International Endowment for Democracy
www.internationalendowmentfordemocracy.org    or    www.iefd.org

The Real World of Democracy

Canadian Broadcasting Corporation: 1965.
Chapter 5: The Myth of Maximization

By C.B. Macpherson

The liberal-democratic state which we in the West now enjoy is, we have seen, a historical compound of the liberal state, which was not democratic at all to begin with, and the democratic franchise, which was added to it later. The liberal state was a matter of having competing political parties and having certain guaranteed freedoms—freedom of association, of speech and publication, of religion, and freedom of the person, that is, freedom from arbitrary arrest and imprisonment. These freedoms were seen to be both good in themselves and necessary to the working of a competitive party system. The job of the liberal state was, and was seen to be, to provide the conditions for a capitalist market society. The essence both of the liberal state and the market society was competition, competition between individuals who were free to choose what they would do with their own energies and skills, and free to choose whom they would authorize, as governments, to make and enforce the rules which were needed for the competitive market society. The liberal state was the politics of choice, in the service of a society of choices. It had no necessary connection with democracy; indeed, as we have seen, until well on in the nineteenth century the liberal state was generally thought to be endangered by democracy.

Yet when competition and freedom of choice are set up as general principles, when they are proclaimed to be a good thing, or even the good thing, logic demands that everybody be allowed into the competition. This is the point that was pressed by those who had had no vote in the original liberal state. Their view finally prevailed. Not that there is any natural affinity between politicians and logic, but that the politicians of the day became aware that if they did not yield to logic they might have to yield to force. By the time the liberal state was democratized, the old idea of democracy had been liberalized. We may even say that the countries which successfully made the transition from the non-democratic liberal state to the liberal-democratic state are those in which the old idea of democracy, as rule by and for the poor, had been converted to the idea of democracy as the right to get into the competition.

The notion of democracy has always contained the notion of equality. Not arithmetical equality of income or wealth, but equality of opportunity to realize one's human capacities. This is what had been denied in the pre-liberal societies, where many men had been slaves or serfs or at least had been held down to inferior positions which prevented them from realizing their potentialities as individuals. The goal of the liberal revolutions was to end this state of affairs and to open up opportunity to everyone. This goal provided some common ground on which those who wanted a competitive liberal society and those who wanted a more equal society could meet. This is probably the reason why the liberal revolutions could generally enlist some popular support.

Yet equality of opportunity can mean very different things. It can mean an equal right to a fully human life for all who will exert themselves: on this interpretation it comes to about the same thing as the classic democratic vision of an equal society. Or equality of opportunity can mean an equal legal right to get into the competitive race for more for oneself: on this interpretation it comes to about the same thing as the classic liberal vision of the market society. It was this second interpretation that came to prevail, and it has set the tone of our present liberal-democratic societies. Everyone can be in the race, indeed everyone has to be in the race. But, as we saw in the last lecture, everybody cannot be in it on equal terms. For in the nature of the capitalist market society there must be some who own the capital on which others must work. Those without enough capital on which to work have to pay for access to others' capital. They have to pay for access to what I have called the means of labour. They have to submit to a net transfer of part of their powers to other persons.

This transfer of powers, I have said, generally goes unnoticed because it is overshadowed by the greater productivity of the capitalist economy. It is when this productivity declines, as in the great depression of the 1930s, that the transfer is really noticed. And it is then seen to affect not only those whose sole resource is their own labour but also those who have some little capital as well. Independent family farmers then find they are no longer independent if much of their working capital is borrowed.

It is then that both industrial workers and farmers are apt to turn to radical political action, designed to reduce the transfer of powers, or even to end it. Such action has sometimes succeeded in reducing it, at least from the extreme it reaches in a depression, by getting the state to set up systems of transfer payments in the other direction. Social insurance and other benefits of the welfare state, to the extent that they are paid for by graduated taxes on wealth and income, are a transfer in the other direction.

