V.J. Chalupa

On Post-Modern Politics

CHAPTER 9

 ECONOMY

The collapse of state planned and/or directed economies marked the triumph of the free economy, and at the same time diverted the attention from the general overview of the types of economic systems. Nevertheless, such an analysis is indispensable for an active academic or practising participant in political theory and practice.

In order to achieve the purpose of happiness, each individual acquires goods and utilizes them. This is his economic activity. The total of the economic activities of individuals as well as that of other subjects of volition pursuing their sundry technical objectives constitutes the economy of the state.

Each individual is a subject of duty of the state under whose sovereignty he lives, as well as a part of the state's object of care that encompasses all persons on the state's territory. Therefore, the state observes and evaluates the economy on its territory from the standpoint of the state's idea of a good (or better) society and interferes with it when it finds economy's results harmful or not useful enough.

According to the basic principle under which an economy functions, economic systems fall into two groups:  economic activities are driven by the needs of individuals as perceived by them -- economic individualism -- or by the needs of society as perceived by the state -- socialism.

Individualism

The individualistic economic system is built on the premise that every individual takes care of himself, i.e., procures and utilizes means according to the  purposes derived from his primary purpose of happiness. Subjects of volition acting under an objective technical purpose proceed similarly. The main features of such system are as follows:

Each legally recognized subject of will, whether an individual or a collective body (business, corporation, partnership)  acts independently in economic matters following singlemindedly his or its purpose. As a consequence, available goods (= useful objects) are divided among the subjects of economic activities to the extent to which he or it is able to obtain by his or its own efforts. Material freedom, i.e., the possibility to act according to one's primary purpose, is secured legally. The possession of appropriate goods, if guaranteed by law, becomes one's ownership; without it, one's political freedom and rights are constrained in practice and may become illusory.

The principle of economy (to obtain a maximum usefulness at the cost of minimum harm) generates division of labor and trade: the subject of economic actions swaps (exchanges) his (i.e., owned by him) goods of lesser utility for goods in the possession or ownership of other subjects who, for their own purposes, rate the utility of the owner's goods higher than the usefulness of goods in their own possession (ownership). Trade (exchange, swapping) takes place when interests of the trading parties are complementary, and ceases as the trade becomes harmful to one of the trading parties.

The network of exchanges creates a market from which the designation of this system as a market economy is derived. It assumes that individuals are better qualified to take care of their needs than the state. Its main characteristic is its productivity. Consumers (buyers) communicate their needs to distributing organizations (retailers and wholesalers) who in turn place orders of the goods in demand to producers. To serve the needs of consumers becomes the pivotal point of the economy, because each entrepreneur follows the objective of maximum profit whose size depends on ability to satisfy customers' demands.

Exchanges of goods and services are radically facilitated by the existence of a good which is acceptable to all economic subjects as a common denominator in which they can express the degree of usefulness by which they value the traded goods. Such a good, originally having its own intrinsic value, i.e., mostly rare metals, has been gradually replaced by an imaginary claim on a portion of the goods produced by society: paper money (supplemented by the use of checks and more recently so-called plastic money and electronic transfers). The system of exchange changed to a monetary economy. On the market, economic subjects offer goods demanded by other economic subjects for a number of units of the exchange medium, i.e., money, according to the grade of usefulness perceived by them with regard of their respective goals; they place a price on the the goods they offer.  The existence of a market generates production of goods their owners do not need for themselves, but produce only to place them on the market; such goods are merchandise. If demand increases, prices rise, if supply increases, prices fall; similarly, falling prices increase demand, increased demand lowers the amount of available goods, and prices rise . Buyers compete with each other, and so do sellers. Individualist economy is a competitive economy. Competition is in prices as well as quality of the goods offered and conditions (terms) of payment. Those who sell below the cost of producing or acquiring their merchandise and those for whose merchandise there is no demand, are eliminated from the market. Competition is the dynamic force of a market economy: it  lowers prices and increases the variety and quality of goods.

In order to fill its role as common denominator of various goods, money must be stable, the monetary unit must have the same value in time, must buy the same quantity of merchandise or its equivalent also in the future. Fluctuation of the purchasing power of the monetary unit impedes forward planning and favors certain economic subjects while harming others. When the purchasing power of a monetary unit rises (deflation), existing borrowers must spent a higher than expected quantity of goods in order to pay off the same amount of their borrowings. If the purchasing power declines (inflation), the lenders are able to obtain only a lesser quantity of goods for the amount of the loan than they would have at the time of lending. Deflation favors lenders, inflation favors borrowers. Both distort and disrupt the equilibrium of the economy created by the markets, and thus subvert the market economy.

