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There are two fundamental views of
economic life. One dominated the economic philosophy
of the nineteenth century, under the influence of
the British Classical Economists, such as Adam Smith
and David Ricardo. The other dominated the economic
philosophy of the seventeenth century, under the
influence of Mercantilism, and has returned to
dominate the economic philosophy of the twentieth
century, largely under the influence of Lord Keynes.
What distinguishes these two views is this: In the
nineteenth century, economists identified the
fundamental problem of economic life as how to
expand production. Implicitly or explicitly, they
perceived the base both of economic activity and
economic theory in the fact that man’s life and
well-being depend on the production of wealth. Man’s
nature makes him need wealth; his most elementary
judgments make him desire it; the problem, they
held, is to produce it. Economic theory, therefore,
could take for granted the desire to consume, and
focus on the ways and means by which production
might be increased.
In the twentieth century, economists have returned
to the directly opposite view. Instead of the
problem being understood as how continuously to
expand production in the face of a limitless desire
for wealth resulting from the limitless
possibilities of improvement in the satisfaction of
man’s needs, the problem is erroneously believed to
be how to expand the desire to consume so that
consumption may be adequate to production. Economic
theory in the twentieth century takes production for
granted and focuses on the ways and means by which
consumption may be increased. It proceeds as though
the problem of economic life were not the production
of wealth, but the production of consumption.
These two diametrically opposed and mutually
exclusive basic premises concerning the fundamental
problem of economic life play the same role in
economic theory as do conflicting metaphysics in
philosophy. Point for point, they result either in
opposite conclusions or in the advancement of
opposite reasons for the same conclusion. So
thoroughly and fundamentally do they determine
economic theory that they give rise to two
completely different systems of economic thought.
Two Views
of Employment
If one is on the nineteenth century, productionist
premise, one realizes first of all that there is no
such thing as a problem of “creating jobs.” There is
a problem of creating remunerative jobs, but not
jobs. At all times, the productionist holds, there
is as much work to be done—as many potential jobs to
be filled—as there are unsatisfied human desires
which could be satisfied with a greater production
of wealth; and as these desires are limitless, the
amount of work to be done—the number of potential
jobs to be filled—is also limitless. The employment
of more and better machinery, therefore, argues the
productionist, does not cause unemployment. It
merely allows men, to the extent that they do not
prefer leisure, to produce more and thus to provide
for their needs more fully and in a better way. Nor
does the working of longer hours or the employment
of women, children, foreigners, or people of
minority races or religions deprive anyone of
employment. It simply makes possible an expansion of
production.
If one is on the twentieth century, consumptionist
premise, one takes another view of machinery and the
employment of more people. One regards every
expansion of production as a threat to some portion
of what is already being produced. One imagines that
production is limited by the desire to consume. One
fears that this desire may be deficient and,
therefore, that an expansion of production in any
one segment must force a contraction of production
in some other segment. Hence, one fears that the
work performed by machines leaves less work to be
performed by people, that the work performed by
women leaves less work to be performed by men, that
the work performed by children leaves less to be
performed by adults, that the work performed by Jews
leaves less to be performed by Christians, that the
work performed by blacks leaves less to be performed
by whites, and that the extra work of some means a
deficiency of work available for others.
Neither the productionist nor the consumptionist
desires long hours or child labor. Here, to this
extent, both reach the same conclusion. But their
reasons are completely different. The consumptionist
does not desire them because he thinks there is a
problem of what to do with the resulting products,
unless other products are to cease being produced
and other workers are to become unemployed. The
productionist does not desire long hours or child
labor because he attaches no value to fatigue or
premature exertion. The problem, in the eyes of the
productionist, is not what to do with the additional
products produced by longer hours or by child
labor—only the intense need for the additional
products calls forth this additional labor—but how
to raise the productivity of labor to a level at
which people can afford to have time for leisure and
to dispense with the labor of their children.
Wealth
Through Scarcity?
Because he imagines production to be limited by the
desire to consume (rather than consumption being
limited by the ability to produce), the
consumptionist values not wealth but the
absence
of wealth. For example, after World War II, he
imagined that the relative absence of houses,
automobiles, television sets, and refrigerators in
Europe was an asset of the European economy because
it represented a large supply of unused consumer
desire, thereby supposedly ensuring a strong
consumer demand. By the same token, he imagined that
the relative abundance of these goods in the United
States was a liability of the American economy
because it represented a depleted supply of consumer
desire, thereby supposedly ensuring only a weak
consumer demand. Prosperity depends on the absence
of wealth, and poverty follows from its abundance,
the consumptionist concludes, because that priceless
commodity, consumer desire, more limited in supply
than diamonds, is produced by the absence and
consumed by the presence of wealth. It is on this
principle that the consumptionist relishes war and
destruction as sources of prosperity and attributes
the poverty of depressions to “overproduction.”