The welfare state has pretty clearly come to stay. It is the norm in liberal-democratic capitalist societies now. But we must notice that the offsetting transfers which the welfare state provides can never, within capitalism, equal the original and continuing transfer. This is fully appreciated by the strongest defenders of capitalism, who point out, quite rightly, that if welfare transfers got so large as to eat up profits there would be no more incentive to capitalist enterprise, and so no more capitalist enterprise. As long as we enjoy the benefits of capitalism, then, we must put up with the compulsive transfer of part of the powers of non-owners to owners. We don't mind putting up with this, indeed we don't even notice it, while capitalism is producing the goods.

A great many thoughtful people, reflecting on the nature of their society, may find this sketch of its anatomy unfamiliar and unconvincing. Professional people who work for public or semipublic bodies which are not in business for profit will not recognize any net transfer of part of their powers to those who own the capital on which they work. Teachers and social workers, librarians and civil servants, are not obviously having part of their powers transferred to others who are owners of their means of labour. Must we then redraw the anatomy of our society to take account of the large number of such people in it? I think not. For the amount of reward such people get for their work is determined by the amount that people of comparable skill and length of training can get in the profit-making sector of the economy. This is so whether or not their skills are of a kind that can be marketed in the profit-making sector as well as in the non-profit sector of the society. Sonic professions afford little or no possibility of moving back arid forth between the two sectors, but salaries cannot be higher in the non-profit sector than in the profit sector or everybody deciding on a career would go into the non-profit sector. So the rate of reward for comparable skills and lengths of training cannot, in a free market economy, be higher in the non-profit sector than in the profit sector. The rate of reward in the profit sector is necessarily one which allows a transfer of part of the person's powers to the owners of the means of his labour. To whom, then, is the transfer made in the case of those working in the non-profit sector? It can only be to the public, to the whole local or regional or national community which has, through one agency or another, decided as a community to provide such services to itself.

The transfer of part of a man's powers to his own community does not seem to be a net transfer at all; for he seems to be getting it all back as a member of the community. But he isn't getting it all back: he is getting only part of it. Some of it is going to those members of the community who are contributing their powers not to the community but to private owners of the means of labour. So some part of his powers is being transferred away from bun. This is unavoidable so long as we are using capitalist enterprise to look after the main productive work of the whole society.

We are confirmed, then, in our earlier conclusion that a capitalist market society necessarily involves a net transfer of part of the powers of some men to others. The politics of choice and the society of competition do contain, and generally conceal, a compulsive transfer of powers which is a diminution of the human essence. The fact that the transfer has only been severely felt in periods when the productive system has not been working very well, or in countries which are less prosperous than the most prosperous, does not alter the fact that the continuous transfer is built into the system.

Now all this did not matter very much as long as there were no alternative prospects or visions, no conceivable ways of reaching high productivity without this transfer of powers. But as we have seen, there are now alternative visions. The logic of capitalist society is in fact challenged. How satisfactory has our answer been?

An answer has been in the making for a long time now, for it is a long time ago—something like a century ago—that the most perceptive liberal thinkers saw that an answer was going to be needed. I think of that great liberal, John Stuart Mill, who saw, rather more than a century ago, that what he called the labouring classes would not put up with the existing transfer of powers much longer, he could not himself find a feasible answer. It was loft to a subsequent generation of economists, in the 1870s and later, to provide something that has passed for an answer ever since. (It has to be said that most economists today are aware that it is not an answer, but it is still received as an answer in the general ideology of our liberal societies.)

The answer they provided really picked up from an earlier individualist theory which had been set out as early as the seventeenth century when a new twist had been given to the traditional natural law idea. The traditional idea, which goes back as far as Aristotle, was that the human essence is activity in pursuit of a conscious, rational purpose. The new turn was to say that the essence of rational behaviour was maximization of individual satisfactions, or maximization of individual utilities. So the human essence was rational action which maximized utilities.

By the nineteenth century this Utilitarian theory had pretty well carried the day. It assumed that maximization of utilities was the ultimate good. It assumed that men's desires for all kinds of satisfactions are naturally unlimited, so that they will in fact go on seeking to maximize them. Since desires were unlimited, the means of satisfying them would always be scarce. The problem then was to find the system which would employ die scarce means to produce the maximum satisfactions. The problem was solved by demonstrating that the way to maximize utilities over the whole of a society was to leave everything to a competitive market economy, upheld by a liberal state. And the justifying theory of liberal-democracy has leaned heavily on this theory of maximization ever since.