Market economy oscillates between economic growth and recession. During the period of prosperity, the income of consumers rises and enables them to increase their purchases. In order to satisfy their demand, producers increase the supply of goods to the market. Increased demand of goods and services by consumers and their suppliers creates a pressure on prices and forces prices of goods, labor and money upward. When the prices, especially the price of money (interest rates) reaches a certain point, they become prohibitive for consumers as well as suppliers (producers), and they stop buying. Due to diminished demand, enterprises overburdened by interest or producing unsalable merchandise are forced to stop or restrict production and start to dismiss employees. If those who lost jobs are also overburdened by borrowings, they are unable to keep up their payments for houses, cars, furniture. etc., and must give them up at a loss. With the decline of prices the consumers and suppliers who avoided overextension during the previous period of an economic boom, start buying again; production picks up, jobs open, the unemployed begin to share again in the economic processes, and the recession turns into a new economic upswing, into recovery. (The period between recession and recovery varies according to circumstances. During World War Two, Germany and Japan were so heavily affected by the war that the accumulated demand provided a long period of prosperity.)

Goods are produced by work, but work alone is not sufficient. To be effective, the worker needs tools as means of production. With the progress of technology, means of production become more complicated and more expensive. In order to produce, the entrepreneur must have available the goods needed to obtain in exchange the means of production. In a monetary economy, this means he must accumulate the necessary amount of money, the necessary capital. Because the individualistic economy is based on the principle that everybody takes care of himself, the natural law of the survival of the fittest applies. In a monetary economy, fitness does not reside in physical qualities; nor are mental qualities the most important; fitness -- strength -- belongs to those who have at their disposal the largest amounts of money, who are owners of capital, capitalists; an individualistic economic system is also a capitalist system, capitalism.

Owners of capital exchange it for means of production, and if they themselves do not work with them, they hire others who perform the work for a compensation, usually monetary; the size of the compensation is determined on the market (labor market) by demand and supply similarly to the price of goods. The utilization of means of production and labor requires efficiency and efficiency requires organization; this can be handled by the owners themselves or by experts (managers) hired for this purpose. Thus is born a subject different from its constituent parts with a separate primary purpose that is objective and can be communicated. This purpose is maximum monetary profit, the subject of will thus created is an enterprise. An enterprise is an organization of capital and labor for the purpose of monetary profit. Because the utilization of means of production is controlled by their owners and because owners are private individuals, the system is also called the private or free enterprise system.

Ownership of means of production is important because economic fluctuation affects primarily those who do not own them, i.e., those who are constrained to procure their livelihood on the market of labor. The individualist economic system results in the division of society into two groups. The source of coherence of one of them is that its members do own means of production, of the other the fact that they do not own means of production. On the basis of their interests, each group creates economic and political organizations. The main point of contention between them is how to divide the results of their joint economic undertakings, i.e., the profit of their enterprise, because ultimately the share of one of the participants in the enterprise -- capital (owners), labor (wage earners) and organization (managers) inevitably diminishes the share devolving to the other participants. For dealing with the others, mainly the owners, labor organizes into unions which create a sort of monopolies on the labor market. Politically, labor attempts to secure legislation which would involve the powers of the state in matters of the division of the joint result of the workers' and their employers' efforts, by legislating minimum wages, pension funds, working hours, work environment, hiring and firing, profit sharing and labor participation in the management of the enterprise (i.e., utilization of the means of production owned by others) or even in a change of the entire economic system.

Rather than be entrepreneurs, owners of capital may consider it to be to their advantage to lend, for a price, the money to other subjects of economic activities. This price is called interest and is determined on the market of capital on the basis of supply and demand for various types of loans (long term, short term, secured, unsecured) in the same way as the price of goods and of labor. These three markets are interconnected and influence each other. Demand for goods creates a demand for capital and labor so that interest rates and wages rise; a lower interest rate facilitates lower prices which in turn stimulates demand. The movement in the price of labor has a similar effect. This interrelationship increases the efficiency of this economic system. Through its price mechanism, the market of goods  dampens the production of certain goods and encourages others. A change in preference for certain goods is accompanied by a corresponding shift in demand for types of labor and wage levels. The resulting relocation of workers cannot be handled administratively. In a market economy, the market of goods is inseparably connected with the labor market; both are affected by and affect the market of capital. Competition forces every enterprise to produce well and economically. In the system of private enterprise, competition and the interest of the entrepreneur in profit is a permanent guarantee of productivity.