The consumptionist does not believe that the
destruction of wealth is the only means of achieving
prosperity. Though he believes it difficult of
accomplishment, he has hopes that the supply of his
commodity, consumer desire, may nevertheless be
increased by positive measures. One such measure is
a high birth rate. By bringing more people into the
world, one brings more consumer desire into the
world. The existence of a larger number of people,
the consumptionist tells businessmen, will make it
possible for business to find someone upon whom to
unload its otherwise superfluous goods. Business
will prosper because its supply of goods will find a
counterpart in an adequate supply of desire for
goods. In the absence of a high birth rate, or along
with a high birth rate, the consumptionist believes
advertising may suggest to the otherwise fully sated
consumers some new desire. And, on a somewhat
different plane, technological progress, the
consumptionist argues, may provide new uses for an
expanding supply of capital goods, which otherwise
would find no “investment outlets.” Or, if all else
fails, the government may be counted upon to supply
an unlimited consumption—even in the absence of
desire. Or perhaps, the consumptionist hopes, a
country may be fortunate enough to be in danger of
attack by foreign enemies and therefore stand under
the necessity of maintaining a large defense
establishment. In either case, the consumptionist
imagines that the government will be able to promote
prosperity by exchanging its consumption for the
people’s products.
Production Limits Consumption
The productionist, of course, takes a different view
of matters. He argues that the birth and upbringing
of children always constitutes an expense to the
parents. In raising children, the parents must spend
money on them which they otherwise would have spent
on themselves. Of course, the parents may, and
hopefully will, consider the money better and more
enjoyably spent on their children; but still, it is
an expense. And if they have a large enough number
of children; they will be reduced to poverty. This
is a fact, the productionist argues, that anyone may
observe in any large family which does not possess a
correspondingly large income. The presence of
children does not make the parents spend more than
they otherwise would have, but only spend
differently
than they otherwise would have. They buy baby food,
toys, and bicycles instead of more restaurant meals,
a better car, or costlier vacations. There is no
stimulus given to production. Production is merely
differently directed, to the different distribution
of demand.
The only increase in production that could take
place, the productionist maintains, would be as a
result of the parents having to take an extra job or
work longer hours to support their children and
still be able to maintain their own previous
standard of living. And when the children grow up,
the additional market which they are supposed to
constitute for houses and automobiles and the like
will only materialize to the extent that they
themselves are able to produce the equivalent of
these things and thereby earn the money with which
to purchase them. It will only be by virtue of their
production, and not by virtue of their desire to
consume, that they will be able to constitute an
additional market.
Advertising and the Consumer
Advertising, the productionist holds, does not
create consumer desire where no desire for
additional goods would otherwise have existed. It is
not the case that, in the absence of advertising,
people would be at a loss as to how to spend their
money. Advertising is not required, and would not be
sufficient, to rouse vegetables into men. What
advertising does is to lead people to consume
differently and in a better way than they otherwise
would have. Advertising is a tool of competition,
and, as such, for every competing product whose sale
is increased by it, there is another competing
produce whose sale is decreased by it.
The consumptionist’s attitude toward advertising
brings into clear relief some further corollaries
and implications of his basic premise. His estimate
of advertising, like that of war and destruction, is
ambivalent, and necessarily so. On the one hand, he
approves of it, on the grounds that by creating
consumer desires, it creates the work required to
satisfy those desires. However, this very belief,
that advertising creates desires where absolutely no
desires would otherwise exist, also makes him
condemn advertising. For if it were true that, in
the absence of advertising, men would be perfectly
content with very little, the desires created by
advertising must appear to be only superficial and
basically unnecessary and unnatural.
And this is precisely how the consumptionist regards
such desires. In his eyes, all desires men have for
goods, beyond what is necessary to make possible
bare physical survival and a vegetative existence,
represent an unnatural taste for “luxuries.” These
desires the consumptionist considers to be
inherently unimportant. Their only justification is
the creation of work. The consumptionist’s
conception of the greater part of economic activity,
therefore, is that it represents senseless motion,
with deceit and deception required to make people
desire goods for which they have no need, in order
to enable them to pass their lives in the production
of those very same goods.
Paradoxical as it may first appear, it is the
productionist who attaches importance to consumer
desires. In his view, the desire for “luxuries” is
important; it is necessary and natural; for it is
nothing but the desire to satisfy one’s inherent
needs (including the need for aesthetic
satisfaction) in an ever more improved way. It is
from the importance which attaches to the
satisfaction of the desire for “luxuries,” the
productionist maintains, that the importance of the
work required to produce them is derived, and not
vice versa.