The theory of maximization looked all right at first. Political economists could demonstrate that, taking as given everyone's resources of land and capital and labour, the maximum product would he got by leaving everyone to make the best bargain he could in a freely competitive market. Not only would this maximize the product, it would also distribute the whole product among all the individuals exactly in proportion to their contribution to it. This could be, and was, demonstrated with impeccable logic.

Yet although the justifying theory of liberal-democratic society still leans heavily on this theory of market maximization of utilities, it has become somewhat unsatisfactory as a justifying theory, for several reasons.

In the first plan, it is only if incomes are taken as given that it is possible to demonstrate that the fully competitive market does maximize satisfactions. With any given distribution of resources and income you can show that the operation of the free market maximized the returns to which everyone is entitled. But unless you can show that the existing distribution is fair you do not get a justification of the system.

Nor was it a sufficient way out of this to show, as could easily be shown, hat in the fully competitive market everyone must get a reward exactly proportional to what he put in. For to make this an ethical justification of the system you would have to be able to show that the reward was proportional to the human energy and skill that each man put in. But this is just what could not be shown, because the rewards had to be proportional to all the factors of production including the accumulated capital and natural resources that were contributed by the owners of them, and there could scarcely be shown to be owned in proportion to the human energy and skill expended by their owners.

So, even on the assumption of perfect competition, there was no adequate justification of the system. But on top of that, the natural development of the capitalist market has been away from the perfect competition that was assumed in the theory. The proof that the production of utilities would be maximized by the natural operation of the market requires the assumption of a market so fully competitive that no one person or combination of persons can control any prices. Only if every enterpriser had to take as given by the market, the prices for what he needed to buy and what he was considering producing for sale, only then would the system of enterprise produce what was wanted most efficiently. Only so would the scarce means at the disposal of the society be automatically directed by the market mechanism to the production of the desired goods arid services. Only so, that is to say, would the market maximize utilities.

But the advanced capitalist economies have long since reached the stage at which large corporate enterprises, or groups of them, are able to control the output and prices of a good many things. To the extent that they are able to do so, their decisions about production are not determined by the market, and there is no reason to expect that their decisions will contribute to the maximizing of utilities over the whole society.

The virtue of the fully competitive market is that all the individuals and firms in it, who are all assumed to he trying to maximalize their own profit or utility, can do so only by behaviour that maximizes utility over the whole society. What is constant in any market society is that everyone is trying to get the most he can. But it is only where there is perfect competition that this behaviour leads to maximization of utilities over the whole society. Where competition is removed, the firms go on maximizing their profits, hut this no longer maximizes social utility.

But whether we go on assuming effective competition as the norm, or whether we make allowances for the decline of competition and the rise of price-making corporation, the theory that the market maximizes utilities is not much good as a justification of the market society. It is not much good because it begs the question. That is, if the theory is to be a justification as well as an explanation of the market economy, it has to take for granted what it is supposed to prove. It has to take for granted that a certain distribution of income is justifiable, and that the market distributes rewards in accordance with some justifiable pattern of human deserts.

We can I think neglect here certain further difficulties about the idea of maximization of utility, but they may be mentioned in passing. How can you add together the satisfactions or utilities that different people get from different things? How can you compare them on a single measuring scale? There is, to say the least, no obvious way of doing so. But if you can't do so, then you can't say that one assortment of satisfactions is the maximum one. You can't say U at one set of utilities available for the whole society, one set consisting of so many units of x and so many units of y and so on, adds up to a larger total of utility than some other set that might have been made available. The only way of avoiding this difficulty is to say that every society does make a rough and ready moral judgment of the relative human value of different goods, putting so many pyramids ahead of so many more homely delights, or so much milk for school children ahead of so many yachts.