The market economy balances supply and demand, but it also creates demand artificially. Artificial creation of demand is called marketing. Demand is created by causing potential customers to feel dissatisfaction with their situation, a dissatisfaction that can be overcome only by purchasing certain goods or services. To produce dissatisfaction, entrepreneurs and their hired specialists (also entrepreneurs) utilize modern means of social control from opinion research and demographic studies to psychological manipulation and subliminal stimulation. Joining pleasing impressions (pleasant music, pictures -- especially of seductive females and virile males) with offers of certain goods alternates with attempts at creating feelings of inferiority which can be overcome only by acquisition of the advertised products; without them the objects of advertising would be unacceptable to members of the opposite sex or avoided by their peers. A frequent device of marketing is to represent the purchase of the promoted articles or services as a duty towards self ("you owe it to yourself") or others (to protect your family by insurance or alarm installations, to secure children's education by opening a savings account or purchasing a share in a mutual fund). Constant reinforcing of concern about one's own or one's family health (blood pressure, arthritis, cholesterol, depression, impotence, heart failure, stroke, loss of hair, bad breath, body odors and so forth) generates sales of exercise equipment, dieting programs, frequent medical examinations, unnecessary surgical and chemical interventions,  toiletries and medications, fear of radiations and of chemical pollution of food, building materials, paints, air, water.

Long term effects of these influences affect the mental equilibrium of the targeted population -- on one side the constant evoking of the feeling of dissatisfaction, inferiority, anxiety, fear for life, on the other hand, the constant effort to acquire additional means (money) to purchase new goods or services which would heal the negative feelings. This influence on individuals affects the entire culture because the marketing addresses the widest audience and appeals to the widest, most common motivations and most basic instincts at the expense of good taste, reason and sensitivity. The unceasing search for the "latest" type of merchandise results in exaggeration of minute improvements or changes and triggers purchases of new goods even if the previous items are still usable and useful. Artificial creation of demand thus increases the dynamism of the market economy: constant research, constant improvement, constant rise of the standard of living, phenomena summed up under the concepts of "consumerism" and "instant gratification"  result in a culture where everyone is convinced that he is entitled to everything, immediately, and at the same time lives in a state of anxiety, dissatisfaction and tension. The steep increase in the standard of living is paid for by increased consumption of energy and material resources and rising indebtedness, private and public.

Competition gradually causes concentration of enterprises and capital as less efficient enterprises are forced out of the market and extensive sources of capital enable financially strong enterprises to undertake expensive innovations and rationalizations which are beyond the means of smaller entrepreneurs. This tendency is reinforced by the bureaucratization of public administration -- compliance with rules, regulations and paperwork burdens small enterprises relatively more than large ones. In order to secure the greatest profits, large enterprises substitute agreements for competition and form consortia, cartels, syndicates and trusts which monopolize production of a certain merchandise and manage it so as to achieve a maximum of profit. Such management is not simple, because their pricing and production policies must take into consideration the status of the entire national economy, political circumstances and foreign relations, and requires extensive planning. Competition between enterprises changes into conflicts between syndicates until it reaches certain equilibrium and  ultimately agreements between syndicates and conglomerates on the basis of their maximum profits. The equilibrium between syndicates is accompanied by artificial restriction of production and consumption at higher prices. The suppression of competition weakens the influence of the market and undercuts the dynamism of this economic system. In their own interest, large companies slow down technical progress also by purchases of inventions, patents or of smaller enterprises which could introduce innovations that would devalue extensive investments in existing production methods or products. The same tendencies are followed by labor unions which consider technological improvements as threat to jobs or wage levels of their members. New technology sometimes remains unutilized at all or at least until the investments in old methods or products have profitably paid for themselves.

Connected with the existence of huge enterprises is a phenomenon to which only recently appropriate attention began to be given, although already half a century ago James Burnham called attention to it in the path breaking book The Managerial Society, namely the role of the third player in the functioning of enterprises, namely professional managers. If a class is constituted by the relationship of its members to the means of production, then managers are a class  consisting of those who dispose with means of production belonging to others. The interests of managers are often identified with the interests of capitalists, because managers were alleged to be compensated according to their success in increasing the profitability of an enterprise. This concept is erroneous. Because the return of an enterprise is divided between labor represented by workers, capital represented by owners, and organizational skills represented by professional managers and the bureaucracy, the interest of managers is not always identical with the interest of the owners or of labor. In big enterprises where professional managers make most of the decisions, they manage the enterprise for their own benefits even at the price of causing it damage or collapse. They increase their salaries and compensation regardless of the financial situation of the enterprise and leave it as soon as its future appears questionable. In view of the demand for good managers, their future is less dependent on the fate of an enterprise than the future of workers and owners. The education of the members of this class reinforces this tendency and recommends that a specialist in management plan to change several times his employer during his career. It is in his interest to show fast and impressive results, obtain an appropriate compensation and reputation, and then leave for another enterprise before long-term unfavorable consequences of his management become apparent. When this occurs, he is already active in a different enterprise and problems caused by him are "inherited" by his successor, a new manager who requests and obtains an even higher compensation than his predecessor. He, too, uses effective short term measures, and the process repeats itself. Long term consequences, if unfavorable, are born by the owners and employees. (This type of management is prevalent in American enterprises and Japanese critics cite it as one of the main reasons for a relative decline of American proficiency.)

