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Foreword to 1962 Printing

On looking over this book again with a view to writing a foreword for the French and German translations as well as for a new American printing, I have a strong feeling of ambivalence. There is first the thought that it may be not too immodest on my part to submit this work once more to the reader in its original form. Neither historical events which have taken place since it was written, nor subsequent reflection and study, partly stimulated by the criticism to which it has been subjected, have changed my conviction that taken as a whole the view which it presents and the argument which it advances are still entirely valid. But then there are other considerations—referring not to the whole but to the parts—which are less comforting. For were I at this time to write the book afresh, I would try to eliminate what strike me now as weaknesses and to develop several of its themes in a more comprehensive and convincing manner. However, since the pressure of other, not unrelated, work renders such a major undertaking impossible, I must reluctantly adopt the principle of “letting bygones be bygones,” and attempt to resolve the conflict between the whole and the parts by means of this prefatory note dealing briefly with those aspects of the book which are most in need of reconsideration and supplementation. The order in which the topics are taken up is determined not so much by their general importance as by the sequence in which they appear in the book itself.

I

Hard as I tried to clarify the prevailing confusion about a central concept of economic theory, that of consumer sovereignty, the success attained was anything but spectacular. There are few other areas where the limitations of the conventional economist are as obvious and as damaging to insight as in the treatment of this subject. Irrevocably committed to taking the existing economic and social order for granted, and thinking exclusively in categories reflecting capitalist relations of production, even the ablest academic economist is inexorably trapped by the basic predicament of all bourgeois thought: the compulsion to choose continually between equally pernicious alternatives. Like the man condemned to death who was granted “freedom of choice” between being hanged and being shot, bourgeois economics is eternally plagued by the problem whether the irrationality of monopoly is better than the anarchy of competition; whether the cumulation of means of destruction is better than unemployment; whether inequality of income and wealth leading to saving and investment on the part of the rich is better than fair shares and greatly reduced saving and investment. In the same way the problem of consumers’ sovereignty is viewed as the question whether the consumer—however much exposed to the barrage of advertising and high-pressure salesmanship—should be left free to spend his income in any way he pleases or be forced to accept a basket of goods which a “commissar” would judge to be best for him. It can be readily seen that placed before this dilemma, the economist is indeed confronted by a Hobson’s choice. Kneeling awe-stricken before the absolute truth of the consumer’s “revealed preferences” places him in the disturbing position of having to refuse to make any judgments on the resulting composition of output and hence on all the waste and cultural degradation which so obviously characterize our society. On the other hand, rejecting the consumer’s revealed preferences as the ultima ratio in favor of a set of decisions imposed by government would be equally distressing, implying as it would the repudiation of all the teachings of welfare economics and—more importantly—of all the principles of individual freedom which the economist rightly strives to uphold.

The conservative reaction to this perplexity appears in two variants. One school of thought deals with the problem by denying its existence. This school holds that the molding of consumers’ tastes and preferences by the advertising and high-pressure sales efforts of corporate business is nothing but a bogey, because in the long run no amount of persuasion and no ingenuity of salesmanship can change “human nature,” can force upon the consumer what he does not want.¹ Furthermore—so the argument runs—the revealed preferences of consumers yield results which are quite adequate and call for no particular improvements.²

Another conservative current of thought takes a different tack. It freely acknowledges that the consumer’s revealed preferences have nothing in common with the traditional notion of consumer sovereignty, that the power of the giant corporations is such as to mold consumers’ tastes and preferences for the benefit of corporate interests, and that all of this has a deleterious effect on both our economy and our society. As Professor Carl Kaysen puts it:

One aspect of [its] broad power … is the position that corporate management occupies as taste setter or style leader for the society as a whole. Business influence on taste ranges from the direct effects through the design of material goods to the indirect and more subtle effects of the style of language and thought purveyed through the mass media—the school of style at which all of us are in attendance every day.… This, more shortly stated, is the familiar proposition that we are a business society, and that the giant corporation is the “characteristic,” if not the statistically typical, institution of our society.…³

Yet skeptical and realistic as the writers of this orientation are, they place the utmost emphasis on the fact that these irrationalities and calamities are inherent in the order of things, which they identify with the economic and social system of monopoly capitalism. “To touch the corporation deeply,” remarks Professor Mason, “is to touch much else.”⁴ And in our day touching “much else” is definitely not on the economist’s agenda.

This is not the stance of the so-called liberal. Considering the consumer’s revealed preferences to be the source of our society’s irrational allocation of resources, of its distressing moral and cultural condition, the liberal is exercised about the pernicious impact of advertising, about fraudulent product differentiation and artificial product obsolescence; he inveighs against the quality of culture purveyed by the educational system, Hollywood, the newspapers, the radio and TV networks; and, driven by this indignation, he arrives at the conclusion that “the choice is not whether consumers or a central planner should exercise sovereignty but whether and how the producer’s power to ignore some consumers and influence the preferences of others should be curbed, modified, or shared in some ways.”⁵ To accomplish this curbing, modifying, and sharing, he recommends a list of “remedies and policies” ranging from regulatory measures such as those taken by the Food and Drug Administration, through government support for opera houses and theaters, to the formation of Distinguished Citizens Committees the task of which would be to influence public opinion in the direction of rational choices and better taste.

Disappointing as it may be to many, there can be little doubt that at the present stage of capitalist development the conservative “realist” often comes nearer the truth than the liberal meliorist. Just as it makes no sense to deplore war casualties without attacking their cause, war, so it is meaningless to sound the alarm about advertising and all that accompanies it without clearly identifying the locus from which the pestilence emanates: the monopolistic and oligopolistic corporation and the non-price-competitive business practices which constitute an integral component of its modus operandi. Since this locus itself is never approached, is indeed treated as strictly out of bounds by Galbraith, Scitovsky, and other liberal critics, since nothing is further from their minds (or at least their public utterances) than “touching deeply” the giant corporation, what can be expected from their recommending various regulatory boards and even their possible appointment to Distinguished Citizens Committees? One would think that the record of already existing regulatory agencies is sufficiently eloquent in showing that it is Big Business that does the regulating rather than vice versa. And is more evidence needed on the ineffectuality of the Food and Drug Administration, the Federal Trade Commission, and the Federal Communications Commission than has already been assembled thus far?⁶ Nor is there any need to elaborate on the profound impact on society exercised by the recent activities and reports of the President’s most distinguished Commission on National Goals.⁷ But the liberal meliorists ignore all this. Treating the state as an entity which presides over society but does not form a part of it, which sets society’s goals and reshuffles its output and income but remains unaffected by the prevailing relations of production and impervious to the dominant interests, they fall prey to a naive rationalism which, by nurturing illusions, merely contributes to the maintenance of the status quo.⁸ Compared with this, the “contracting out” dictum—“we have … reached the frontier between economic and political theory; and we shall not cross it”—with which Professor Scitovsky a decade ago concluded his magnum opus,⁹ formulates a relatively tenable position.

For the crux of the problem is not even approached by the liberal critic. In the first place, he of all people, being a good Keynesian, cannot avoid inconsistency when he recommends the interference with or curtailment of corporate advertising and other sales activities. In this regard The Wall Street Journal and the “realistic” economists who share its views are surely on firmer ground. For all these “undesirable” business practices do in fact promote and increase sales, and do actually directly and indirectly help in propping up the level of income and employment.¹⁰ So also does the sale of ever more motor cars, even if they do strangle our cities and poison our atmosphere; and the production of armaments and the digging of shelters. None of these activities can be regarded as promoting the progress and happiness of the human race, although all of them constitute remedies against sagging production and increasing unemployment.¹¹ And yet such is the dialectic of the historical process that within the framework of monopoly capitalism the most abominable, the most destructive features of the capitalist order become the very foundations of its continuing existence—just as slavery was the conditio sine qua non of its emergence.

