Political Econ of Growth. Paul A. Baran
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