State and the Economy

The state whose object of care is society, assigns value to capitalism according to the degree this economic system advances society  towards the state's idea of what represents a betterment of society. If the state's purpose includes increase of national wealth, the state considers on one hand the increase of national product and on the other hand its distribution. National product is the total of goods (including services) which society -- the "nation" -- produces. National wealth increases with increase of capital invested in means of production which causes higher production. But its distribution is also important; a nation prospers most if the national product is divided so that society as a whole evolves towards the ideal of life, health and culture of society as it is established by the political process. The state is interested in distributing the national product according to the objective needs of society as a whole.

The growth of production, which means ultimately the volume of goods available for distribution, is in inverse relationship to their allocation according to the objective need and its consequence -- an egalitarian development of society. The highest productivity is not achieved when goods are allocated according to the objective needs of society (as perceived by the state). In this regard, pure capitalism results in the worst distribution of goods and the most unequal development of society simultaneously with maximum productivity and technical progress accompanied by the highest creation of capital necessary to sustain the related expansion of and improvement of the means of production. The principle of individual responsibility and competition are here the driving force. On the other hand, for political reasons (stability of society and social peace) the state may be interested and mostly is interested in such a distribution of income that the gap between highest and lowest incomes is not as large as pure capitalism would produce. It therefore seeks a more egalitarian distribution of income.  Capitalism as a play of free forces brings, in a certain sense and in certain regards, society closer to the state's ideal than other economic systems, due to its higher productivity and faster pace of technical progress.

The state intervenes in the spontaneity of capitalist economy in the interest of the growth of GNP (gross national product) whenever the principle of maximum profit results in restriction of productivity and slowdown of technical progress. Such intervention takes the form of protection of competition, prohibition of price fixing, of monopolies and near-monopolies, syndicates. In the interest of objective values of society such as health and life of its members, the state interferes with the freedom of economic activities by regulations concerning the quality of products, truth in advertising, controls of production and imports, protection of environment, testing of medical drugs and procedures, obligatory responsibility for the safety of merchandise and -- as a special group of laws and regulations -- protection and safety of workers. It influences the composition of merchandise by taxing those types of goods and services it considers as objectively harmful, and by tax advantages or outright subsidies supports production and activities it considers as objectively beneficial. Progressive taxation is the most effective means by which the state affects high incomes or large properties and transfers them to groups which, according to its standards, need it.  In certain areas, the state implements its objectives by producing desirable goods or services by its own means of production organized in publicly owned enterprises which do not pursue the goal of maximizing profits, but of producing goods of the best technical quality at minimum cost.

When these and other ways of influencing the size, composition and distribution of the national product are applied and combined to such an extent that the results of the national economy are not any more decided by the dynamics of a market economy and private enterprise, but by the objective defined by the state, the free economy changes into directed economy. The most frequent examples of directed economy are economies directed towards increase of the military strength of the state.

The combined effects of the markets of goods, labor and capital constantly seek and establish an equilibrium between demand and supply. Free economy can establish an equilibrium in which demand and supply are in balance at the cost of leaving out of the economy a group of persons who do not own any means of production and whose work society does not need -- economy stabilizes in a situation of permanent unemployment which it does not need to overcome in order to maintain its automatic functioning, or would overcome only very slowly. In such a situation, the unemployed represent a group excluded from the economic process as if exiled to an empty island. In order to live, such group needs to create on its island an economy, and for this end, it needs tools, machinery, materials -- generally speaking: capital. If unemployment reaches a certain extent, such capital cannot be procured by taxation because its scope would cause the breakdown of the entire system. Under such circumstances, the state creates the necessary capital for those whom the system excluded, by manipulating the currency -- by inflation. The states adopts a budgetary deficit to cover the expenses of products not required by the market, but socially useful: programs of public works, production of armaments, subsidies for education, research, arts, improving infrastructure, cleaning up environment. The result is the same as if the state had given to those exiled on the island capital for the establishment of their own economy in practice interconnected with the free enterprise system. The state thus disturbs the existing equilibrium of the market and forces it to seek a new balance which includes those previously excluded. The same method can be used to revive the dynamism of a stagnant economy which does not perform in a way satisfactory to the state; this is known as "priming" an economic recovery.

