On The Economic Theory Of Socialism

The Development Of Socialist Economic Thought,
On The Economic Theory Of Socialism

While mainstream economic thinkers were writing an ode to capitalism, others were coming to different conclusions. Even before the birth of Christ, some viewed with serious misgivings the greater attention being given to the eco­nomic aspect of life. Before capitalism was fully formed during the Industrial Revolution, some writers had seen enough of nascent capitalism to find its impact on individuals and society objectionable.

These early philosophers and moralists were predecessors of early and middle socialist thought, what Marx termed Utopian socialists. The pre-Marxian social­ists oriented their writings toward a criticism of capitalistic society and devoted little attention to an exposition of what the essentials of the society they were advocating (socialism) would be like. They paid particularly little attention to the economic organization of socialism.

Early Writing About Socialism, Fact About Socialism

Some early critics of capitalism have so little in common that it may be questionable to refer to them as socialists. One common thread that does bind this diverse group is their view of the functioning of capitalism in nineteenth-century Western Europe as disharmonious. Nearly all the early pre-Marxian critics of capitalism advocated nonviolent means of eliminating the conflicts in society, although the remedies prescribed vary with each writer.

One of the earliest uses of the term socialism is in the writing of Louis Blanc (1811-1882). He argued that an economic system should provide everyone with a job, and he defined socialism as a system in which all individuals have jobs paying fair wages. The term quickly changed to include government as the provider of those jobs through its control of the means of production. Blanc coined the phrase, "from each according to his ability, to each according to his needs."

Robert Owen (1771-1858), an important early English socialist, was a successful industrialist who turned his attention to the evils of capitalism. He followed the Godwin tradition, which asserted that people are perfectible and that the evils in society result from institutional factors. He therefore advocated educational reform and the substitution of cooperatives for the competitive market process. It is interesting that he rejected any notion of a class conflict in the society of his time.

Another group of English writers came to conclusions similar to Owen's, but because their critical analysis of the faults of society started with a labor theory of value, they have become known as Ricardian socialists. In Ricardo's system the landlord is a parasite who receives part of the social dividend while perform­ing no essential economic function. These writers used Ricardo's labor theory of value to conclude that, because labor is the source of all value, the capitalist exploits labor by depriving it of a portion of its fruits. The most important of these writers were John Bray (1809-1897), John Gray (1799-1883), Charles Hall (c. 1740-c. 1820), Thomas Hodgskin (1787-1869), and William Thompson (1775-1833).

The most prominent of the early French socialists were Henri de Saint-Simon (1760-1825), Charles Fourier (1772-1837), and Pierre-Joseph Proudhon (1809-1865). Saint-Simon was impressed with the possibilities of expanding economic output by state planning in which the scientist and engineer played key roles; Fourier's conception of the good society envisioned cooperatives in which a minimum income was guaranteed to all; and Proudhon, distrusting state action, recommended an anarchy in which credit would be granted to all without any interests being charged to a borrower.

Although the early German socialists had little direct or indirect influence on the development of economic theory, a Swiss writer, J. C. L. Sismonde, now known as Sismondi (1773-1842), who is classed more properly as a social reformer than as a socialist, deserves closer attention. Sismondi was a prolific writer of history who produced a sixteen-volume history of Italy and a history of France comprising thirty-one volumes. His major contributions to economic thought are contained in his Nouveaux principes d'economie politique (1819). In his early writing, Sismondi had followed Adam Smith in perceiving the economy as fundamentally harmonious and believing that a governmental policy of laissez faire would most benefit society. But in his Nouveaux principes he concluded that Smith, Ricardo, and Say had overestimated the benefits of laissez faire. He attacked Say's Law, contending that a laissez-faire policy would result in unemployment and misery for a large mass of the population. Though he was convinced that the distribution of income achieved by laissez-faire markets was not fair, just, and equitable, he agreed with Ricardo that the distribution of income was the most important question in economics. Sismondi was concerned about the slow but certain disappearance of the small-farm owner and small-shop owner. He envisioned a society of class conflicts, rather than harmony, as society became more and more polarized between the proletariat and the capitalists. He believed that the large increases in total output resulting from increased indus­trialization were not being passed on to the average citizen as increased welfare. Thus, the major thrust of Sismondi's criticism of orthodox doctrine was to reject the harmony of classical liberalism and find instead a discord manifested in the system's failure to provide full employment and, consequently, in growing class conflict. Sismondi is an obvious predecessor of Marx.

Sismondi's appreciation of the failures of capitalism was more intuitive than analytical; the remedial policies he advocated were vague and, in part, internally inconsistent. To Sismondi the primary causes of periodic fluctuation in the level of economic activity were the uncertainty of competitive markets and the elimination of the small farmer and artisan. His remedies were to slow down the increases in production caused by capitalism and to return to an economy in which the separation of labor and capital was minimal and production would more closely mesh with the ability of the economy to consume.

His advocacy of the small-scale, independent industrial and agricultural economic unit led him to defend private property, a view opposed to the general tenor of socialist writing during this period. Solving the problem of overproduc­tion by limiting, if not contracting, total output was not likely to attract much support during the nineteenth century from either the capitalist or the laboring classes of France or England. Whether Sismondi should even be called a socialist is subject to question. In any event, his rejection of Say's Law and his replacement of the harmony of the classical system with disharmony proceeding from a class conflict between capitalists and laborers place his ideas in sharp contrast to the Smithian tradition that Sismondi at one time had accepted.