The “realistic” conservative scores also over the liberal “do-gooder” in his general comprehension of the problem of consumer sovereignty. For in warning against exaggerating the impact of advertising, high-pressure salesmanship, and the like, on the preferences and choices of consumers, they occupy a position of formidable strength. Their statements that consumers like only what they care for and buy only what they wish to spend money on are obviously tautologies, but, being tautologies, they are equally obviously correct. From this, to be sure, it does not follow, as some business economists like to assert, that the barrage of advertising and salesmanship to which the consumer is continually exposed has no influence on the formation of his wants. But neither is it true that these business practices constitute the decisive factor in making the consumer want what he wants. Professor Henry C. Wallich comes closest to the spot where the dog is buried in his shrewd observation that “to argue that wants created by advertising are synthetic, are not genuine consumer wants is beside the point—it could be argued of all aspects of civilized existence.”¹² This, to be sure, is overstating the case. Human wants are not all wholly “synthetic,” created by an almighty Madison Avenue (or “purified” and “ennobled” by a Madison Avenue “in reverse”: government regulatory boards and/or Distinguished Citizens Committees for the Promotion of Good Taste) : that view reflects the spirit of limitless manipulability of man which is so characteristic of the “men in gray flannel suits” who dominate the executive offices of corporations and the important bureaus of the government. But neither do all wants stem from man’s biotic urges or from a mythical eternally unchanging “human nature”: that concept is metaphysical obscurantism which flies in the face of all historical knowledge and experience. The truth is that wants of people are complex historical phenomena reflecting the dialectic interaction of their physiological requirements on the one hand, and the prevailing social and economic order on the other.¹³ The physiological requirements sometimes must be abstracted from for analytical purposes because they are relatively constant. And once this abstraction is explicitly made and firmly borne in mind, the make-up of human wants can (and must) be legitimately thought of as being “synthetic,” i.e., determined by the nature of the economic and social order under which people live. What Professor Wallich apparently fails to see is that the issue is not whether the prevailing social and economic order plays a prominent part in molding people’s “values,” volitions, and preferences. On this—Robinson Crusoe having finally departed from economics textbooks to his proper insular habitat—there is a nearly unanimous consensus among serious students of the problem. The issue is rather the kind of social and economic order that does the molding, the kind of “values,” volitions, and preferences which it instills into the people under its sway. What renders the social and economic order of monopoly capitalism so irrational and destructive, so crippling to the individual’s growth and happiness, is not that it influences, shapes, “synthesizes” the individual—as Professor Wallich suggests, every social and economic order does this—but rather the kind of influencing, shaping, and “synthesizing” which it perpetrates on its victims.

A clear understanding of this permits a further insight. The cancerous malaise of monopoly capitalism is not that it “happens” to squander a large part of its resources on the production of means of destruction, that it “happens” to allow corporations to engage in liminal and subliminal advertising, in peddling adulterated products, and in inundating human life with moronizing entertainment, commercialized religion, and debased “culture.” The cancerous malaise of the system which renders it a formidable obstacle to human advancement, is that all this is not an assortment of fortuitously appearing attributes of the capitalist order, but the very basis of its existence and viability. And such being the case, bigger and better Food and Drug Administrations, a comprehensive network of Distinguished Citizens Committees, and the like can merely spread a veil over the existing mess rather than clean up the mess itself. To use an earlier comparison once more: building sumptuous cemeteries and expensive monuments for the victims of war does not reduce their number. The best—and the worst—that such seemingly humanitarian efforts can accomplish is to dull people’s sensitivity to brutality and cruelty, to reduce their horror of war.

But to return to the starting point of this argument. Neither I nor any other Marxist writers with whose works I am familiar, have ever advocated the abolition of consumer sovereignty and its replacement by the orders of a commissar. The attribution of such an advocacy to socialists is simply one aspect of the ignorance and misrepresentation of Marxian thought that are studiously cultivated by the powers that be. The real problem is an entirely different one, namely, whether an economic and social order should be tolerated in which the individual, from the very cradle on, is so shaped, molded, and “adjusted” as to become an easy prey of profit-greedy capitalist enterprise and a smoothly functioning object of capitalist exploitation and degradation. The Marxian socialist is in no doubt about the answer. Holding that mankind has now reached a level of productivity and knowledge which make it possible to transcend this system and replace it by a better one, he believes that a society can be developed in which the individual would be formed, influenced, and educated not by a profit- and market-determined economy, not by the “values” of corporate presidents and the outpourings of their hired scribes, but by a system of rationally planned production for use, by a universe of human relations determined by and oriented toward solidarity, cooperation, and freedom. Indeed, only in such a society can there be sovereignty of the individual human being—not of the “consumer” or the “producer,” terms which in themselves reflect the lethal fragmentation of the human personality under capitalism. Only in such a society can the individual freely co-determine the amount of work done, the composition of output consumed, the nature of leisure activities engaged in—free from all the open and hidden persuaders whose motives are preservation of their privileges and maximization of their profits.

And to those of my critics who skeptically or “realistically” sneer and condescendingly remark that the image of such a society is nothing but a utopia, all I can answer is that if they are right, all of us—my critics and myself—are utopians. They because they believe that a social and economic order which they wish to preserve can be made to last forever by means of manipulative tricks and superficial reforms that fail even to touch its increasingly manifest irrationality, destructiveness, and inhumanity; I because I trust that mankind, which has already managed to sweep capitalism off the face of one third of the globe, will in the fullness of time complete this Herculean task and succeed in establishing a genuinely human society. Having to choose between these two utopias, I prefer the second, subscribing to the beautiful words of Simone de Beauvoir: “Socialist Europe, there are moments when I ask myself whether it is not a utopia. But each idea not yet realized curiously resembles a utopia; one would never do anything if one thought that nothing is possible except that which exists already.”¹⁴

II

Chapters Three and Four, dealing with monopoly capitalism, call for a clarification of the argument. The required modifications are not far-reaching, but may add—I hope—to its consistency and persuasiveness. My views on this vast subject have crystallized in the course of extensive work undertaken jointly with Paul M. Sweezy; the results of our studies and discussions will be presented in a book which we hope to complete in the near future. What follows in this section is confined therefore to only two points which the reader should bear in mind when turning to the relevant part of this volume.

I have argued above that it is necessary to probe deeper than the readily observable surface with regard to the problem of consumer sovereignty. This is at least equally true when it comes to what I consider to be the key to the understanding of the general working principles of capitalism: the concept of the “economic surplus.” That I was unable to explain it sufficiently well is apparent from the fact that a critic as eminent as Nicholas Kaldor failed to grasp its meaning and significance.¹⁵

The root of the trouble is that Mr. Kaldor, like all other economists spellbound by the surface appearances of the capitalist economy, insists on identifying the economic surplus with statistically observable profits. If such an identification were legitimate, there would be no need to introduce the term “economic surplus,” and—what is obviously more important—there might be no justification for speaking about rising surplus. The crux of the matter is, however, that profits are not identical with the economic surplus, but constitute—to use what has become now a hackneyed metaphor—merely the visible part of the iceberg with the rest of it hidden from the naked eye. Let us recall that at an early stage of the development of political economy (and capitalism) the relevant relations were seen much more clearly than they are at the present time. An intense theoretical struggle was fought, in fact, to establish that the rent of land (and interest on money capital) are not necessary costs of production but components of the economic surplus. At a later phase, however, when the feudal landlord and moneylender were replaced by the capitalist entrepreneur and banker, their returns were “purged” of the surplus “stigma” and became promoted to the status of necessary prices of scarce resources or of indispensable rewards for “waiting,” “abstinence,” or “risk-taking.” In fact, the very notion “economic surplus,” still prominent in the writings of John Stuart Mill, was declared non grata by the new economic science which proclaimed any and every outlay as “necessary” as long as it received the stamp of approval from the revealed preferences of consumers operating in a competitive market.

The situation became more complicated with the proliferation of monopoly; and a number of economists—beginning with Marshall but later on inspired primarily by the work of Pigou—who conducted their investigations from the vantage point of competitive capitalism found it impossible to treat monopoly profits as necessary costs of production.¹⁶ This was undoubtedly an important step forward; it constitutes, however, only the beginning of what needs to be understood. For monopoly capitalism generates not only profits, rent, and interest as elements of the economic surplus, but conceals an important share of the surplus under the rubric of costs. This is due to the ever-widening gap between the productivity of the necessary productive workers and the share of national income accruing to them as wages.