Socialism

A state can conclude (and in some instances historically did conclude) that influencing a free economy does not suffice for the implementation of its objective of a better (or good) society. It decides that it is necessary to plan the implementation and to guarantee the performance of the plan by taking over the control of the means of production: It can either acquire their ownership (through investment, expropriation or confiscation) or it can leave them formally in the ownership of capitalists while substituting their owners' right of disposing with them by the obligation to execute the imperatives of the state's plan. In this way, the state seeks to replace the spontaneity of the market by a rationally conceived plan to be realized by means of production concentrated in its hands, whether openly or factually. These two properties characterize socialism.

When production is concentrated in the hands of the state, the entire structure of economy is fundamentally  changed, because the profit motif disappears: the state has no need to make money -- in reality, it already owns everything. Success is not measured by financial return: it is measured by achieved progress of society towards the ideal pursued by the state or rather the political program pursued by the ruling political organization(s) through the instrumentality of the state. True competition disappears, its place is taken by the plan. A plan is the core of socialist economy, and the principle on which the plan is constructed, determines the type of socialism. It can be cooperative or solidarist depending on the moral maxim it pursues: justice or equality, merit or need.

The Cooperative System

The cooperative economic system is organized on the principle that the only reason for compensation is work and that work is to be compensated according to merit. It is basically a technocratic system which presupposes the existence of a quantitative measuring unit, a common denominator to which all kinds of work can be reduced and compared. The conflict between the three components of a capitalist enterprise disappears: capital is in the hands of the state, organization (management) is considered as work.

The plan is composed on the basis of the wants of the members of society, i.e. on the basis of demand. The state does not limit its subjects in their choices of goods, i.e., it does not allocate goods; on the contrary, it follows the demands of its subjects and produces goods they demand according to their purposes of happiness, in the quantities they demand. This presupposes constant identification of the composition and volume of demand, central direction, expansion of production, if the demand of certain sort increases, and reduction where it declines. Workers must be reallocated from one sector to another according to the shifts in demand, the reallocation to be effected administratively. In this system, everyone has the right to work and must work in the job to which he is assigned on the basis of the plan. Work is allocated, the cost of goods and the compensation for work is proportional to the amount of work performed.

In practice, this system encounters several fundamental problems. The key one is that the technical measuring unit of work, the work's common denominator, does not exist. Therefore, the basic presupposition of the cooperative system is limited to measuring performance of identical kind of work: the principle "same compensation for the same performance" in practice means the introduction of piecework combined with graduated work tables, bonuses for technical innovations, improvement of work organization or simplification of production, profit sharing, punishments for poor performance and forced labor camps.

As soon as the principle of "same compensation for the same performance" is applied to different types of work, its evaluation becomes largely arbitrary and depends on the purposes wanted by the evaluator. It is called compensation according to the worker's contribution to society. In autocratic states, the highest valuation is given to the work of members of various security organs protecting the system, and the arbitrariness appears in many other areas. There exist various systems of points which replace by points the missing common unit for measuring work, but the number of points granted for various types of work changes according to the interests of the active and passive participants in the process. An enterprise needing theoretical expertise allocates a higher number of points to higher education than to practical experience; an enterprise needing experienced employees, will do the opposite. The situation is similar on the side of those whose work is being evaluated: nurses assert that a higher number of points should be allocated for responsibility for life and health; miners demand that  exhausting and dangerous work deserves a higher number of points. The result is that members of different professions compare their numbers of points with the evaluation of members of other professions, naturally find their own work undervalued and unappreciated, and insist on adjustments. This generates a steady pressure on increase of wages not corresponding to increased performance.

Another problem lies in the planning of production. Because the composition of production depends in this system on the purposes of happiness of members of society, it is constantly changing. No technology has been discovered, and probably cannot be discovered, which could capture these changes currently and transform the plan on their basis. The composition of production always limps behind the composition of demand, and the gap between goods society (people) demands, and goods the state is able to supply, increases.

The third problem is the allocation of work. It is true that no economic system allows that everyone work on what he would like to do and where and when he would like to do it, but it is equally true that everyone attempts to do so. In an economic system where workers must be transferred in accordance with the plan by administrative fiat, the question inevitably arises which one among the workers will be transferred, and what will his new assignment be, and each of them generates every possible effort to influence the selection in accordance with his purpose of happiness, not in accordance with the purpose followed by the state (as expressed by the plan). This produces protectionism, bribes, influence peddling and other forms of corruption, subterfuges, excuses and appeals of those who are dissatisfied or have been wronged; all this slows down and inhibits the necessary shifts of labor, and when the reallocation is completed, the demand has changed again, and the entire process is repeated.

The fourth problem consists in the bureaucratization of economy. The executive power of the state swallows the entire economy. The application of this power must be directed by norms which translate abstract norms into more concrete ones. If the norms are not specific enough, each bureaucrat passes on the decision to his superior, because he is expected to comply exactly with regulations, not show flexibility and risk taking. Although the purpose of bureaucracy is to act in accordance with the will of the state, the interest of bureaucrats as a profession are not identical with the interests of the state. The position of a bureaucrat in the bureaucratic hierarchy depends on the extent of his jurisdiction which concretely means on the number of his subordinates. If the state orders this number to be reduced, it acts against the bureaucrat's interest, and this conflict of interest joined to the resistance of the workers selected for transfer, is an effective brake on the performance of the state's instructions.

