3 ‘The Marxian Doctrine ‘rouble of studying tactics, But though the revolution can be relegated to the compound of noncsientialy the necesity for distinct action sll remains. “This should alo solve the problem that has divided the disciples revolution or evolution? If [have caught Marx's meaning, the answer {Sot hard to give, Evolution wa for him the parent of socialism. He tras much too strongly imbued with a sense of the inherent logic of things social to believe that revolution can replace any part of the ‘work of evolution, The revolution comes in nevertheles. But it only fomes in order to write the conclusion under a complete set of Dremisce The Marsian revolution therefore differs entirely, in nature Ad in function, from the revolutions both of the bourgeois radical land of the socialist conspirator, Ie ix esentally revolution in the fullness of time’ It is true that disciples who dislike this con- ‘lusion, and especialy ite application to the Russian case ean point fo many passages in the sted books that seem to conuadict it But those pausages Marx himelf contradicts his deepest and most ma ture thought which speaks out uhmistakably from the analytic struc tute of Dat Kapital and—as any thought mast that is inspired by sense of the inherent logic of things carries, beneath the fantasl flitter of dubiovs gems, a distincly conservative implication, And, Sitter all, why not? No serious argument ever supports any "sm" um ‘conditionally To say that Marx, stripped of phrases, admits of {interpretation in @ comervative sense i only saying that he can be taken serioutly 27s hu nd fc res, alm ray he sutjea sah umeng ser thing acs the ets of tht ane of tne” 2Geaaunay in he peace to Theodor ber den Mehr, eten dined the tevoton of tog foe Marsan soca, ate patent tat the toon pnelogy fa few inten wa al at wos ect abou Sri ngument ould be caied uch farther pata, there 1 nching spectealy oat in the inbor theory of alge thi a coun everyone would Sin that whe wa amen of Gn ci ae Hae alte heping ef cue the pion) of the ery of expodon. We ec only tecoqie hae exten Othe tarp 0 dubbed by Mame foe {Sst ea sear cndion forte emerence ef all that we compile in 0 ter Can fh fa wot De eat to de abd thee we ee tobe mei of core not neem) to be a Mari but eter i ‘indent tobeva Marat inorder to Yet mai: Sotit or veveutlonay lovin canbe imprened on ay sce theory no went theory nce ‘Sty mpis them. Ant none wl ep wb what Berard Shaw somewhere ‘faerie as tool age ue 1 wooo op PART II Can Capitalism Survive?PROLOGUE yx caitaliam survive? No, Ido not think it cn. Bu this opinion Cerne te sat of every ter economist ho has prondancod upon the subject, in elf completely uninteresting, What cout invany autcmpe a social prognosis not the Yes or No tht Sums 1p the facts and arguments whi Ted up to i ut thowe fac and fgument themsclven ‘They contain al that is cenife nthe Bal refute Everything ee isnot science but propery. Anas, whether economic oF othe, never yids more tan’ stement shout the fendenies present in an obeerabe paterm, And these neve tell Ut ‘what wil happen wo the patern but only what would happen if they fontinued to act a they Have een acting in the ime intra covered iyrour obuervation and if no other factors inraded.“Inevebiity” or “necesty” can never sean more dan thi What follows most be read with that prov. But there ar other litations to our rete and thelr reliability The proces of socal Iie sa funeton of vo many variables many of which te not amenable to anything lke measremant that even mere dagoosis of a given State ofchings becomes a doubul matter quite apart from the fermi able sures of eer that open up 2 0h 28 we altmpt prog “These difeultis should not be exaggersted, however, We shall see thatthe dominant wats ofthe pice early support certain infer ences which, whatever the quaifations that may have tobe added, se (oo stong to be negltte on the ground that they cannot Be [proved in the sense in which a prope of Bucs ean ‘One more point before we stat The thes T shal endeavor (0 establish is that the actual and prospective performance a the cap tats ycem i such ast negate the ten of ts breaLng down under the weight of eonomie faire, but that is very sucess wnderines the focal instetions whieh protect i, and “inevitably” erests on. Alitions in which it wl not be ale to live and which stongly pont to socialism asthe heir apparent. My fal conclusion theres does ot dif, however much my argument may, ftom that of mot focialt writers and in parietlar fom that ofall Marxists, But in ander t seep it one does not need to be a vocalist Prognosis doer hoc