A simple numerical illustration may be helpful here. Assume that in period I, 100 bakers produce 200 loaves of bread, with 100 loaves constituting their wages (one loaf per man), and 100 loaves being appropriated by the capitalist as surplus (the source of his profit and his payment of rent and interest). The productivity of the baker is two loaves per man; the share of surplus in national income is 50 percent, and so is the share of labor. Now consider period II in which the productivity of the baker has increased by 525 percent to 12.5 loaves and his wage has risen by 400 percent to five loaves per man. Assume further that now only 80 bakers are employed in baking, producing altogether 1,000 loaves while the remaining 20 are engaged as follows: five men are commissioned to change continually the shapes of the loaves; one man is given the task of admixing with the dough a chemical substance that accelerates the perishability of bread; four men are hired to make up new wrappers for the bread; five men are employed in composing advertising copy for bread and broadcasting same over the available mass media; one man is appointed to watch carefully the activities of other baking companies; two men are to keep abreast of legal developments in the antitrust field; and finally two men are placed in charge of the baking corporation’s public relations. All of these individuals receive also a wage of five loaves per man. Under these new circumstances, the total output of 80 bakers is 1,000 loaves, the aggregate wage of the 100 members of the corporation’s labor force is 500 loaves, and profit plus rent plus interest are 500 loaves.¹⁷ It might seem at first that nothing has changed between period I and period II except for the increase of the total volume of output. The share of labor in national income has remained constant at 50 percent, and the share of surplus does not appear to have varied either. Yet such a conclusion, though self-evident from the inspection of customary statistics, would be wholly unwarranted and in fact would merely serve to demonstrate how misleading such statistical inferences can be. For the statistical fact that the shares of labor and capital have not changed from period I to period II is irrelevant so far as our problem is concerned. What has happened, as can be readily seen, is that a share of the economic surplus, all of which in the earlier period was available to the capitalist as profit and for payment of land rent and interest, is now used to support the costs of a non-price-competitive sales effort, is—in other words—wasted.¹⁸

In the light of this, it should be clear that Mr. Kaldor’s and other critics’ contention that my admission of the validity of the thesis that the share of wages in income remained more or less constant over a number of decades is wholly incompatible with my maintaining the theory of the rising surplus—that this contention reflects merely their own failure to understand the surplus concept. A constant, and indeed a rising, share of labor in national income can coexist with rising surplus simply because the increment of surplus assumes the form of an increment of waste. And since the “production” of waste involves labor, the share of labor may well grow if the share of waste in national output is increasing. Treating productive and unproductive labor indiscriminately as labor and equating profits with surplus obviously obscure this very simple proposition.

Several objections to the above could be raised. In the first place, it could be (and is being) asserted that there is no point in distinguishing between productive and unproductive labor or between socially desirable output and waste since there is no possibility of making these distinctions “objective” and precise. The correctness of the latter assertion can be readily granted. But that brandy and water mixed in a bottle cannot be separated, and that it may be impossible to establish accurately the proportions in which the two liquids are combined, does not alter the fact that the bottle contains both brandy and water and that the two beverages are present in the bottle in some definite quantities. What is more, to whatever extent the bottle may be filled, it can be safely asserted that in the absence of one or the other ingredient of the mix, it would be less full than in its presence. That we cannot at the present time neatly separate the wheat from the chaff, i.e., identify unequivocally the dimensions of the socially desirable output and of the economic surplus in our economy, is in itself an important aspect of the economic and social order of monopoly capitalism. Just as the problem of consumer sovereignty is not whether a commissar should screen existing consumers’ wants and impose on them standards of good taste, but rather how to attain a social and economic order which will lead to the emergence of a differently oriented individual with different wants and different tastes, so it reflects a complete misunderstanding of the issue to demand from the critical economist that he present a comprehensive compilation of the existing number of unproductive workers and the existing volume and forms of waste. Apart from the, by no means trivial, fact that under prevailing conditions there is not (and cannot be) available the amount and kind of information and knowledge that would permit the drawing up of such a “catalogue,” no economist, however ingenious, could presume to set himself up as a sort of tsar empowered to lay down the criteria by which the “sorting out” process should be carried out. For it can only be a socialist society itself—in which people are not governed by the profit motive and in which the individual is steeped not in the “values” and mores of the market place but in the consciousness emerging from the new, socialist relations of production—which will give rise to a new structure of individual preferences and to a new pattern of allocation of human and material resources. All that the social scientist can do in this regard is to serve as Hegel’s “owl of Minerva which commences its flight in the onset of dusk,” and signal orbi et urbi that a social order is fatally ill and dying. The concrete forms and working principles of what is moving to take its place and the exact specifications of the changes which the new society will carry in its train, can be broadly visualized but not precisely established by economists and statisticians, however skillful they may be. This must be left to the social practice of those who will struggle for and succeed in achieving a socialist order.

Of a different nature is another argument advanced against the theory of the rising surplus. Its burden is that the distinction between socially desirable output and economic surplus is irrelevant, even if it could be made with all the required exactness. For since a satisfactory level of income and employment depends on an adequate amount of aggregate spending regardless of what the spending is on, the question whether it evokes useful output or waste, employs productive or unproductive labor is brushed aside as having no bearing on “business conditions,” and on the extent to which the society of monopoly capitalism provides for “fullness” of employment. This reasoning, cogent as it is, resembles all Keynesian short-run analysis in being desperately myopic. It is undoubtedly true that investment in productive equipment and investment in submarines, consumption of books and “consumption” of advertising, incomes of physicians and incomes of drug peddlers, all enter aggregate effective demand and help to maintain income and employment. It is equally clear, however, that the resulting structure of output, consumption, and investment exercises a profound impact not merely on the quality of society and the welfare of its members but also on its further growth and developmental possibilities. Moreover, while a few decades ago it might have been possible to argue that, given a shortage of rational employment, any employment—as irrational as digging holes in the ground, for example—is better than no employment, even this cold comfort is no longer available in our day when the alternative to unemployment is no longer relatively innocent digging but the all but innocent stockpiling of means of destruction.¹⁹

A further objection has been voiced that while all the above may be correct, it should not be forgotten that it is precisely owing to all the irrationality and waste that characterize monopoly capitalism that high levels of income and employment are maintained, considerable amounts of rational investment are induced, and certain—if admittedly low—rates of economic growth are achieved. This argument is very much akin to the counsel to burn the house in order to roast the pig. But the worst of it is that it is not even true that in the process “the pig gets roasted,” that—to paraphrase J. K. Galbraith²⁰—such increases in wealth as have taken place under monopoly capitalism in the United States go far to render the irrationality of the system “inconsequential.” It surely is not “inconsequential” that even after World War II—during what C. Wright Mills has so aptly called the years of the “Great American Celebration”—in at least one half of the period (1948-1949, 1953-1954, 1957-1958, 1960 to date) government-reported unemployment has been in the neighborhood of 5 million, and according to trade union sources no less (and probably more) than 6 million.

Nor can it be shrugged off as “inconsequential” that in what has come to be referred to as the affluent society, approximately one third of the people live under conditions of abject poverty, and at least one fifth of all American families (and twice as large a proportion of non-white American families) subsist in miserable substandard and slum dwellings. And if cold statistical aggregates are left aside and concrete conditions are examined in specific areas, the human tragedy encountered defies description. “In a slum section composed almost entirely of Negroes in one of our largest cities,” writes a former president of Harvard University, James Bryant Conant, “the following situation was found: A total of 59 percent of the male youth between the ages of sixteen and twenty-one were out of school and unemployed. They were roaming the streets.…”²¹

All that can be said for the objection now under discussion is that the development of capitalism in general and of its last phase—monopoly capitalism—in particular, while nowhere near creating anything resembling a good society,²² has produced the objective potentialities for the emergence of such a society. The prodigious expansion of the forces of production which has taken place during the period of imperialism, although a by-product of war, exploitation, and waste, has indeed laid the foundations for the truly affluent society of the future. But such a society cannot evolve under the rule of an oligarchy administering society’s vast resources for the benefit of a few hundred giant corporations and with the all-controlling purpose of the preservation of the status quo. Such a society can become reality only when its abundant resources will be administered by a human “association in which the free development of each is the condition for the free development of all.”

