Peter was looking at Adams with surprise and admiration. “You sound almost like a trained philosopher!”
“Oh, I used to be quite a student of Dialectical Materialism in my twenties, chief. And then, you know, Hegel was available in the private Politburo library because of his profound influence on Marx, and though I was perhaps his only reader—”
“Well, fortunately, Adams, we don’t have to solve every problem now.” “No. We should be considerate enough to leave a few,” said Adams with an ironic smile, “for our descendants.”
Chapter 35
IN Moscow Marshall Zakachetsky was addressing the Politburo. “I have the pleasure to report,” he said, “that the government now has as many planes in operation as it had the day before the Uldanovite counterrevolutionaries flew off with our entire supply. This is even better than it sounds, for we have twice as many long-range bombers as we had then. And all our planes are new. Half of the rebels’ planes, on the other hand, were obsolete when they stole them. They are all now three years older; a good part have probably been junked; they had to start from scratch in building their airplane and motor factories and their machine tools; so it seems impossible—”
“Excellent,” said Bolshekov. “But we’ve got to establish even greater superiority. One year more, and we’ll have a little surprise for them “
Peter’s economic reforms in the Western Hemisphere had succeeded far beyond his fondest dreams. Though only three years had passed since the flight from Moscow, Peter’s statisticians were already informing him that the man-hour productivity of Free-world was at least four times as great as that of Wonworld, and might be much higher.
Peter did not take these statistics too seriously. It was not easy, he had concluded, to measure comparative living standards or comparative human satisfactions. Even in comparing goods, it was not as easy to measure differences in quality as differences in quantity. And as there was no trade between the two half-worlds, because Bolshekov’s regime would not permit it, it was difficult to compare values. But in whatever could be measured in quantity, the achievements of Freeworld were far beyond those of Wonworld. This was true even in the military field, where Peter’s intelligence agents informed him that in ship producing capacity, tank producing capacity, and even in plane producing capacity Freeworld had already surpassed Wonworld, in spite of the latter’s great head start.
But even more than by the record of production, Peter was struck by the startling change that had come over the whole spirit of the people. They worked with an energy and zeal infinitely greater than anything they had shown before. Peter now found people everywhere who regarded their work as a pleasure, a hobby, an exciting adventure. They were constantly thinking of improvements, devising new gadgets, dreaming of new processes that would cut costs of production, or new inventions and new products that consumers might want.
Adams was bewildered by the transformation.
“What caused it?” he asked.
“I think two things have caused it,” said Peter. “And the first is liberty.”
“Liberty may be fine for its own sake,” replied Adams, “but what has it got to do with this tremendous release of human energy?”
“You have practically answered your own question, Adams. That is precisely what economic liberty does. It releases human energy. Before people had economic liberty, you and I and the Central Planning Board laid down the central economic plan. And from then on nobody else had any function or duty but that of slavishly carrying out, to the last detail, the plan that we bureaucrats had laid down. Now everybody can plan. Now everybody is a center of planning. The worker can plan to shift to another employer or another line of production where the rewards are higher. He can plan to train himself in a new skill that pays better. And anybody who can save or borrow capital, or who can get the co-operation of other workers or offer them more attractive terms of employment than before, can start a new enterprise, make a new product, fill a new need. And this puts a quality of adventure and excitement into most people’s lives that was never there before. In Wonworld, in effect, only the Dictator himself could originate or initiate: everybody else simply carried out his orders. But in Freeworld anybody can originate or initiate. And because he can, he does.”
“And the second thing that caused this transformation, chief?’1
“The second thing, Adams, is that in our new free private enterprise system—an integral part of which is the right to and the protection of private property—every man gets what he himself produces. And as his reward is proportioned to his product—as his reward is, in fact, merely another name for the exchange value of his product—he knows that it depends upon himself, upon the value of what he creates. Each man is constantly striving to increase the amount he himself creates because it increases his own reward.”
“I can’t see that at all, chief. I can cite you the case of one fellow, for example—”
“I purposely exaggerated,” confessed Peter, “for the sake of clarifying the situation. This is what would happen if there were perfect competition, including—if it is possible to imagine such a thing—perfect foreknowledge on the part of producers and consumers. Nevertheless, even under our system as it stands, it is still true, though there may never be an exactly ‘perfect’ correspondence, that every individual and every group tends to get the amount of wealth that he or it specifically brings into existence. Everyone tends to be rewarded by the consumers to the extent that he has contributed to the needs of the consumers. In other words, free competition tends to give to labor what labor creates, to the owners of money and capital goods what their capital creates, and to enterprisers what their co-ordinating function creates.”
“If you could achieve that, chief, no group would have the right to complain. You would have achieved an economic paradise.”
“Whether you call it an economic paradise or not, Adams, this is in fact what we have achieved. We have changed the entire principle on which economic life is based. For Marx’s unworkable dictum: From each according to his ability; to each according to his needs, we have substituted a new, workable principle: To each what he creates.”