Similar resistance meets introduction of new methods of work, new inventions and new organization, which all require additional expenditure of effort  to learn new approaches, changes in existing regulations and established procedures, amendments to the plan, seeking new suppliers of materials and outlets for new products, reassignment or restrictions of the work force and more administrative work (accounting, new forms, additional reports).

Due to these problems, a cooperative economic system evidences steady pressure on wages without corresponding increase of productivity, i.e., has a built-in inflationary tendency; is incapable of satisfying demand, is not able to adjust the composition of the labor force to the demands on production, and loses efficiency due to the growth of bureaucracy. As long as its functioning is enforced by an autocratic state, resp. a dictatorship, and isolated from other states, this system is capable of consolidation, or rather: stagnation, on a lower standard of living; but when exposed to competition with a state whose economy is more efficient and more flexible, it cannot survive because it is not capable of producing enough goods needed both for the normal functioning of society, and at the same time for maintaining a military power needed to meet or remove competition with other states.

Solidarism

applies as an absolute a principle which always existed in the family, namely that the weakest members of the group are given the most of care by the strongest family members at the expense of the latters' own interest: members of a family are solidary. Because it absolutizes the principle of support of the weak by the (or at the expense of) the strong, such an economic system is called solidarism. 

In solidarism, the state does not create a plan according to the demands of its citizens; it formulates the plan as a means to bring, through directing consumption and supply, society  as a whole to the implementation of an ideal whose concrete contents (type of life, health and culture) are determined politically. A citizen is no longer a subject taking care of himself, he is an object of care by the state. The state creates a link between strong and weak members of society so that the strong ones must assist those who are farthest from its ideal. The production and utilization of goods are directed by the state according of the principle of personal solidarity. The citizen has not only the right, but also the duty to work to the best of his ability in such capacity and on such a job as assigned to him by the state; the strong ones must bear the heaviest burden, the weak ones only as much as they are able to. Work is not rewarded according to the amount of work produced, but according to each individual's objective needs as projected onto him by the state's purpose. Because the needs of weak and ill members of society are the greatest, they receive proportionally most of produced goods although their productivity is lowest.

In solidarism, everybody's existence is assured, i.e., food, clothing, shelter, education, culture and recreation, and everybody has the duty to work on his assigned task. He can not chose what he would like to have, do or be; the state allocates to him goods in the quantity and assortment needed to bring the society as a whole closer to the state's ideal. Rationing and distribution by vouchers is the creation and expression of solidarism: those with the greatest needs: children, ill persons, those holding exhausting jobs obtain more and different goods than the rest. Complete solidarism appears to be the most ideal economic system because it seems to guarantee that society as a whole will progress most rapidly and surely to the ideal situation of equality of all and that the state will not permit anyone to suffer lack of necessary goods.

Solidarism assumes that the state knows better how to take care of its citizens, than those citizens themselves. Therefore, it is appropriately described as command economy. Its main problem is that it simply cannot take care of the needs of each individual so that its objective purpose and the individual purposes of its subjects frequently differ or are contradictory. Because the purpose of the state in time becomes distorted to suit the interests of those who wield power, in its final stage its purpose and the purposes of its members clash at every step. The result is inefficiency and ultimately collapse of its centrally directed economy: food rots in warehouses and is missing in shops; grandiose enterprises are conceived and begun, but never finished, goods can be obtained only on a black market.

What was said above about the role of bureaucracy in a cooperative economy, applies to a much greater degree also to solidarism. Solidarism's distribution of goods is almost the opposite of the share individuals have in the goods' production. This undermines productivity which must be maintained by an all pervading system of controls and enforcement which alienates the population. Its principle "contribute as much as you can and consume as much as you need" changes in practice to "contribute as little as you can and consume as much as you can,"  because the ideal to whose likeness the states transforms (in the view of its members: deforms) its individual members, is not the ideal of these individuals, but its own.

The conclusions concerning the viability of the cooperative are valid even for solidarism, only more so.

Reverse Solidarism

Gradually there arose the philosophical foundation and piecemeal application of a different system which has a similar ideal like solidarism: a society of individuals physically and mentally healthy and  provided with all means necessary to the full actualization of their potential. The difference is in the process how to achieve this ideal: where solidarism endeavors to attain such an ideal by supporting the weak at the expense of the strong, this new solidarism tries to achieve the same goal by concentrating the resources in favor of the strong members of society and denying them to the deficient ones. In view of this new economic system, public as well as private resources spent on nourishing, clothing, housing and caring for those incapable of caring for themselves are wasted. They would be "better" (from the standpoint of the state's ideal) utilized to develop the potential of individuals gifted and productive.