But of course if you allow such a measuring scale you are not leaving things to the operation of the market, and you cannot then claim that the market does maximize the satisfaction of the spontaneous desires of all the separate individuals.

However, we need not spend any time on the logical difficulties of the theory that the market maximizes utilities over a whole society. We can neglect those difficulties because they are not the most serious ones when we are looking at the theory as a justification of the competitive market society. The serious difficulties, in this context, are the ones we noticed at the beginning. First, the market can only be shown to maximize utilities when a certain income distribution is taken as given: the market can only maximize the satisfactions people can afford to buy. And secondly, the market cannot reward people in proportion to the energy and skill they expend, since it has to reward ownership as well. It has to look after the transfer of powers that we spoke of earlier.

We have perhaps spent too long on this theory of maximization, which I think we are now entitled to call the myth of maximization. What has it got to do with the prospects of liberal-democracy, which is, after all, our central concern in these lectures? Quite a lot, I think. For our ill liberal-democracies seem to be relying more heavily on the myth of maximization the more they feel themselves challenged ideologically by the two-thirds of the world that has rejected the ethics of competition. It is time we realized that the theory of maximization isn't good enough in the kind of contest we are now in, and are bound to continue in for the foreseeable future.

I want to suggest that our moral and political theory took the wrong turning when it began to interpret the human essence as possession or acquisition. I said, earlier in this lecture, that before the rise of the all-inclusive market society the traditional view had been that the human essence was activity in pursuit of a conscious rational purpose. Then, with the rise of the market society, the essence of rational purpose was taken to be the pursuit of maximum material possessions. This was a fairly realistic conclusion at the time, because with the rise of the market society, possessions were becoming the only effective means an individual could have to the achievement of any rational purpose. The liberal theory of man and society, being developed to explain and justify the market society, had this emphasis on possessiveness embedded in it from the beginning.

Yet as a social theory it left a good deal to be desired. For as soon as you take the essence of man to be the acquisition of more things for himself, as soon as you make the essential human quality the striving for possessions rather titan creative activity, you are caught up in an insoluble contradiction. Human beings are sufficiently unequal in strength and skill that if you put them into an unlimited contest for possessions, some will not only get more than others, hut will get control of the means of labour to which the others must have access. The others then cannot be fully human even in the restricted sense of being able to get possessions, let alone in the original sense of being able to use their faculties in purposive creative activity. So in choosing to make the essence of man the striving for possessions, we make it impossible for many men to be fully human. By defining man as an infinite appropriator we make it impossible for many men to qualify as men.

You may say we have no choice. You may say that men do in fact have limitless desires, and will try to satisfy them by acquiring more possessions in every way they are allowed to do. So, as soon as we recognize that men are in fact unequal in strength and skill, we have no alternative but to put up with the fact that some will get more. You may say that we have to put up with it, even though it makes some men less human than others. If we leave men at all free in their human capacity as appropriators we must acquiesce in the denial of full humanity to a substantial part of mankind. If we refuse to permit this denial of humanity we have to set up another denial: we have to deny men the freedom to try to satisfy their naturally unlimited desires by the acquisition of property. And this also appears as a denial of humanity. There does not seem much hope of avoiding one contradiction or the other. Either way, to assert full humanity is to deny it. The record of past societies, those preceding the full market society, seems only to confirm the dilemma. For they generally denied freedom, and even so did not maintain equality.

But we may find some hope in the fact that the dilemma has always been an offshoot of scarcity, and that we are now, thanks to the technological advances made by capitalist enterprise, within sight of a society of abundance. The paradox, a very pleasant paradox, is that the idea of scarcity in relation to limitless desires was itself largely a creation of the market society, and that the advances in productivity made by the capitalist market system are now making the idea out of date.

We shall have to consider, in the final lecture, whether the prospect of a society of abundance, replacing an economy of scarcity, will allow our liberal-democratic market society to overcome the contradiction that has been inherent in it so far. The question is whether, and on what terms, we can move from a society that has necessarily diminished our humanity by defining it as possession, to a society which will reinstate humanity as creative activity.


  
 
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