Technology and Capital Goods
The value of technological progress, the
productionist holds, does not lie in the creation of
“investment outlets” or “investment opportunities”
for an expanding supply of capital goods. If the
concept of capital goods is properly understood, as
denoting all goods which the buyer employs for the
purpose of producing goods which are to be sold,
then, the productionist maintains, there is no such
thing as a lack of “investment opportunity" for
capital goods. So long as more or improved
consumers’ goods are desired, there is need of a
larger supply of capital goods.
For example, ten million automobiles of a given
quality require the employment of twice the quantity
of capital goods—twice the quantity of steel, glass,
tires, paint, engines, and machinery—in their
production as do five million automobiles. If the
quality of the automobiles is to be improved, then a
larger quantity of capital goods is required for the
production of the same number of automobiles. For
example, a given number of cars of Chevrolet quality
require a larger quantity of capital goods in their
production than the same number of cars of
Volkswagen quality; the same number of cars of
Cadillac quality require still a larger supply of
capital goods; and the same number of cars of Rolls
Royce quality require yet an even more enlarged
supply.
The identical principle applies to houses of
different size and quality. A given quantity of
eight-room houses of a given quality requires the
employment of a larger supply of capital goods than
the same number of seven-room houses of the same
quality. A given number of brick houses requires a
larger supply of capital goods than the same number
of wooden houses of the same size; the bricks or any
more expensive material constitute a larger supply
of capital goods because a larger quantity of labor
is required to produce it. The principle applies to
food and clothing, to furniture and appliances, to
every good. So long asmore of any consumers’ good is
desired, so long as not every consumers’ good that
is produced is of the very best known quality, there
is a need for a larger supply of capital goods.
As
Technology Advances
It is not the case that in the absence of
technological progress, the supply of capital goods
would continue to expand, but find no “investment
outlet.” It is not the case that what we have to
fear from a lack of technological progress is a
flood of goods in which every car produced will be
the equivalent of the finest known model Rolls
Royce, in which every house that is built will be a
palatial mansion, in which every suit of clothes
produced will be fit for the Duke of Windsor, and in
which every morsel of food will be a rare delicacy,
and that then we shall be at a loss as to how to
employ our expanding supply of capital goods. On the
contrary, what we have to fear from a lack of
technological progress, the productionist argues, is
that we shall
not
have an increase in the supply of capital goods,
that we shall not be able to exploit any
considerable portion of the virtually limitless
“investment outlets” which already exist,
within the
framework of known technology.
The value of technological progress, the
productionist maintains, consists in the fact that
it enables us to
obtain
a larger supply of capital goods, and not that it
solves the problem of what to do with a larger
supply. The technological advances which made
possible the canal building and railroad building of
the nineteenth century and the development of the
steel industry were valuable, not because they
absorbed
capital goods, as the consumptionist maintains, but
because they made possible the
accumulation
of capital goods. The consumptionist does not
realize that capital goods can only be expanded in
supply by means of an expansion in their production,
and that precisely this is what technological
progress makes possible. Had the technological
advances which made possible the first railroads in
the 1830s not taken place, the supply of capital
goods required for the expanded and improved
railroad building of the 1840s would not have been
obtainable; or, if obtainable, only at the price of
the expansion of some other industry. Had no
technological advances been made in railroading in
the 1840s, the supply of capital goods in the 1850s
would have been less, both for railroads and for all
other industries. And so it would have been decade
by decade, had the technological advances made in
railroading or in any other industry not taken
place.
For capital accumulation to continue for any period
of time, technological progress is indispensable.
Only it can make possible continued increases in
production, and only continued increases in
production can make possible continued capital
accumulation. The consumptionist is not aware that
the very thing which he considers to be the solution
to his imagined problem is the source of what he
imagines to be the problem. Nor is he aware that
when he advances technological progress as the
solution to the problem of what to do with more
capital goods, he is confronting himself with the
problem of what to do with the larger supply of
consumers’ goods, which even he admits results from
technological progress. The consumptionist is faced,
in addition to other quandaries, with the dilemma of
explaining how it is that technological progress may
raise the rate of profit by, as he puts it,
“increasing the demand for capital,” while at the
same time, as he admits, it increases the production
of consumers’ goods, which, he maintains, lowers the
rate of profit through “overproduction.”