This brings me to the second comment which I should like to make in connection with the monopoly capitalism chapters of this book. This comment refers to the view of innovation and technological progress under monopoly capitalism which is there advanced. Although I still believe in the basic soundness of Steindl’s contention, to which I subscribed, that technological progress and innovation are a function of investment rather than vice versa, I have devoted insufficient space to the undeniable dialectical interaction of the two processes. Not only do the institutionalized research and development staffs of giant corporations operate, to some extent at least, with a momentum of their own and grind out inventions and technical improvements as a matter of normal routine,²³ but what is perhaps even more important, the military establishment which has become a permanent and vast component of the economy of monopoly capitalism, has turned into a continuously operating “external stimulus” to both investment and scientific and technological progress. As the demand of the military has to a considerable extent replaced the demand of the would-be investor, so the sequence of Soviet Sputniks and Luniks has taken over some of the functions of the “perennial gale” of competition. This does not call for regressing to the position of Schumpeter to whom technological progress was a deus cum machina—autonomous and inexplicable. Nor does it imply that technological progress determines investment, so that forthcoming increments to knowledge tend to be regularly translated into additional productive facilities. What it does suggest, however, is that the consolidation of research and development activities within the framework of giant corporations combined with a steady flow of military demand creates certain investment opportunities when there otherwise would be fewer or none. And the importance of the military nature of demand as well as of the monopolistic and oligopolistic nature of supply expresses itself most precisely in the selection of the technological potentialities which are made use of as well as in the rejection of those which remain in the files of scientists and engineers. Both the slow progress made in the economic application of atomic energy as well as the very uneven advances in automation would seem to justify the proposition that only that technical progress is acceptable to monopolistic and oligopolistic business which is either required by the military or sharply reduces costs without at the same time unduly expanding output.

III

We turn now to the underdeveloped countries. To Chapters Five, Six, and Seven, dealing with one of the three dominant themes of our age (the other two being the vicissitudes of monopoly capitalism during its current period of decline and fall, and the outlook for the nascent socialist societies in Europe and Asia),²⁴ I would like to add a qualification and a reaffirmation. The former has to do with the applicability of the general theory advanced in this book to some highly populated areas with what Marx called the “Asiatic mode of production”—notably India and Pakistan. In such parts of the underdeveloped world, several critics have contended, it might well be feasible to ascertain with some degree of accuracy the magnitude of the economic surplus appropriated by landowners, usurers, and commercial intermediaries of all kinds, but it would be wholly impossible to channel that segment of the surplus into productive investment even after these parasitic strata had been swept aside by a social revolution. This view is based on two sets of considerations. First, it is argued, a revolutionary government which would carry out the necessary expropriation measures could not possibly substitute itself for the blood-sucking rent collectors, money lenders, and greedy traders who were eliminated by the very revolution that put it into power. With such a switch in the destination of the surplus thus politically precluded, the nationalization and confiscation measures would not lead to an accumulation of an investible surplus in the hands of the revolutionary government but to its lapsing into the peasants’ desperately skimpy consumption basket. The second point is that in an underdeveloped country in which the economic surplus accrues to a numerically insignificant group of exploiters (as was and is the case in countries with a “classic” feudal system and/or those dominated by a handful of domestic and foreign monopolists) the situation is quite different from that prevailing in a society in which a multi-million-strong stratum of kulaks, village bosses lending money on the side, small traders, dealers, and brokers, appropriate altogether an amount of economic surplus constituting a large slice of total national income but providing only low per capita incomes to its recipients. In the former case the expropriators can be relatively easily expropriated, and their fate after the expropriation does not present a major social problem; their number being small, they either find alternative employment, emigrate, or retire to live on some remnants of their fortunes. In the latter case, however, the surplus recipients, being many, constitute an important social and political force; and, once deprived of their revenues, present a serious problem in social welfare. In fact, supporting them on even a minimum level by means of relief or artificially created jobs could annul much of the advantage derived from the expropriation itself.

These are serious problems, and although I was by no means oblivious of their existence when writing this book,²⁵ they may not have received sufficient attention and emphasis. I do not believe, however, that recognizing their importance vitiates the basic approach to the issues confronting the underdeveloped countries which is outlined here, it undoubtedly implies that in some countries the breakthrough to the open road of economic and social growth is more difficult than in others, and that the obstacles that need to be overcome are in some places more formidable than elsewhere. It may well be, indeed, that in countries which are particularly plagued by the structural malaise just described, the strategy of development may have to be different from the one suitable to societies more favorably structured. Lenin’s famous law of uneven development suggests obviously not only that the historical process is different in different societies, but also that the stage reached at any given time differs from country to country. There is thus no general formula applicable to all situations regardless of time and place, and nothing was ever further from my mind than an intention to assert the existence of such a magic wand.

Consider for instance a country in which there exists a certain nucleus of an industrial economy and where the peasantry, whether exploited by kulaks, or held in servitude by feudal landlords, is intensely land-hungry, and longs for nothing but individually owned plots of land. In such a country it may be possible to generate a sizable amount of economic surplus via the economy’s industrial sector. If, in addition, the country is relatively small so that whatever aid it may receive from abroad can materially influence the volume of its capital accumulation, it may well be able to afford to allow its peasants to “sit it out” for a while, and to learn by observation and experience the advantages of a rational and modern organization of agricultural production. Such has apparently been the broad perspective of some socialist countries in Eastern and Southeastern Europe.

Take, on the other hand, a large country with a small industrial oasis in a vast sea of subsistence farming. Here the industrially generated surplus is of necessity small, and the practically accessible foreign assistance can constitute at best only a drop in the bucket of development requirements. If in such a country, the peasants’ craving for individually owned plots is for any number of economic or cultural reasons not urgent or even absent, its agricultural economy can be shifted onto new tracks based on cooperative farming or even on a system of state-operated, large-scale, and increasingly productive “factories in the field.” The gentry, rich peasants, village storekeepers, and moneylenders displaced in the process may either be integrated into the new agricultural economy or find employment in the expanding industrial and distributive sectors. And the surplus which they used to appropriate may become available for purposes of economic development. This would seem to be—in a nutshell—the model of the Chinese strategy of economic development.

And visualize finally a banana or sugar republic—if that flattering designation is considered applicable to the semi-colonial dictatorships involved—where the bulk of agricultural output is produced in plantations, and where the. agricultural population consists predominantly or in large part not of peasants but of agricultural workers. In such countries the expropriation of the peasant was so thoroughly completed by the domestic and foreign plantation owners that even the image of individual land holdings has all but evaporated from the mentality of the rural proletariat. There mass parcelling of land is not on the agenda at all, and the nationalization of the plantations places immediately at the disposal of society as a whole the surplus that was previously appropriated by foreign and domestic corporations. This is not to say that all of the surplus so released can be turned to investment; much of it may have to be used to raise immediately the wretched living conditions of the working population. Also complications and frictions in the process of the reorganization of the economy, difficulties in securing new sources of essential supplies, as well as in finding new markets for customary exports—all largely due to the sabotage and obstruction on the part of the former ruling class at home and its allies and protectors abroad—may temporarily reduce aggregate output and accordingly also the volume of available surplus. In such a situation the possibility of overcoming all these hurdles is to such an extent dependent on various economic and political factors at home and abroad that there can hardly be a generalization that would fit the individual case. The obvious example of what I mean is the dramatic experience of Cuba since its great Revolution.²⁶

Thus each and every one of the underdeveloped countries presents a wide spectrum of economic, social, cultural, and political configurations; and nothing could be more futile than to seek to force them into a rigid mold of a “universal prescription.” But as the intellectual gratification derived from the discovery of a broad generalization should not be permitted to deflect attention from the specificity of concrete reality, so fixation on detail must not be allowed to bar the insights which can only be gained through generalizing—i.e. theoretical—thought. And this brings me to what I referred to earlier as a reaffirmation of my views on the basic problem confronting the underdeveloped countries. The principal insights which must not be obscured by matters of secondary or tertiary importance, are two.