“But even granting that your new system does operate on this new principle, chief, are you sure that it is in every respect superior to the socialist principle of Marx?”
“It works,” said Peter; “and the ostensible Marxist principle did not work. When we attempted to enforce the principle of ‘to each according to his needs’ we found that it defeated the whole object of getting ‘from each according to his ability.’ But the moment we substitute the principle of ‘to each what he creates’ we automatically solve the problem of getting ‘from each according to his ability.’ “
“But you can’t consistently apply the principle of ‘to each what he creates,’” said Adams. “How do you solve the problem of invalids, the crippled, the blind, the helpless; the problem of mothers bearing children, the problem of children themselves—”
“Let’s not mix up two entirely different things, Adams. I’m talking of the principle needed to secure maximum production. You’re talking of what I think ought to be called ‘secondary distribution.’ Let me explain. Under socialism goods were first produced and then distributed. But this is not what happens under our free enterprise and private property. Under this new system ‘production’ and ‘distribution’ are merely two names for the same undivided process. When production comes on the market it is already somebody’s property. It is merely exchanged for somebody else’s property; it is not ‘distributed.’ To say that each worker or enterpriser gets what he creates is not necessarily to say that each keeps the market value of what he creates merely for himself. He is free to distribute what he creates or what he earns as he sees fit. He may provide for his family, or he may give part of his earnings to the helpless or to charity.”
“But what you are saying, chief, is that the helpless or nonproductive should be provided for only if the productive are generous eno
ugh to provide for them. We can’t depend on that. The State should give everyone a minimum.”
“What you are saying, Adams, is that we are all more generous collectively than we are individually. Or rather, that we are all willing to be more generous with other people’s money than we are with our own. Or still rather, that our vicarious generosity, our pseudo-generosity, is greater than our real generosity; and that therefore we should force somebody else to contribute to the support of the needy through taxes, confiscation, or what not. What you are saying, and what Marx was saying, is that those who have not created the wealth should seize it from those who have created it.”
“But surely, chief, we ought in our collective capacity to make precisely the provision for the needy and the handicapped that we are unwilling to make in our individual capacity—”
“Let’s deal with that question at a later time,” interrupted Peter. “We have been slipping off the point we started to discuss. I began by asserting that under our new system each of us tends to get the amount of wealth, income or value that he specifically brings into existence. And you are denying this.”
“No, I’m not. I’m merely asking you to prove it.”
“Well, let’s begin, Adams, with an overall view of the situation. Here are hundreds of different industries. Here is an industry making and selling shoes. Here’s another industry raising and processing wheat, baking and selling bread. Let’s for the moment consider the bread industry and the shoe industry each as separate integrated units. The shoe industry can sell shoes only if consumers want them; it can sell only as many as consumers want, and it can sell them only at prices that consumers are willing to pay. Therefore the gross income of the shoe industry depends upon how many pairs of shoes it collectively produces and how much it gets for each pair. In other words, the gross income of the shoe industry depends upon the total value of what the shoe industry produces. In fact, the gross income of the shoe industry is the total value of what it produces.”
“Right, so far.”
“This value is measured by consumers who are trying to fill their own needs and wants. They measure this value, in effect, by the value of what they are willing to exchange for it.”
“They exchange money for it,” said Adams.
“Directly,” agreed Peter, “they exchange money for it. But they got this money in the first place by exchanging for the money the products that they themselves made. So indirectly they exchange their own products for the things they ‘buy’ and consume.”
“Correct.”
“And neither party, Adams, would be willing to make this exchange unless he thought he were getting at least equal value for what he was parting with—in fact, not unless he thought he were getting more value so far as his own personal needs were concerned.”
“Correct.”
“So each industry, considered as a whole, Adams, therefore gets the total value of what it produces. The shoe industry gets the total value of what it produces, the bread industry gets the total value of what it produces, and so on.”
“I suppose that is true,” agreed Adams after a pause, “but what does it prove? Suppose the people in the bread industry found they were not getting as much in proportion to their work, skill or input for making bread as the people in the shoe industry got for making shoes?”
“If these people were investors of capital,” said Peter, “they would stop putting money into making bread and put it instead into something else—say, making shoes. If they were enterprisers, some of them would quit making bread—or perhaps be forced to quit—and go, let’s say for simplification, into the shoe business. And certainly the new enterprisers coming along would not go into the bread industry but into something else—again let’s say the shoe industry. And finally, workers would quit the bread industry and go into something else—again, say, the shoe industry, where they were offered more money. And certainly new workers would not learn how to bake bread but, say, how to make shoes. As a result of this, in turn, the price of shoes would drop and the price of bread would rise until enterprisers were earning approximately equal profits in both industries, until capitalists were getting approximately equal returns from both industries, and until workers of the same skill and ability were getting approximately equal wages in both industries.”