Consumptionism and Parasitism
The idea that by consuming his product, one benefits
the producer, by giving him the work to do of making
possible one’s consumption, is absurd, the
productionist holds. Only the use of money lends it
the least semblance of plausibility. If it were
true, then every slave who ever lived should have
cherished his master’s every whim, the satisfaction
of which required of him more work. A slave should
have been grateful if his master desired a larger
house, an improved road, more food, more parties,
and so on; for the provision of the means of
satisfying these desires would have given him
correspondingly more work to do.
The belief that the consumption of the government
benefits and helps to support the economic system is
on precisely the same footing, the productionist
argues, as the belief that the consumption of the
master benefits and supports the slave. It is a
belief the absurdity of which is matched only by the
injustice it makes possible. It is the means by
which parasitical pressure groups, employing the
government as an agent of plunder, seek to delude
their victims into imagining that they are
benefitted and supported by those who take their
products and give them nothing in return.
The only economic benefit which one can give to a
producer, argues the productionist, consists in the
exchange of one’s own products or services for his
products or services. It is by means of what one
produces and offers in exchange that one benefits
producers, not by means of what one consumes. To the
extent that one consumes the products or services of
others without offering products or services in
exchange, one consumes at their expense.
The use of money makes this point somewhat less
obvious but no less true. Where money is employed,
producers do not exchange goods and services
directly, but indirectly. The buyer exchanges money
for the goods of a seller. The seller then exchanges
the money for the goods of other sellers, and so on.
But every buyer in the series must either himself
have offered goods and services for sale equivalent
to those he purchases, or have obtained his funds
from someone else who has done so.
The fact that in a monetary economy everyone
measures his benefit by the amount of money he
obtains in exchange for his goods or services is
interpreted by the consumptionist to imply that the
mere spending of money is a virtue and that economic
prosperity is to be found through the creation and
spending of new and additional money—i.e., by a
policy of inflation.
In rebuttal, the productionist argues that for
everyone who spends newly created money and thereby
obtains goods and services without having produced
equivalent goods and services, there must be others
who suffer a corresponding loss. Their loss, says
the productionist, takes the form either of a
depletion of their capital, a diminution of their
consumption, or a lack of reward for the added labor
they perform—a loss precisely corresponding to the
goods and services obtained by the buyers who do not
produce.
The consumptionist’s advocacy of consumption by
those who do not produce, to ensure the prosperity
of those who do, is, the productionist argues, a
pathological response to an economic world which the
consumptionist imagines to be ruled by pathology.
The consumptionist has always before him the
pathology of the miser. His reasoning is dominated
by the thought of cash hoarding. He believes that
one part of mankind is driven by a purposeless
passion for work without reward, which requires for
its fulfillment the existence of another part of
mankind eager to accept reward without work. This is
the meaning of the belief that one set of men desire
only to produce and sell, but not to buy and
consume, and the inference that what is required is
another set of men who will buy and consume, but who
will not produce and sell. In the consumptionist’s
world, the producers are imagined to produce merely
for the sake of obtaining money. The consumptionist
stands ready to supply them with money in exchange
for their goods—he proposes either to take from them
the money he believes they would not spend, and then
have someone else spend it, or to print more money
and allow them to accumulate paper as others acquire
their goods.
Hoarding is not the only phenomenon upon which the
consumptionist seizes. Where nothing in reality will
serve, the consumptionist is highly adept at
bringing forth totally imaginary causes of economic
catastrophe. Invariably, the solution advanced is
consumption by those who have not produced, for the
sake of those who have. Always, the goal is to
demonstrate the necessity and beneficial effect of
parasitism—to present parasitism as a source of
general prosperity.
The Rationality of Economic
Life
In view of the overwhelming absurdities and
contradictions of consumptionism and the gross
perversion of values which it engenders, one may
only conclude that its support is founded on the
interest which it obviously serves: parasitism.
This, of course, does not relieve the economist of
the duty of identifying the particular errors of
every consumptionist argument. It does, however,
disqualify every consumptionist as an economist. No
scientist, in any field, can accept the view that
reality is irrational or that irrational action is
required to deal with it.
Those economists of the present day who openly and
defiantly proclaim that the economic world is
“non-Euclidean,” do so happily. That is the way they
would like the economic world to be. If they merely
believed that economic life
appeared
to be irrational, and did not at the same time
desire it to be irrational, they would never
proclaim it to be so in fact. Instead of leaping to
the support of consumptionism after only the most
casual examination of their subject, they would not
rest until they had identified the errors which
could make them believe that economic life possessed
the appearance of irrationality; and the greater
such an appearance might be, the greater would they
realize their own ignorance to be, and the harder
would they work to overcome it and expose the
errors. It is this which distinguishes an economist
from a Lord Keynes. |