There are two guiding principles of this economic system.

First: In an ideal society, no individual should be economically dependent on another individual; each should be able to provide for himself. There are individuals incapable of doing so: children, the aged, the handicapped, mentally retarded, incurably ill, or otherwise unproductive. The state, not individuals, must take care of those; sometimes, they "are better off" dead and are provided with euthanasia or assisted suicide. The capitalist system reinforces this tendency by its inherent pressure to increase the standard of living; the effort to reach and/or maintain such a standard leads all adult members of a family, especially the husband and wife, to seek and accept gainful employment and to stow away the family's unprofitable members in institutions fully or partly financed from the public treasury: the children to nurseries, kindergartens, schools and fraternities, the ill members to hospitals, the aged ones to old age homes or nursing care.

The second principle unavoidably flows from the first one. Society, concretely, the state, has only limited resources, and must therefore decide how to use them "best", and the "best" use is to spend them on those who can be somehow useful from the standpoint of the ideal of society as pursued by the state. To spend or to tolerate spending resources on individuals incapable of doing so, is unjustifiable waste.

A very clear explanation of the principles of reverse solidarism was spelled out in the preparation of a "new paradigm" of health care ethics by the leaders of the World Health Organization. Under the slogan of "integration of ethics into overall health policy," WHO opposes individual health care to "public health care measures that would benefit the entire community." While it claims that it integrates health care to individuals to health care needs of whole populations, it actually gives priority to the latter over the former. (This is especially visible in its criticism of the Hippocratic Oath and in weighing the advantages and disadvantages of euthanasia: among positive elements of euthanasia it encloses eliminating financial suffering of the family and implicitly of the community.) The reform of health care in the United States proposed by the President's commission in 1995 was based on this principle: allocation of resources for various types of patients was to be decided by an independent Board excluded from the control of legislature, which emphasized so-called family planning and reproductive health over care and cure of those whose lives are deemed to be meaningless and not worth living, and, therefore, most need medical attention. For those, palliatives and a death with dignity would be preferable to cure and an extension of life.

Prevention rather than cure is the main guideline of this approach, i.e., an eugenic approach to reproduction. By legislating conditions for marriage: investigating genetic history of applicants and prescribing the number of children permitted per marriage (cf. population policy in China) the pool of genetic material of society would be purged of undesirable strains.

The origin of reverse solidarism is threefold. The primary one is the advance of medical knowledge which has extended dramatically the average life span and is capable of significantly prolonging life by artificial -- and expensive -- means. The second source is the demographic development in industrialized nations. Cost of medical care must be born ultimately by the productive generation. The numerical relation of its members to the members of the departing generations is continuing to decrease in consequence of diminishing reproduction. (In Germany, one of the most advanced cases, it will be 5:1 at the beginning of this century.) If the cost of having and raising children is added to the cost of taking care of the aged, the burden on the productive generation is evidently heavy. The third root of reverse solidarism is the shift of the responsibility for the unproductive members of society to the state. This means that the size of savings which people accumulated during their productive life for their unproductive years, plays a steadily diminishing role in the extent and quality of care they receive. In the United States, cost of surgical interventions and nursing care exhausts very rapidly even considerable lifetime savings.

The shift of empowerment and responsibility for its members from family to public institutions plays an additional role: their scale of values is different from that of family members. In the purpose of happiness can be and in general actually are included also the secondary objectives of mutual love, compassion, gratefulness, mutual obligations or religious norms,  for whose implementation the individual is willing to spend certain, and often considerable, means at the expense of other secondary purposes whose material solidarity (cf. p.7) constitutes his primary purpose. Such secondary purposes are non-existent in the decision of the state, hospitals or insurance companies; institutions evaluate the utilization of means mainly from the standpoint of financial cost -- the state expenditures, hospitals and insurance companies profit, because institutions lack human motivations such as enumerated above. For the decisions of institutions it is a very convincing argument that performing an abortion of a weak or sickly preborn child is less expensive than pre- and post-natal care or cure, and such calculations scientifically prepared, are decisive for the type of medical care, medical recommendations and institutional pressure received by the patient. (Moral coercion has here a significant role: as Governor Lamm stated in a speech to recipients of Medicare: it is a duty of those over a certain age to " make room" for the new generation and not burden it by a "selfish" desire to live.) The same applies to persons considered incurable, too old, and generally all those whose health care would generate expenses significantly exceeding those of their painless demise. This is the reason why the properties of reverse solidarism appeared first in the sphere of health care; there is no reason why they should not be extended to other areas substantially financed from public means such as education or social security.