“But suppose there were some third industry, chief?”
“The same process, Adams, would apply to all industries taken together. There would be a constant tendency for all of them to come into balance with each other. There would be an equally constant tendency for profits in all lines, capital returns in all lines, and wages in all lines to come into alignment with each other, to equal each other—with allowances, of course, for differences in risks, skills, and so on. There would be a constant tendency for all industry, in brief, to come into equilibrium—for all prices, wages, capital returns, production, and so on to come into equilibrium with each other.”
“You are assuming, of course,” said Adams, “perfect competition, and perfect mobility of labor and of the means of production—”
“No, I am not,” replied Peter. “If I were assuming perfect competition, perfect mobility, perfect foresight and so on, I wouldn’t have to speak of a tendency toward equilibrium. There would then always be a perfect equilibrium.... I am merely assuming that there is a reasonable amount of mobility and a reasonable amount of foresight and a reasonable amount of competition. Under such actual conditions we will not get perfect equilibrium or a perfect correspondence between a man’s income and his production, but we will get a rough correspondence, a reasonable correspondence—with a constant tendency toward a more exact correspondence. Of course the more competition we have, the greater this tendency will be. So the effort of our government must be to encourage the maximum of healthy competition, to keep every field of competition constantly open to newcomers.”
“You speak of ‘the shoe industry/ ‘the bread industry’ and so on, chief. Aren’t these really general names for several industries? Doesn’t the shoe industry have to buy its leather, for instance, from the leather industry? How can you say, then, that the shoe industry gets the whole value of what it produces?”
“These differences between ‘industries,’ Adams, are all arbitrary differences. We can classify industries any way we please. It’s merely a matter of convenience. One of the shortcomings of central bureaucratic planners is that they always forget this. They try to solve the troubles of the X industry, say, in isolation, because they fail to see the X industry merely as part of the overall structure of production. Now whether a so-called ‘industry’ is vertically integrated, or consists merely of one part of a finishing process, makes no difference in the way rewards are finally determined. The price that the shoe industry gets for shoes is determined by consumers. The price that the shoe industry can pay for leather is determined, among other things, by the price that the consumers pay for shoes. In the same way the price that the leather industry pays for hides is determined largely by the price that the shoe industry is paying for leather; and so on. Part of what the ‘shoe industry’ gets from the sale of completed shoes it must pay over to the ‘leather industry,’ for example, for the leather. Nevertheless, the ‘shoe industry’ considered as a whole gets the total value that it adds to the leather in making shoes. Of course we can subdivide the shoe industry, in turn, into the shoe manufacturing industry, the shoe wholesalers, the retail shoe industry, and so on. But each part of this industry gets the value that its own services add to the final value of the product in getting it into the hands—or should I say onto the feet?—of the consumers.”
“Very well,” agreed Adams. “You have finally proved to me that each industry considered as a whole gets the total value of what it creates, and that each segment of the industry gets the total value which that segment adds to the final value of what it creates. But you haven’t yet proved to me that free competition tends to give to labor what labor creates, nor to each worker what he personally c
reates.”
“Let me try,” said Peter. “We have agreed that freedom of consumption, freedom of movement, freedom of choice of occupation, and freedom of competition tend to equalize the value in different industries of the product that a worker of a given skill can create. This is even more true as between firms in the same industry which utilize the same skills. Let’s assume, for example, that a worker in a given firm adds to the quantity, or quality of its production a value equal to 30 goldgrams a week—”
“You mean the worker adds to production a value or a product that the employer can sell in the market for 30 goldgrams a week?”
“Exactly. And let’s suppose also that this particular worker could add the same amount of output or value to the product of any other employer in that line. Suppose employer A wanted to pay this worker only 20 goldgrams a week.”
“Employer A would want to exploit the worker, naturally.”
“Let’s say he would. Then Employer B, just as selfish, would offer the worker 21 goldgrams a week. For B would be content to make only 9 goldgrams a week out of the worker, rather than stand by and see employer A making 10 goldgrams a week out of him.”
“I can see how B’s selfishness would cause him to do that,” agreed Adams.
“But we have reckoned without employer C,” said Peter, “who is just as selfish, and just as profit-minded, as either A or B. Rather than stand by and see employer B make 9 goldgrams a week out of the worker, C would step in and offer him 22 gold-grams a week. And so on. You can assume as many employers as you want—or, for that matter, as few—as long as there is competition among them. At an open competitive auction the price realized for anything is as high as, or higher than, the second most determined bidder feels that he can afford to go. So A and B alone might bid up the pay of our worker—who produces an added product for either of them equal to 30 goldgrams a week—to 26, 27, 28, 29 goldgrams, or 291/2, 293/4, 29% goldgrams, until the profit in employing him all but disappeared. For either A or B would rather make a slight extra profit, however small, than see his competitor make it.”