Many reformist parties throughout the world, particularly Labour and various social democratic parties, while accepting the continuation of capitalism have argued that market capitalism should not be left to its own devices. In this view, production should be planned, and moreover a deliberate policy should be operated for raising the standard of living of workers by transferring wealth and income from the rich to the poor, pushing up wages, and introducing a series of social reforms.
There are compelling economic reasons why this cannot work. It is nevertheless an old idea, and Marx criticised people who in his own day made the same error as do the various reformist parties now:
Vulgar socialism has accepted as gospel from the bourgeois economists that the problem of distribution can be considered and treated independently of the mode of production, from which it is inferred that socialism turns mainly upon the question of distribution.
(Critique of the Gotha Programme)
What Marx was saying to these “vulgar socialists” was that if there exists production on a capitalist basis — an owning class and a working class and commodities being produced for sale — it is that basis which also determines distribution. It is impossible to have capitalist production and socialist distribution. If there is capitalist production, this will also determine how wealth is distributed.
The experience of reformist parties as governments has been the opposite of what they intended. For example every Labour government in Britain since the end of World War II. instead of trying to push wages up. has been compelled by the pressures of capitalism to introduce a “wages policy” with the object of holding wages down. The trade union movement has been forced to fight many industrial battles over wages and conditions during periods of Labour government. as at any other time.
Another fallacy of these reformist parties is their belief that capitalist production can be planned by the government. They work on the simple assumption that if the government increases total production this must mean that there is more of everything for the mass of the population. But in capitalist society, what there is available for the mass of the population does not depend on how much can be produced, but on how much can be sold at a profit. If commodities cannot be sold, workers lose their jobs and therefore have no wages with which to buy. During the period 1974 to 1979 the British Labour government “planned” to expand steel production and spent hundreds of millions of pounds doubling the output capacity of the steel industry, which it raised to 22 million tonnes of crude steel. But they were unable to sell the steel, and tens of thousands of steel workers lost their jobs. Successive governments have spent more hundreds of millions of pounds cutting back capacity to what it was before they started.
Another example was with coal production. As a result of forward “planning” there were, before the recent strike. 50 million tonnes of coal lying at pitheads, power stations and other places, which could not be sold or used. Arthur Scargill. the president of the miners union, said that the accumulation of unsold coal should be given away, particularly to old age pensioners. But what Scargill forgot is that if the 50 million tonnes were given away it would simply have reduced the ability of the Coal Board to sell 50 million tonnes of newly mined coal. Scargill takes his place among those who Marx described in 1875 as “vulgar socialists” who think it is possible to superimpose socialist distribution on capitalist production.
Another reformist intention has been to make the ownership of wealth less unequal. This was supposed to have two beneficial results. First it would make workers better off. and secondly it was supposed to reduce unemployment because it would expand the market. But this involves another illusion. If wealth is transferred from the rich to the poor it has no effect on total market demand and therefore no effect on unemployment. All it means is that capitalists buy less and workers buy more, so overall market capacity is not affected.
Change in the distribution of income and ownership of wealth has to be looked at more closely. It takes place as a result of a whole set of economic circumstances affecting the operation of capitalism and there is no evidence that this is affected to any considerable degree by particular government policies. For example we can assume that it was the wish of the present Thatcher government in Britain to increase the size of profits and to depress wages. But was it the wish of this government that some 13,000 companies should go bankrupt during 1983? Was it the wish of this government that in real terms, after allowing for price rises, the total profits of companies should have continued to fall, so that in 1983 they were well below the 1979 level? Obviously, what this government wants has very little influence on the way capitalism operates.
Looking back over the past 130 years it is possible to see the phases that British capitalism has passed through. Between 1850 and 1914 average wages rose by nearly 90 per cent. This was against a background of big and rising profits so that the inequality in the distribution of wealth and income probably increased or remained unchanged. On the workers’ side of the division of wealth, the major factor was the growth and development of the trade unions in the last quarter of the century.
Between 1895 and 1914 British capitalism more or less stagnated. Profits began to fall and there was some fall in wages. During the period between 1914 and World War II it is probable that the inequality of wealth and distribution of income remained unchanged or may have increased in favour of profits.
After World War II wages increased and profits declined. Up to 1977 the government statistical office published figures every year showing the distribution of income to wages, salaries and trading profits for manufacturing industries. These showed that in 1950 the total profits of manufacturers were 55 per cent of the total wages and salaries bill, and 57 per cent in the following year. After this there was a continual decline of profits. In 1964 it was 43 per cent. In 1970 it was 35 per cent. This fell to 30 per cent in 1977 and there was a further fall to about 25 per cent in 1982.
What is happening now is a reversal of this trend. Companies which survived in the depression shed a lot of workers and tightened up production. With over 3 million unemployed the position of workers is weakened. Now output has been increasing but companies are not taking on more workers and profits have been rising sharply. As sales have picked up companies are able to achieve the amount of output they had before the depression with far fewer workers. The result has been a remarkable increase in profit over the past year and some estimates have put it as high as 50 per cent and it is still rising.
It is likely now that the post-war trend towards less inequality has been reversed and British capitalism is once again in a phase of greater inequality in the distribution of wealth and income. This has been due to changes in the relative strength and bargaining power of workers on the one side and employers on the other in relation to the ability of the market to provide for sales at a profit.