The first is that, if what is sought is rapid economic development, comprehensive economic planning is indispensable. Small and gradual changes taking place, as it were, on the margin may well be expected to come about by a spontaneous process of trial and error. A few percent increase of output of any product already being produced can usually be obtained without any major planning effort, by raising somewhat its price and by letting the necessary adjustments “work themselves out.” However, if the increase in a country’s aggregate output is to attain the magnitude of, say, 8 to 10 percent per annum; if in order to achieve it, the mode of utilization of a nation’s human and material resources is to be radically changed, with certain less productive lines of economic activity abandoned and other more rewarding ones taken up; then only a deliberate, long-range planning effort can assure the attainment of the goal. On this there is actually hardly any disagreement among serious students of the subject.²⁷ What is perhaps even more important, on this there is no ambiguity in the historical record. While the most conservatively estimated per capita rates of economic growth in the socialist countries have been in the order of 10 percent per annum, in capitalist countries—advanced and underdeveloped alike—they rarely exceed 3 percent, except for extraordinary circumstances of war booms and postwar reconstruction.

The second insight of crucial importance is that no planning worth the name is possible in a society in which the means of production remain under the control of private interests which administer them with a view to their owners’ maximum profits (or security or other private advantage). For it is of the very essence of comprehensive planning for economic development—what renders it, indeed, indispensable—that the pattern of allocation and utilization of resources which it must impose if it is to accomplish its purpose, is necessarily different from the pattern prevailing under the status quo. Since, however, the prevailing pattern of resource allocation and utilization corresponds, at least approximately, to the best interests of the dominant class, it is inevitable that any serious planning endeavor should come into sharp conflict with that dominant class and its allies at home and abroad. This conflict can be resolved in one of three ways : the Planning Board, if one is created by a capitalist government, can be taken over—like the government itself—by the dominant interests, its activities turned into a sham, and its existence used to nurture the illusion in the underlying population that “something constructive is being done” about economic development. The second possibility is that the Planning Board established by a reform government remains more or less impervious to the influences, pressures, and bribes of powerful interests, is staffed by honest reformers who believe in the independence and omnipotence of the state in the capitalist society and set out to introduce far-reaching changes in the national economy. In that case the Board is bound to run into tenacious resistance and sabotage on the part of the ruling class, achieves very little if anything, and ends up in a state of frustration and impotence with the fatal by-product of discrediting the very idea of planning in the eyes of large strata of the population. The third alternative is that planning becomes the battle cry of a broad popular movement, is fought for relentlessly against the entrenched beneficiaries of the ancien régime, and is turned into the basic organizational principle of the economy by a victorious social revolution sweeping aside the former ruling class together with the institution of private property in the means of production on which its very existence rests.

It may be objected that all this may well be true if the fundamental premise is granted: that what is needed is rapid economic development. But why the hurry? Why this “obsession” with economic growth, to use an expression of a recent writer on the Soviet economy? The mere asking of these questions reflects the intellectual distance of Western observers from the living conditions in the underdeveloped countries and the mood of the people who have to endure them. Ours is an age in which misery, starvation, and disease are no longer accepted as ineluctable fate, and ours is the century in which socialist construction has moved from the realm of theory into the realm of practice. The peoples of the backward areas now know that economic and social progress can be organized, given the will, determination, and courage to declare a war against underdevelopment and given the unbreakable resolution to wage that war in the face of the most ruthless resistance on the part of domestic and foreign exploiters.

IV

From such historical experience as we have, it is abundantly clear that the struggle is protracted, hard, and cruel. The victory of the social revolution, although decisive, is merely a success “in the first round.” The establishment of the capitalist mode of production and of bourgeois rule, where it was fully attained, took centuries of cataclysmic developments. It can hardly be expected, even in our much faster moving time, that the greatest social transformation of all—the abolition of private property in the means of production and therefore of exploitation of man by man—should be fully achieved within a few short decades. It is quite understandable that to many the ascent appears sometimes to be prohibitively steep and the uphill movement hopelessly difficult. Since it is impossible to attempt here a comprehensive analysis of the hurdles and problems encountered in the process of socialist construction, I shall limit myself to a few brief remarks on some areas where the roadblocks have been particularly conspicuous in the recent past.

First and foremost among them is the international arena where social revolutions, regardless of where and how they unfold, meet with the implacable hostility of the ruling class of the United States—the most powerful citadel of reaction in the world today. No regime is too corrupt, no government too criminally negligent of the vital interests of its people, no dictatorship too retrograde and cruel to be denied the economic, military, and moral support of the leading power of the “free world”—as long as it proves its allegiance to the anti-socialist Holy Alliance. At the same time, no popular movement, however inclusive and however heroic, no socialist government, however democratically elected and however dedicated to the advancement of its people, can count on as much as non-intervention on the part of those who never tire of hypocritical professions of their devotion to social progress and to the democratic process. The unabating aggressiveness of the imperialist powers—large and small—immeasurably obstructs the economic and social progress in the countries which have entered the road of socialist construction.²⁸ Looking at the matter in purely economic terms and considering the burden of defense expenditures imposed on the socialist countries by the ever-present threat of imperialist aggression, it is obvious how large the costs are that the nascent socialist societies are forced by their class enemy to bear.²⁹

The massive diversion of resources from investment, residential construction, and production of consumer goods that is necessitated by the maintenance of the indispensable defense establishment, slows down the rates of economic growth of the socialist countries, prevents a more rapid increase in the living standards of their peoples, and creates and recreates frictions and bottlenecks in their economies. This heavy load will have to be carried by the socialist societies as long as the threat of imperialism exists; its burden will not decline until the socialist economies have grown—in spite of it—so strong as to greatly reduce its relative weight.

The second area in which the difficulties of the socialist countries have been most marked is that of agricultural production. There the sources of trouble are manifold. The process of industrialization, accompanied of necessity by a population shift from rural to urban areas, and the maintenance of a military establishment which eats but does not produce, have significantly raised the aggregate demand for food and other products of agriculture. This increase of demand has been, on the whole, nowhere accompanied by a sufficient expansion of supply. This is primarily due to the fact that while in countries with considerable underemployment in the villages, the productivity per man at work could be raised relatively fast, the increase of productivity per acre has proved to be an extremely slow process. Thus what might be called the mechanical revolution in agriculture brought about by the introduction of electricity, tractors, combines, and the like accomplished its purpose by freeing millions of peasants for nonagricultural employment; it did not lead to the spectacular increases of agricultural output per acre of land that was expected by many economic theorists—Marxist and non-Marxist alike. The increase of productivity per acre depends apparently much more than was anticipated on the chemical revolution in agriculture: on the application of synthetic and other fertilizers, on seed selection, the adoption of improved methods of livestock breeding, and so forth. This is, inevitably, a slow process: 2 to 3 percent increases of output per acre per year are considered by agronomists to constitute a respectable performance. The achievement of such a rate of growth is predicated on the availability of the necessary supplies (fertilizers, choice seeds, breeding animals, etc.), but also on the skill, diligence, and patience of the cultivators.³⁰

This in turn points to another complication which has arisen in the Soviet Union as well as in other industrializing socialist countries. It stems from the fact that the industrialization of an agricultural country, particularly in its early phases, involves quite naturally the “glamorization” of industrial work, its acquiring greatly enhanced prestige and attractiveness. Large new industrial plants, tremendous power developments revolutionizing the lives of entire regions, thrilling technological achievements move into the center of national (and international) attention, become objects of intense—and justified—pride, and are allotted a preponderant proportion of publicity, of the government’s political and organizational effort, and of scarce administrative and scientific talent. By comparison, the plodding day-to-day drudgery of agricultural work recedes into the gray and dull background of social existence. A young man or woman of ambition, ability, and energy no longer wishes to remain “stuck in the mud” of the agricultural backwaters, to stay confined to the “idiocy of rural life” and be limited in his or her growth and development to what can be achieved even in the most progressive agricultural community. The lure of the city, of its opportunities for material and social advancement, education, participation in cultural activities and plain fun, as well as the desire to become a member of the industrial working class—the most respected stratum of society—exercise an all but irresistible pull on the younger generation. The result is that agriculture becomes increasingly abandoned by its best potential workers, and left to elderly people or to those who do not have the imagination, the enterprise, and the drive to move into the “big, wide world.”³¹

This in turn contributes seriously to the persistent lag in the growth of productivity in agriculture. Nor is it easy to compensate for the relative weakness of the agricultural labor force by the employment of technical devices. Work in industry gives rise to discipline and standards of performance by a specific momentum of its own. The collective nature of the activity involved, its structuring and timing by conveyor belts and similar arrangements, the interdependence and indispensability of specific operations—all impose on the industrial worker a certain rhythm of work which sets its tone, determines its tempo, and largely acounts for its outcome. The situation in agriculture is quite different—such modernization of agricultural methods of production as has taken place notwithstanding. Apart from certain collective functions, the individual worker is to a large extent on his own. Whether in plowing a field or in tending to an animal, it is his (or her) initiative, conscientiousness, and exertion which markedly influence the degree of success attained. And where hide-bound conservatism, irresponsibility, and aversion to hard work characterize those working in agriculture, aggregate agricultural output is bound to be seriously affected.