imply anything abou the desirability ofthe enure of event that one predicts fa docior predicts that ht patient will ae presently, this does no mean that he desis fe- One may hate social or at least lok upon it with col critica, and ye forse is advent Many conservatives did and do, 662 Can Capitalism Survive? i to quay a8 a soia- [Nor nee one accept this conclusion in order to quality ise One my love soll. and ardently tive nts conoms ‘Sora andi superiority but neers beleve a the sae at socety doesnot harbor any tendency toward sl Brute arin fact soclies who believe tha the eapait it ae time goet fine tha deuction is gathering eng ad eaten Shr that iis einer to hope frie breakdown. THE RATE OF INCREASE OF TOTAL OUTPUT explain presently makes i€ much more dffcult than it otherwise ‘would be to form a rational opinion about its economie and cultural formance. The publi mind has by now 0 thoroughly grown out Erhumor with star to make condemnation of capital Sed all ts works a foregone conclusion—almost a requirement of the etiquette tf dscasion. Whatever his politial preference, every writer or speaker hastens to conform to this code and! to emphasie his criti! attivude, his freedom from “eomplaceney,” his Belief In the inadequacies of capitalist achievement, his aversion to capitalist and his sympathy with anticaptaist interests Any other attitude is voted not only foolish but antisocial and is looked pon as an indication of immoral servitude. This is of course perfectly natural, New social religions ‘will always have that effect. Only it does not make it easier to fulfil the aalya’s tak: in goo a. it would not have been easy to expound the achievements of ancien ciation toa fervent believer in Chri anit. On the one hand, the most obvious truths are simply put out ‘of court a imine on the other hand, the most obvious misstatements te borne with or applauded 'A first test of economie performance i total ouput, the total of all the commodities and services produced ina unit of time—a year ot 4 quarter of a year or 3 month. Economists try to measure vatiations i this quantity by means of indices derived from a number of series representing the output of individual commodities, “Strict logic ie & stern master, and if one respected it, one would never construct oF tse any production index. for not only the material and the tech: sigue Of constructing such an index, but the very concept of a total ‘output of different commodities produced in ever-changing, propor Hons, i a highly doubuul matter® Neverthe, T believe that this device is sucinaly reliable to give usa general idea ‘Thar howe aes mth of eng With obvi tna vnc Sri gil Cal ees lc if rae ay net Se pen, oe Ee SA. bur Production Tvens tthe Usted Sates Shc sy, p te ie camot caer ot problem ere, & te wl, howe be wi ato hen ve mex agin in the tee Cap Hor a alle ween my book sn se Gye th % Texan of twig to captain which we sal have to64 Can Capitalism Survive? hn Sy pn tin nnd nce the ep net sent toen wernt Be ori tet for tpn bec a seperate claw is See ae eee hniaal Gugene dior aa corse, i ae pe a coe eis etry at pei Ber i ttt a pa PSs ppote thatthe epi engne keeps on producing a tat re tt rE ee Boveri hte tren daa ees fingers eet nant wee ta ns mpage si a dest ca plc Sores nay pall ll oe bea alo be Ba Se ce" aoe tr eect se ha Fr that aged ahi SAL MM it At ey eae undead a ha pot would be epecaly onde Debs tan dpa ing neni guy etna a hehe tle nei teil Salle a men ea ee ite an’ Ge See EASON Slane p's 2 eS set turem one se Se es rae ‘The Rate of Increase of Total Output 65 ua oun ith he bat ane amen gy SS ey en wih lacey Fela heritage at fe it i Ba aes ean le Poor ey iepeher eo eine’ aE Te iO a otter 25 ine lps a Na See a at pt Boy Se Toate ale Pee tein for fd pte ht eae ine eb ntegac o Senta i Pc i ce Se sap lpi re yo ron noth Can Se Se Tas ial ga Ne ned e ece a t ee a ea is a Sas Teter ht» pn hoe ies ait Set conta seep cma ude Ma dt pa es ied ine hh oa i gO (at ig he ea ng el pat ie meh nese a Sr oe Pc NES Me san pol ee a el “ent notin eee ply Senn ites ee rr rite aan ener Sour rate of 196 per ent It wo happens tat in Eola ding the etry ik ce irene ata teenie died trench die crete Misc cecne mee as eg fee se Sieiecercere ead A cee Soave a wo relat 7 na ro66 Can Capitalism Survive? © sgn nso he oth cou ober Heat See Saat a Sees sctee fte Bifoes c sanity mas est lw eo Epon ric ee is a ce ciate pon tat fom “ vated its oro cig ne tt nin Sn a se oa mes iy ea et nc, Sede CON Ra pl ene PRS en ny do mn cgokey Ne i See carci eae Rs Se inhi, eet ai he sae arr a eet tae drat oa, yr A a een aes Oa lank mc