Pubblicato da res publica : quaderni europei aprile 2015
Market and Welfare State
Market
In the last century, real communism has failed spectacularly and irreparably in all its versions: from the Soviet to the Chinese, to Southeast Asian, and Albanian. However, we cannot say that capitalism has triumphed. Instead, what has been established in Western countries and the most prosperous parts of the world (especially in the Far East) is a model that we could call the "welfare state." In this model, more than 40% of GDP is taken through taxes and managed by the State so that giving and receiving are proportionate to income. In essence, it is the realization of the Marxian concept of "from each according to his ability, to each according to his needs," but the giving is not voluntary; it is enforced through taxation.
Furthermore, the State manages large enterprises at a privatized level and regulates the entire production process in a detailed manner with a plethora of regulations (perhaps too many), particularly ensuring the rights of the economically weaker. It guarantees, at least broadly, pensions, healthcare, education, and many other provisions too numerous to list.
Marx was interpreting the world of 150 years ago; it would be absurd if he were to uphold the same ideas in a world so different from his time. It’s like saying that Aristotle would still advocate geocentrism today. All this has been made possible by the economic development initiated and promoted by free enterprise, the necessity of which is now unquestioned.
Limits
Certainly, nothing is perfect, least of all the market. The enterprise is the engine of economic development, but it must be guided; otherwise, it destroys itself: engines lack intelligence, they are mechanisms that need guidance. In this context, economic liberalism is tempered by strong state intervention. Today’s political discourse focuses on the relationship between economic freedom and State intervention (or rather, community intervention), not on the alternative between capitalism and communism, both of which no longer exist.
Generally speaking, if each of us, acting as we please and according to our own judgment, created progress and prosperity, there would be no need for the State, laws, traffic codes, regulations, ethics, authority, and so on—in other words, society. We would be like in beehives where each bee does what it is supposed to do, and everything is perfect. Man is a social animal: the community (of which the State is just one of many expressions) lives within the rules it produces. Why should the economy be any different?
In fact, there is no society that doesn’t regulate economic activity: what is up for discussion is the extent and the methods. Therefore, we can discuss which rules are needed and to what extent, not whether rules are necessary. As we said, what is up for discussion is the relationship, the balance, the compromise (call it what you will) between the two, and this depends on the context, the concrete and specific situation. In certain cases, for instance, it will be appropriate for the community to intervene in managing public transportation, competition, monopolies, prices, wages, and so forth, while in others it would be harmful: it cannot be discussed in the abstract.
Rich and Poor
In our world, the interests of large enterprises and the masses converge: the former thrive only if there are the latter to buy. But this seems incomprehensible to those stuck in the world of 150 years ago, to which Marx referred. Contrary to what happened in the past (with land ownership), the wealth of some no longer rests on the poverty of others because we are capable of producing more than we can actually consume. It is enough to see that the countries with free enterprise are those where the welfare of the masses, not just the capitalists, is highest.
Industries, therefore, have every interest in having buyers for their products: if poverty spreads, these buyers decrease more and more. Also, at an international level, one can export to rich countries, not poor ones. Indeed, our most important exports go to Germany and America, and very little to Angola and Gabon. No one likes paying taxes, but without them, there would not only be no fair redistribution of income, but in the absence of buyers, there would be no production. And paradoxically, if the rich paid fewer taxes, they would be less rich. Based on the overproduction crisis, Marx 150 years ago predicted the end of capitalism: he was right. In reality, 19th-century capitalism no longer exists because it has been replaced by what we have defined as the welfare state.
State Interventions It is true, however, that we cannot impose high wages and benefits by law; otherwise, it would be enough to make laws to make everyone prosperous: it would be so easy. Resources are needed: for example, the adjustment of wages to the real possibilities of productivity is not automatic: without collective bargaining, which is then given legal value, it would be difficult for the entrepreneur to increase them spontaneously.
It is true that compensation is regulated by the market, by the law of supply and demand, but if an entrepreneur wants a famous singer, he must pay a lot, while a simple electrician (or laborer, or driver) can be found even at a meager price if the bargaining is free. In practice, bargaining and, therefore, the State protect the poorest, as is in the nature of the community. It should be noted that in a free competition regime, wage increases do not decrease corporate profits but are passed on to the product price: this is why Chinese products cost a fraction of ours. It is naive to think that lowering wages automatically corresponds to increasing corporate profits.
Solidarity
We need to distinguish between two concepts that seem very different to me: economic needs and solidarity. It is inherent in economic activity that everyone is selfish: entrepreneurs, workers, and buyers; then there is also altruism, solidarity at other times. Solidarity, once called charity, is another matter: it depends on personal sensitivity. There are those who think only of their own interest and those who feel empathy for the less fortunate. Charity is done, not by everyone but by some: the poor, the well-off, the very rich, each to the extent that they can, of course: the poor less, the well-off more, the very rich a lot.
Let’s also consider that the hungry in the third world are fed by our aid: even Gaza lives almost exclusively on our aid. It would be a mistake to think that solidarity is the exclusive domain of the rich, the poor, or the middle class: we are all human and all have the vices and virtues of humans. We must consider that man acts in his own personal interest but also follows limits set by the community, and the most important of these are often not even codified. Economic collectivisms have all failed in history, from Plato’s republic to the medieval pauperistic heresies to the communism of the last century, because they were based, as Marx said, on the idea that man, freed from the chains of selfishness, gives according to his abilities and receives according to his needs. It is not so: man, by nature, acts in his own interest.
But even the capitalism of Marx’s time has disappeared, replaced by the welfare state. We may have a greater propensity for collective intervention and for entrepreneurial freedom, but denying either is out of touch with reality.