Reverse solidarism is necessarily unfriendly to family and other mediating institutions between the individual and the state whose role and jurisdiction is radically expanded. After the obvious failure of socialism, reverse solidarism is superimposed on economic individualism so that it strives to monopolize the obtaining and allocation of means in areas of key importance for the achievement of its primary purpose. In order to achieve such monopolies, it is necessary to use the state's power; after such monopoly is created, the allocation of means is separated from the control of legislators by the creation of independent commissions or boards of experts not responsible to the normgivers nor to the public. Such bodies then assign the means received from public treasury, in accordance with principles of rationing in solidarism, but in reverse: those closest to the ideal of a society composed of individuals physically vigorous, highly intelligent and productive, receive the greatest share of entrusted means, those who are most remote from such an ideal, are excluded or eliminated in one way or another. 

Links between Economic and Political Systems

Economic systems influence political systems and vice versa.

Capitalism grants citizens the greatest extent of personal freedom. In theory, each participant is free to work or not; even he who relinquishes it by contracting to do a job, retains the option to utilize his property to undertake his own enterprise and to utilize his possibilities and abilities in a way most profitable for him. Therefore, this economic system is compatible with democracy, or rather: presupposes democracy. In practice, this freedom is limited by material circumstances. French author Proudhon commented that the majesty of law prohibits equally the rich and the beggar to sleep under bridges. Individualistic economy is a system where everyone seeks to make a living as well as he can, and suffers poverty if he does not own any means of production and cannot find work. The separation of labor from ownership of the means of production renders workers most vulnerable to economic cycles.  Free competition  in the markets of goods, money and labor can result in an equilibrium in which some workers are not included, are not needed and are condemned by the system to poverty from which they are unable to escape by their own efforts.

This is the main reason why, in certain societies, a part of the people find attractive a system which offers economic certainty, i.e., work, in exchange for a part of their freedom -- the cooperative system. There, all means of production are concentrated in the hands of the state and production is planned in response to demand. Inevitably, the plan requires the forfeiture of the freedom to chose one's work and assignment of labor to jobs according to the needs of the plan. The sole entrepreneur ruling the entire production, offering jobs and assigning work is the state. From the standpoint of democracy as a system of individual freedom, a complete cooperative system is deficient in that it denies people the right to free enterprise, choice of work and utilization of individual  personal qualities; it limits people  to the choice of either working at an assigned job or suffering hunger. Therefore, the pure cooperative system is incompatible with democracy; for its functioning,  a strongly autocratic form of government, preferably a dictatorship, is needed. A total cooperative system removes the existential and economic uncertainty of all who work or are able to work, but does not take care of those who are unable to work, and  has no place for those who are unwilling to work at all or at the assigned job. It guarantees a "just" compensation to those who work, but does not provide for those who work not.

Solidarism, even under the assumption it could function economically, deprives the individual of all freedom. Total solidarism is incompatible with democracy because it considers the individual as an object of the state's care, whom it provides with life, health, culture and recreation according to its ideal. Solidarism of either form requires a totalitarian system; solidarism of the classical form requires a centralized totality, a reverse solidarism a decentralized totalitarian system.

In reality, pure economic systems do not exist; all economies are mixtures of their types and are characterized only by the scope of preponderance of this or that principle. After the experience with the so-called real socialism as well as the experience of democratic states with strong elements of socialism, there exists a consensus that the flexibility and productivity of the market economy with preponderance of private ownership of means of production, is the best instrument to achieve a democratically created ideal of society. Under the impact of the collapse of planned economy, existing shortcomings of the free market economy are overlooked to the same extent as shortcomings of socialism tended to be overlooked after World War Two. In order to survive in a democratic system, i.e., in a system of free competition of ideologies and free elections, the free economic system is forced to incorporate strong elements of the socialist systems. In areas where free economy does not result in a society live, healthy and cultural, it is complemented by elements of solidarism. The freedom of enterprise, consumption and work of each individual is in principle preserved, but every one, individual or enterprise, has the duty to contribute a portion of income or profit to defray the expenses of measures the state designates as necessary for progress to its politically defined ideal: education, health care, military, and social security. The contribution is assessed on the basis of solidarist principles: the state's subjects of duty contribute according to their ability, according to the size of income, and the state uses these contributions where it needs them: education, illness, recreation, and so forth. According to the abilities and inclinations of the population, the mixed economy includes also elements of the cooperative system such as public ownership of enterprises and management of certain sections of the economy, production as well as services: such as communications, mass media, insurance, financing, production of arms, research. Lately, elements of reverse solidarism have become apparent and side by side with elements of solidarism, measures to improve society by elimination of its weak members are increasingly being applied.