The Socialists Supply and Demand

The Socialists, Competition, Supply and Demand, Price

Sismondi's criticism of competition and the reliance upon the law of supply and demand to determine price set the pattern for later socialistic writing on this subject. Briefly stated, the Socialists contend that when prices are set by the freely operating forces of the market, and when wages and employment are left to the com­petitive self-interest of employers, the result is exploitation and impoverishment of the wage-earning population. Marx goes even further; he adds that the disparity between what the employee receives for his work and the value he actually produces is con­fiscated by the employer. This process is the result of competition coupled with the institution of private property, and leads directly to recurring economic crises. This last paragraph has anticipated a discussion of business cycles which will be taken up in some detail in a later chapter, but it is well to point out at once the ultimate result of unregulated competition according to So­cialist thought.

The line of classical thought on the subject in hand is broken frequendy by sharp attacks, and by conflicting ideas developed by other schools of thought. The Socialist attack was one. There were others. List, as leader of the nationalist school, undermined the whole concept of free competition and dependence upon the law of supply and demand. Since industrial development was a source of national strength and enrichment, it could not be left to the free play of economic forces. The government, in the na­tional interest, must regulate industry. While competitive enter­prise might yield a greater abundance at present, the nation must bear the sacrifices necessary to increase the national productive capacity. There obviously is little room in List's economic system for free private enterprise, at least in the stage of economic de­velopment which he assumed applied to the Germany of his day.