Under capitalist conditions the tendency of the cream of agricultural manpower to migrate to the cities has usually been kept in check by the slowness of the capital accumulation process and by the more or less chronic shortage of urban jobs resulting therefrom. Accordingly, agriculture remained overcrowded, competition in it fierce, and productivity and real income per man increased much more slowly than productivity per acre. In the socialist society matters had to take a different course. The collective, large-scale organization of agriculture which, by doing away with the unviable dwarfholdings of the peasantry, creates the indispensable conditions for the long-term, sustained growth of agricultural production, transforms the peasant into an industrial worker working in agriculture. In this way it insulates him from the ruinous impact of the capitalist market, immunizes him against the sticks and carrots of the competitive struggle, without putting him at the same time into the framework of integration, coordination, and discipline characteristic of a large-scale modern industrial enterprise. And what is even more paradoxical and economically serious: by advancing him to the status of a full-fledged working member of a socialist society, it accords him automatically a claim to a share of aggregate social output, to real income, which is at least approximately equal to the shares of other, more productive workers.

This amounts in effect to a reversal of the earlier relation: agriculture becomes subsidized by industry. This is exactly as it should be, except that these subsidies do not lead to an adequate expansion of agricultural output. In the longer run this problem can, and undoubtedly will, be solved. Once a considerably higher stage of economic development is reached, the living and working conditions in city and countryside will be more nearly equalized and it will become possible to provide for the movement of skilled, educated, and socially conscious and responsible workers not only from the village to the city but also from the city to the village, with both of these movements turning into a general means of enhancing the variety, stimulation, and gratification derived from productive work in industry as well as in agriculture. Before that situation is reached, however, there is still a long way to go. In the meantime, in different socialist countries reliance is placed on different palliatives. In some countries the collectivization of agriculture was halted (or even reversed) with a regulated exchange between city and village taking the place of an immediate socialization of agriculture. In another socialist country, China, a solution has been sought in the opposite direction, through a more rapid transformation of the peasant economy into a system of socially operated, disciplined, large-scale agricultural enterprises. In the Soviet Union an in-between course has been followed: agricultural work is being “re-glamorized,” investment in agriculture is being increased as much as possible, and incentives to collective farmers raised by shifting relative prices in favor of agriculture. Much of this puts an additional strain on the industrial economy, cuts into real wages of industrial workers, and reduces the volume of surplus investible outside of agriculture, thus slowing down the overall rate of economic growth. Even so, the agricultural difficulties, not insuperable but seriously hampering and retarding the development of the socialist societies, represent only a fraction of the tremendous price which the socialist societies have to pay for having first emerged in underdeveloped countries.

It is against the background of this economic stringency—the insufficiency of agricultural output to keep pace with the rising living standards of the people, and the shortage of industrial output in the face of rapidly growing demands from within and without the individual socialist countries—as well as of the intensified class struggle in the international arena that one must consider the political troubles within the socialist camp. Under this heading, there is in the first place the all-important problem of retention of popular support by the socialist government during the most trying effort to initiate the “steep ascent.” What has come to be called the “revolution of rising expectations” which is sweeping the world’s underdeveloped countries confronts not only reactionary and corrupt regimes seeking to stem it by all available means, but also revolutionary governments dedicated to economic development and socialism. Since a rational plan of economic advancement calls not for the shot-in-the-arm policy of an immediate increase of popular consumption, but for a well-considered strategy of assuring maximum possible rates of growth over a planning horizon of, say 10-20 years, it is not only possible but most likely that during the early phase of the effort mass consumption should rise very slowly, if at all. Only after the foundations of a progressive economy have been laid, and the “hump” overcome, can the system begin to yield fruits in the form of an expanding supply of consumer goods, housing, and the like.

Yet the masses who have just been through a revolution, who have fought and suffered in the bitter struggles against their class enemies and exploiters at home and abroad, seek and feel entitled to immediate improvements in the daily lives of their cities and villages. The fledgling socialist government cannot conjure such improvements out of the ground. Still engaged in the “uninterrupted revolution,” it must demand “blood, sweat, and toil” without being able to offer commensurable rewards hic et nunc. Only the most class-conscious and insightful groups in society recognize and comprehend the momentous issues involved. Broad strata of the population, unaccustomed to thinking in terms of economic necessities and longer-run perspectives can easily become disaffected, can fall prey to enemy propaganda which seeks to capitalize on their age-old superstitions and ignorance, can lose their faith in the revolution. They do not grasp that the suffering under the ancien régime was suffering for the benefit of their domestic overlords and their imperialist exploiters, that the misery which they had to endure in the past was misery without hope and prospect—while the privations accompanying the revolution are the birth-pangs of a new and better society. And ignoring this fundamental difference, they frequently became apathetic or even hostile to the revolution itself. This inevitably gives rise to a more or less acute conflict between socialism and democracy, between people’s long-run needs and their short-run wants. Under such circumstances the socialist government’s unwavering and uncompromising commitment to the overriding interests of society as a whole, its unquestionable duty to defend these interests against their foreign and domestic enemies no less than against opportunists and traitors among its adherents, creates the need for political repression, for curtailment of civil liberties, for limitation of individual freedom. This need can only recede and eventually disappear when the objective hurdles are at least approximately mastered, when the most burning economic problems are at least approximately solved, and when the socialist government has attained a measure of stability and equilibrium.³²

Stemming from the same basic cause, in one word poverty, is the second category of troubles besetting the socialist camp: the relations among socialist countries. These relations have obviously not been as harmonious as a socialist would have liked them to be; but while giving rise to legitimate concern, they must be subjected to a dispassionate analysis and put into a proper historical perspective. Although nothing that might resemble adequate information is at my disposal, from what little I have been able to learn it would seem that the causes of the existing tensions relate to several closely interdependent issues.

One has to do with the allocation of economic resources within the socialist camp, and stems essentially from the vast differences in the degree of economic development attained by the individual socialist countries. To put it in its simplest terms, the question is, how much aid should the economically most advanced members of the socialist camp—primarily the Soviet Union but also Czechoslovakia, the German Democratic Republic, and Poland—give other less (and very much less) developed socialist countries? Clearly, no such problem would exist, if all socialist societies were about equally rich or if all were about equally poor. It should also be clear that at the present time an even proximate equalization of per capita incomes between the haves and the have-nots in the socialist camp is entirely impossible. It would drastically reduce the living standards of the, say, 250 million people living in the better-off parts of the socialist world, and even if such a move could substantially accelerate the growth of the worse-off parts inhabited by over 700 million people, it would be politically and socially wholly unfeasible, would be, indeed, suicidal to socialism in the more fortunate nations.

This issue was obviously not on the agenda as long as the Soviet Union and other European socialist countries were in the throes of reconstruction from the economic catastrophe caused by the war, and could furnish no more than symbolic assistance to the worst situated arrivals in the socialist camp. It became more urgent in the middle 1950’s by which time the Soviet Union had made major strides in its economic reconstruction and advancement, and embarked—after the death of Stalin—on a course of a far-reaching economic and political liberalization. In the economic realm this implied a shift from the earlier policy of austerity and limitation of current consumption for the sake of the highest attainable rates of investment and growth, to a marked increase in the supply of housing, manufactured consumer goods, and food to the Soviet people who had suffered grievous privations during the prewar era of industrialization and were forced to make even more enormous sacrifices during the shattering years of the war. In the area of politics it meant a drastic change in the general atmosphere prevailing in Soviet society, the elimination of political repressions, and a break with the rigid dogmatism which affected all aspects of Soviet life during the rule of Stalin. As far as international relations are concerned, the new course involved a major effort to arrive at some accommodation with the United States with a view to the preservation of peace, to a reduction of the burden of armaments, and to securing a relaxation of international tensions necessary for the consolidation and progress of socialist societies in the Soviet Union as well as in the countries which entered the road to socialism after World War II. Indeed, the advancement and increasing welfare of these socialist societies were pronounced to be one of the most important leverages for the further expansion of socialism in the world. In what appeared to be a repudiation or at least an important modification of the conventional theory of imperialism, the new Soviet leadership declared such an accommodation to be not impossible in view of the radical shift in the world’s balance of power caused by the rapidly mounting strength of the socialist bloc and the progressive disintegration of the imperialist control over colonial and dependent countries. In fact, the latter process was to be accelerated by the extension of economic and political aid to the newly emerging nations.

