite modern form of Mad Cow Disease. Next year, perhaps a salmonella scandal, or in the form of chickens fed sewage, or … or … – it does not stop. And this is all the market economy, because everyone involved behaved perfectly according to real market conditions.

The market forces efficiency, but not efficiency in the concrete labor of producing goods, but forces efficiency in the issue of costs; it forces ever less expenses for a given retail price. And I very much doubt that this is a rational way to produce.

9. The market as the spontaneous and self-regulating organization of production

There is another opposition between market economy and planned economy. Here stands the planned and therefore inflexible division of labor of the planned economy against the spontaneous and self-regulating division of labor of the market economy. This also belongs to the basic views of economics, which anyone who has studied it even a little bit has already heard before in principle. 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. In contrast, the market economy regulates itself, always much better than it would if it were planned, because the center cannot know all that is needed in the society, it cannot react fast and flexibly when needs change.

Two different things can be said to this statement. A while ago, I mentioned part of it under the heading: “the coordination achievement.” The unplanned, self-regulating division of labor in the market economy, which 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 destroy 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, spontaneous, self-regulating division of labor, then it is remarkable: the human victims in this division of labor simply do not matter.

The other half is: it is also clear that the society does not divide the work in a market economy. It is not at all the case that we say: we need this much from him and this much from her; but each possible applicant tries to find a buyer for themselves, frequently enough edging out somebody else. And then the result of this is called the division of labor, although the labor was never divided. Cooperation, which should really be the meaning of 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 market economy. The whole is rather the result of a struggle in which there are winners and losers.

There is still another comic aspect to the assertion that one cannot plan production: as if the market would replace the entrepreneur's knowledge of the specific division of labor. It is not the case that the entrepreneur stumbles blindly in the market, looking for what he can get. Someone who produces a car knows from experience how many prefabricated plastic parts he needs, how much wire he needs, how much sheet metal he needs, etc., and he definitely knows all this 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 market economy takes place everywhere! But for another purpose. A factory is planned in minutiae; an assembly-line is a total planning of labor, and if there is group work instead 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, the market economy and the planned economy, is wrong in another way than those previously mentioned. Now still another version of the error: planned economy defines much less than socialism; that a national economy is centrally planned is nowhere near socialism. It depends on what the purpose is that is planned for. Every wartime economy is a planned economy. The Emperor and Hitler also drew up planned economies, at least partly. That an economy is planned, that would not be enough for us, it would depend on what the purpose is that is planned for, what should count as worthwhile. And there are still many more viewpoints on what counts as worthwhile than only producing as large an output as possible; e.g. how the work is experienced, whether one is spared, whether a person is not completely tuckered out after work, but still has a life apart from work, etc. These are also all parts of being worthwhile. And market economy, on the other hand, defines much more than a method of co-ordination. In the market economy, there is – an unspoken but very definite purpose – the whole mode of production.

10. The market – not a place, but the circulation of capital
Discussion: the market as the most efficient answer to human stupidity

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 market economy: without everyone producing something for someone else, there would be no 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 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 needs of the others and only for oneself. The need of others is necessary, but it is not the purpose of production. It is not that one produces the shoes that another person 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 by which I can get access to the products of all the others for myself.

Question: The market economy is so successful because it comes from the badness of human nature 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 does successful mean here? The real comparison between the market economy and really existing socialism was never an economic efficiency comparison free of force, but force was always at work, for which the cold war is the signifier. There are even those who ask the question about the “better” economic system, then refer to this force comparison: yes, and who built better weapons? Who could prepare more deaths? So capitalism is the better system! The second one is the following: you get an answer to the last question, which comes 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 maintained: this is not rational, but humans are unfortunately irrational, and under this premise it must just be. Main counterargument: from where do you know that humans are so irrational and so bad as that? From where do you know the nature of humans? This counter-question aims at the following point: 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 the other sellers. That is not a question of desires, but of necessities.

I agree that one should not say somebody 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 exist here, simply explaining the conflicts of people as 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 too? You are stupid? And if you are, then you do not refrain from stupidities? But it belongs to our bourgeois world view, to the world view of our society, to maintain that humans are idiots, hence one knows (!) better, and at the same time one maintains the belief that one can not change this. 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.

There is also frequently this contradictory pair of ideas in this world view: egoism/altruism. All humans in capitalism would be egoists and if they were altruists, then they would be for socialism. One always thinks in these alternatives. 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 any church. My argument is: people are bad egoists, they do not properly organize the proper care of themselves, so they must work much more than they have to, so they get much less than they could.

11. Success on the market is directed against the source of income of those who must live from the sale of their labor

So far, we have held: market economy does not define an economic mode, but a substantial amount of the economic mode is already defined by it. 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 were 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 in 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 one's 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 character than is commonly imagined when someone talks so loosely about efficiency. Efficiency is increased, in the sense of the purpose, by higher productivity, by buying better machines. What is that efficient for? For saving on paid labor. Is that beneficial? For the entrepreneur it is; for the employee, it is a layoff. 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. Efficiency in production can be achieved just as well if one does not increase productivity, but if one simply pays people less. If “efficiency” means 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. Its all the same. At this point, one may not join the praise of those who consider efficiency – something insane – rational. In our society, efficiency consists of the fact that the market success is greater the less the wage laborers get from their work. One notices: if it is not about the efficiency of concrete labor, thus production appropriately directed toward useful goods, a completely different criteria for efficiency suddenly comes into play.

12. The theory of the “invisible hand” – the metaphysic of economists and its use for a waterproof praise of capitalism

Now, I still want to make a point. If one sits in on an economics seminar at the university and makes some of the criticisms I have made here to the lecturer – does he then say that its all rubbish, the world is not as I maintained? No, he will not do that. He says: but it is the genius of the 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 universal egoism, but the “greatest 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), about the basis for the laws regulating exchange and competition. The economists cannot perceive this and reproach the early economists, calling them metaphysical, because they talked about value, about something behind the facts. I do not want to ask here whether this is justified or not, I only want to judge the criteria. One may not talk about something that is behind the facts, but what is it then with the “invisible hand”? It is actually a call 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 conflicting with each other, there is this larger general prosperity. That is the meaning of metaphysic, the call 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 situation of the goods supply. This methodological concept of the market economy, that this social economy has an insane mechanism, this thought frees itself from the assertion that it is all for the best, one must not deny that in the midst of the most wonderful market economy there are 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 evidence for the fact that the market does not function well? What do the economists say about this? They say that it is not due to the market, but it is the market participants who are are responsible. The market participants did not behave in conformity to market trends, by being ready to pay the appropriate price for housing. Consequently, less housing is 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 made that, in this way, the basis is laid for the number of dwellings to (soon) rise again, because with high rents investment in housing construction will increase again. Whether that actually happens is undecided.

Another example: unemployment. What do those who always uphold the coordination achievement say about this? Again, they say it is not the market’s fault, the workers are too expensive and if they would be cheaper, then a market-clearing of their product would take place. In this respect, the theory is amusing. It does not state who gains from it, but it 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 market economy ideologists say it can be no different if one does not act in conformity with the market. This is an amusing idea, 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 the 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 issues 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 there to help the weak and stupid humans, but now suddenly humans must ensure that the market functions reasonably. And every time there is a reason to criticize the damages it does to people, they say: you have offended against the market. And thus the theory is finally immune. No fact can be suitable for proving that the market is bad, because every recognized evil is automatically a proof that the people offended against the market. This is amusing: in the end, nobody claims any more that everything is well coordinated, but the market economists say: everything would be okay, if people would just not continuously offend the market.