Various aspects of this new course were met with skepticism in China and other socialist countries still struggling desperately with the initial, most formidable, hurdles on the road to economic development. The disagreement involved the timeliness and wisdom of the liberalization program in the Soviet Union in the light of the needs of the entire socialist camp, the appraisal of the “appeasability” of the imperialist powers, and the judgment on what constitutes the best strategy in the struggle against imperialism and for peace and socialism.³³

But while increasingly pronounced in the course of the last few years, it was not until the 22nd Congress of the Communist Party of the Soviet Union in the autumn of 1961 that the controversy erupted into a publicly acknowledged major conflict. Although still retaining its original roots, the dispute became acerbated by a number of developments. In the last couple of years, for reasons which it would take us too far afield to discuss, the economic development of China has suffered a serious setback,³⁴ and accordingly its need for large-scale economic assistance from the Soviet Union has greatly increased. Soviet policy at the same time remains committed to continuing on the road to further liberalization. This was solemnly proclaimed in the program of socialist construction in the Soviet Union adopted by the Congress, which provides for spectacular increases not only of the gross national product of the USSR in the next twenty years, but also for a significant reduction of the number of working hours of Soviet workers and for a vast improvement of the general living standard of the Soviet people. The question naturally arises whether it is necessary to set the Soviet welfare targets as high as they are fixed in the new Program, whether the policy adopted with regard to the rates of growth of the entire economy combined with somewhat less ambitious goals in terms of consumption would not leave more room for a program of large-scale assistance to other socialist countries. In other words, does not the Soviet Party leadership take a too narrow, “nationalist” view of the needs and requirements of the entire socialist camp and focus too much on the rapid betterment of the economic situation of the Soviet people? And would not more rapid progress of the Chinese, North Korean, North Vietnamese, and other underdeveloped socialist economies have a larger impact on the world as a whole, and on the peoples in the non-socialist underdeveloped countries in particular, than the Soviet Union’s “attaining and surpassing American standards of living” in twenty years, as envisaged by the new Program, rather than in, say, the thirty years that it would take if a larger slice of its national product were devoted to the advancement of other socialist societies?

These questions translate themselves into political terms. As mentioned earlier, the Soviet Union’s departure from the policies of austerity and curtailment of consumption for the sake of rapid growth goes hand in hand with the accelerated drive of “de-Stalinization,” with the reduction and progressive abolition of the system of political repression which was largely due to the earlier regime of belt-tightening and maximal exertion. It goes without saying that nothing could be more welcome to a socialist than the evolution of the Soviet Union into a socialist democracy with the highest attainable levels of welfare and enjoying an ever wider degree of individual freedom. Neither the Chinese, who remained remarkably free of Stalin’s abuses of power, nor any other socialists to my knowledge, have objected to the elimination and drastic suppression of all the aberrations and crimes committed by Stalin and his henchmen. What is at issue therefore is not “de-Stalinization” per se, but the abandonment of the policy of “forced marches” which is so prominently associated with the name of Stalin. Neither China nor some other socialist countries are as yet economically ready for the “thaw”; and, not being economically ready, they cannot afford the liberalization, the relaxation of the pressures on consumption, and all that goes with them which in the Soviet Union are at the present time not only feasible but constitute major steps towards the economic, political, and cultural advancement of Soviet society. In explaining to their peoples their policy of rapid industrialization, collectivization of agriculture, and ineluctable limitation of consumption, the socialist governments of China and some other socialist countries made extensive use of the Soviet example and of the authority of Stalin who was universally considered to be the chief architect of the Soviet successes. The dramatic overthrow of that image of Stalin at a time when the policies which he symbolized cannot yet be discarded, constitutes undoubtedly a severe political shock to those socialist governments which are still confronted with the kind of obstacles which the Soviet Union by now has been able to overcome.

Similarly, in their international relations, China and other socialist countries of Asia find themselves in a position quite different from that of the Soviet Union and the European socialist countries. With important parts of their countries still under the control of the enemy, politically discriminated against, militarily threatened and economically blockaded by the imperialist powers, the socialist countries of Asia are much less able and willing to accept a détente on the basis of the prevailing status quo than the socialist countries of Europe. While in Europe the settlement of the German question is the only major issue standing in the way of an at least temporary accommodation, the issues in Asia are many and complex and their solution appears even less likely than an acceptable compromise over Germany. This difference in the objective situation obviously contributes to the crystallization in the Soviet Union and in China of different appraisals of the international situation.

And yet, taking the risks which always attach to prophecy, I would venture the opinion that in spite of all the heat generated in the current debate and all the sharp arrows flying back and forth bewteen the protagonists, the conflict will not inflict irreparable harm on the cause of socialism. In the longer run the fundamental identity of the relations of production prevailing in the socialist countries will prove to be a more powerful factor than the temporary divergencies among their leaderships on short-run strategy and tactics. Just as the socialist mode of production survived all the abhorrent doings of Stalin, so the socialist revolutions in China and elsewhere remain irreversible historical facts which cannot be altered, let alone annulled, by whatever frictions and disagreements may temporarily shake their political superstructures. Compromises are possible and will probably be arrived at. But even should the socialist governments of the countries involved fail to arrive at a mutually acceptable modus vivendi, the resulting estrangement need neither prevent the continuous progress of the individual countries on the road to socialism, nor preclude their cohesion and solidarity in the fullness of time.

To conclude: the dominant fact of our time is that the institution of private property in the means of production—once a powerful engine of progress—has now come into irreconcilable contradiction with the economic and social advancement of the people in the underdeveloped countries and with the growth, development, and liberation of people in advanced countries. That the existence and nature of this conflict have not yet everywhere been recognized and fully understood by the majority of people is one of the most important, if not the decisive, aspect of this conflict itself. It reflects the powerful hold on the minds of men exercised by a set of creeds, superstitions, and fetishes stemming from the very institution of private property in the means of production which now desperately needs to be overthrown. The argument now most prominent in bourgeois thought, that the “adjustment” of people to a pernicious social order and their inability and unwillingness to rise up against it prove that this social order caters adequately to human needs, demonstrates merely that bourgeois thought is guilty of rank betrayal of all its finest traditions of humanism and reason. One may well wonder what would have been the reaction of the great philosophers of the Enlightenment if they were told that the existence of God is adequately proved by the fact that many people believe in it? Substituting ignorance and “revealed preferences” for truth and reason, gloating over all manifestations of irrationality and backwardness, whether in advanced or underdeveloped countries, as proving the impossibility of a more rational social order, bourgeois thought in our day has negated itself and has returned to the condition which in its glorious youth it set out to conquer: agnosticism and obscurantism. Thus it exchanges the great commitments of all intellectual endeavor—the search for and the clarification of truth, the guidance and support of man in his struggle for a better society—for the contemptible functions of rationalizing irrationality, inventing arguments in defense of madness, serving as a source of an ideology of vested interests, and recognizing as a genuine human need merely the interests of those whose sole concern is the preservation of the status quo.

P. A. B.

Palo Alto, California

March, 1962

¹ “The consumer is king today.… Business has no choice but to discover what he wants and to serve his wishes, even his whims.” Steuart Henderson Britt, The Spenders, (New York, Toronto, London, 1960), p. 36. Italics in the original. Also: “If the product does not meet some existing desire or need of the consumer, the advertising will ultimately fail.” Rosser Reeves, Reality in Advertising (New York, 1961), p. 141. Italics in the original.

² “The so-called waste in our private economy happens to be the way people make a living and in so doing spread well-being among all. It happens to be the way we get our gleaming schools and hospitals and highways and other ‘public’ facilities.” The Wall Street Journal, October 7, 1960, p. 16.

³ “The Corporation: How Much Power? What Scope?” in Edward S. Mason, ed., The Corporation in Modern Society (Cambridge, Massachusetts, 1959), p. 101.

⁴ Ibid., p. 2.

⁵ Tibor Scitovsky, “On the Principle of Consumers’ Sovereignty,” American Economic Review, May, 1962. I am indebted to Professor Scitovsky for letting me see a copy of this paper prior to publication.

⁶ Cf. for example, James Cook, Remedies and Rackets (New York, 1958), passim; and “Behind the FCC Scandal,” Monthly Review, April, 1958.

⁷ Cf. Goals for Americans, The Report of the President’s Commission on National Goals (New York, 1960), passim.

⁸ For a lucid exposition of the Marxist theory of the state, cf. Stanley W. Moore, The Critique of Capitalist Democracy; An Introduction to the Theory of the State in Marx, Engels, and Lenin (New York, 1957).

⁹ Walfare and Competition: The Economics of a Fully Employed Economy (Chicago, 1951), p. 450.

¹⁰ This point was made for the first time to my knowledge in the excellent paper by K. W. Rothschild, “A Note on Advertising,” Economic Journal, 1942.

¹¹ “Right now, officials incline toward a new round of military ordering in preference to either massive public works or a cut in taxes, if they decide the economy needs another push.” Business Week, December 9, 1961. And it is not only “right now” that, this is the “official inclination.” For “some advisers like the idea of shelters, but want to push it at a time when the economy needs a stimulant.” Ibid., November 4, 1961. Thus the shelters are not to protect the people against radioactive fallout but against depression and unemployment.

¹² Quoted in Steuart Henderson Britt, op cit., p. 31.

¹³ For a more extended discussion of this, cf. my Marxism and Psycho-analysis (New York, 1960), containing a lecture on the subject, observations by critics, and a reply.

¹⁴ Les Mandarins (Paris, 1954), p. 193. I have translated this passage from French.

¹⁵ Cf. his review of the present book, The American Economic Review, March, 1958, pp. 164 ff.

¹⁶ It was reserved for Schumpeter (to be followed eventually by Berle, Galbraith, and others) to make an effort to save the “honor” of monopoly profits by proclaiming even them to be “necessary costs of production.” This tour de force was accomplished by pointing out that technological innovations were predicated upon monopoly gains on the part of the innovators, that it is monopoly profit that enables corporations to maintain costly research laboratories, etc. Thus static vice was made into dynamic virtue and the last attempt of economic theory to retain some minimum standards for the rational appraisal of the functioning of the capitalist system was swept aside by the comprehensive endorsement of the status quo.

¹⁷ Clearly, if the wage of the 20 unproductive workers is higher than five loaves per man—as it would be realistic to assume it would be—then either the real wage of the bakers would have to be lower or the profits would be encroached upon, or both. In the former case, the surplus is larger; in the case of reduced profits, it remains the same; and if both the productive workers’ wages and profits are lower, the surplus is increased by the amount of the wage reduction.

¹⁸ Incidentally, a couple of other interesting things can be learned from this very simple illustration: first, customary statistics would usually tend to suggest that the productivity per man engaged in the bakery business has increased less than it actually did: with 100 men employed in the bakery concern in period I as well as in period II, and with output rising from 200 loaves to 1,000 loaves, productivity would appear to have gone up by 400 percent rather than by 525 percent as was actually the case. To be sure, a careful “sorting out” of the labor force denominator used for the computation, with a view to limiting it to productive workers only, could remedy this deficiency, but the statistical information which is usually supplied renders such an adjustment impossible. Secondly, statistics commonly compiled would show that wages have increased in exactly the same proportion as productivity (from one to five loaves), while in reality the wages of the productive workers lagged considerably behind the rise of their productivity. That the official statistics convey such garbled impressions is obviously not fortuitous; it is due to the concepts which govern their organization. With the notion “economic surplus” denied official recognition, and with the all but meaningless distinction between “production” and “non-production” workers substituted for the all-important difference between productive and unproductive workers, available statistics hide rather than illuminate a most important aspect of capitalist reality.

¹⁹ An extension of this discussion can be found in Paul A. Baran, “Reflections on Underconsumption” in Moses Abramovitz and others, The Allocation of Economic Resources (Stanford, California, 1959); reprinted also in Shigeto Tsuru, ed., Has Capitalism Changed? An International Symposium on the Nature of Contemporary Capitalism (Tokyo, 1961).

²⁰ American Capitalism: the Concept of Countervailing Power (Boston, 1952), p. 103.

²¹ Slums and Suburbs: a Commentary on Schools in Metropolitan Areas (New York, Toronto, London, 1961), pp. 33 f.

²² This is not the place to go into a more detailed description and analysis of the quality of the monopoly capitalist society; for this the interested reader is referred to Sweezy’s and my forthcoming book, and in the meanwhile to Monthly Review, July-August, 1962, where some parts of that book are scheduled to be published in advance.

²³ Cf. Paul M. Sweezy, “Has Capitalism Changed?” in Shigeto Tsuru, ed., op. cit., pp. 83 ff.

²⁴ Since this book was first published, Latin America has joined the regions of socialist beginnings.

²⁵ Cf. pp. 167 ff. as well as pp. 262 ff.

²⁶ A comprehensive account of the developments in Cuba will be found in Leo Huberman and Paul M. Sweezy, Cuba: Anatomy of a Revolution (2nd ed., New York, 1961), and an elaboration of the remarks above in my Reflections on the Cuban Revolution (2nd ed., New York, 1961).

²⁷ This is not the place for a survey of the relevant literature; suffice it to mention the writings of H. B. Chenery, E. S. Mason, T. Scitovsky, and J. Tinbergen, the principal burden of which is the demonstration of the necessity of coordination and synchronization of investment if the rapid economic development of underdeveloped (or, for that matter, developed) countries is to be effectively advanced.

²⁸ The grave harm done to the magnificent revolutionary effort of the Cuban people by the “starving out” strategy of American imperialism is the most striking and the most distressing case in point.

²⁹ Those who are so influenced by the mendacious propaganda of imperialism as to believe that the vast armaments buildup in the United States is governed by the fear of aggression on the part of the socialist countries must read the monumental work of Professor D. F. Fleming, The Cold War and Its Origins, 2 vols. (New York, 1961), as well as the revealing account of the actual course of disarmament negotiations in recent years by Professor J. P. Morray, From Yalta to Disarmament: Cold War Debate (New York, 1961). It is hard to believe that anyone who is willing to recognize the truth can fail to be impressed by the incontrovertible evidence assembled in these extraordinary studies.

³⁰ The situation is obviously somewhat different in parts of the world where the underemployment of manpower in agriculture is matched by underutilization of arable land—as in the case of Cuba. Under such circumstances, aggregate agricultural output can be, at any rate in the early stages, rapidly increased by taking into cultivation previously uncultivated areas, although even in such cases major difficulties are caused by lack of agricultural implements, fertilizers, and livestock.

³¹ After World War II, the situation in the Soviet Union in particular was seriously aggravated by the casualties suffered by the agricultural male population to a larger extent than by the industrial proletariat who were more frequently exempted from military service.

³² The Soviet experience during the last decade provides an excellent illustration of this development.

³³ In Albania, and possibly elsewhere, it was apparently also held that Soviet grants and credits to nonsocialist underdeveloped countries reflect nothing but an illusion that the nonsocialist governments of those countries could be genuinely won over to the cause of peace and socialism. In a decisive moment, regardless of what benefits they may derive from the Soviet Union and other socialist countries, these governments would betray their benefactors and join the imperialist camp. Therefore—it was argued—all resources allocated to such uncertain friends are wasted and could and should be more usefully employed in helping socialist countries. This is reported in an article by F. Konstantinov, the editor-in-chief of the official theoretical organ of the Central Committee of the Communist Party of the Soviet Union Kommunist: “Raskolnicheskaya, antimarksistskaya deyatelnost albanskikh rukovoditeley.” (“The divisive, anti-Marxian activity of the Albanian leaders.”) Kommunist, November, 1961, p. 48.

³⁴ Albania has apparently fared even worse, although there, according to some reports, the fault lies chiefly with highly inefficient management on the part of the party leadership.