pe reid So ts pat aly Soci ty mene ah si ih or al re Se ee a cctiers Soot a She Sa hal ly epee Bate pe rl ea ee Me Ie ls kp ey meta Se fe ara ati me tal Sp ret cal a Serene tented ee Sere ck mena a et icy es Bae eh iment crthn ean Ge eal Se a a wigeyeinerge fe Se Say bade nae foto, we seat te tater he it TRE at ep et rrtowe gate ae covered y te sane mata Hee es wate dog nam cea Rompe Seema a ‘The Rate of Increase of Total Output & why we ate interested in the index of production and the pounds and gallons chat enter inca it and would hardly be worl while is Uhemtelves Bat let ws keep to our # percent, Thete is one more point chat 4s important fr comer praia of that figure. The sed seat that, broadly speaking, relative shares in national income: have fe: rained substantially constant over the last hunsred yeary This howe ‘ver is true only if we measure them in money. Neaszed hea term, relative shares have substantially changed in favor of the lower income groups. This follows ftom the fac that the capital engine is fst ad lest an engine of mas production which wane bly means also production for the massey whereas, Aibing upward {in the sal of individual incomes, we find that a increasing prope tion is being spent on personal services and on handmade connie ia the prices of which are largely fonction of wage rte. Verication is eaty. There ate ho doubt some thing availabe to the modern workman chat Louis XIV hivelf would ave been de Aighted to have yet was unable to havemoderm Gentry for i stance. On che whole, however, a budget om that level ad Hee tht really mattered to gan from capital achievement, Even speed of teaveling maybe asumed to have been a minor consideration fot 50 very dignified a gentleman. Electric lighting is no great boo, to suyore who has money enough to buy a slfeent nunber of candles and to pay vervans to attend to therm. Its the cheap cloth th cheap ouon and rayon fabric, hoots, motoreats and son that are the typical achievements of capitalist production, and not as rule tne provements that would metn much tthe rch man. Queen Eliberh ‘owned sik stockings, The capitalist achievement does not typically ‘ons in providing more silk stoekings for queens but in binging them within the reach of factory glen neta for steadily deceoe ing amount of efor. “The same fact stands out still beter if we glance at tho long ‘eaves in economie activity analyst of which acvels the nature‘ mechanism of the capitate procem better than anything else: Each ‘of them consists of an “industrial revolution” and the absorption of i effects, For instance, we ate able to observe satisialy bad hie ‘ovially—the phenomenon iso cear that even out seanty infor {ion sufices to establish fete vse of such long wave toward the end of the 1780, its culmination stound 1800, its downwards and then a srt of recovery ending atthe beginning of the sBqee, ‘This was the Industrial Revolution dear to the hear of textbook writers. Upon its heels, however, came another such revoluion pro Alicing another long wave that rose in the fori, calminated fost before 1857 and ebbed ayay to 1897, to be followed in turn by the68 Can Capitalism Survive? © cae Se and nit ig re splay eo eng rect aunty by Tnroduciog. new methods of prodvction—the mechanied au tet tet Ml net tc he te py cee a ay or eet hr ae stg Maen "pol aah iar ee a te cl aoe cee evn gel eg a pe marae he ot hac te tr dee ore lt ie nt ig elder te feist cy nar a ne ne a oe Somme ee go cit Fo fa ona et can be at nt nein ee mn rere oe ne cee eget rr ck ot Sie le he oe ss ce a oi cake oan le a way ma conan et ue gl uc Lo mea omega oe get ap se tg ee eal, ren eid ae Ae at ae cl gone sin alle as wi cron cave ch we Sng te ee can po ams a ae te “og wre whi a tanen ee iene, we inary este ee aun aplics Co apeoral commode, heap mas Pr A aan be wane of resale cpa emerpi (aon SNping aetna mace eles) ‘The Rate of Increase of Total Ourput 69 Sea ete ter aes sea cate that are induced by the mentality it generates. Deferring dere. tion of the latter (Chapter XI), we shall now turn ie aes ee eae (Chapt 1), we shall. ‘to some aspects ieee alles ib ete ba Belts a tase tt oc atari on eps te gl el in SETA ar ene en eg a den ne re aac ren SLES crane oer os a ot fl ees rien dabracaes a en op ncd fo Be pray pet eo a etapa ee of orton i te de set fa a it lm Saas oat eet Bc sion inet it the caps poe Ar Shomecren'a andes aera rece iy daar geet iy gala acta ope ents (10 per cent of the population) would not in itself be'a sions srr camel mor) wl a i a In Sete gah murat ilo ee fe Se ee eee any wel cn ge et a Sra ann Et rough the sy yeas preceding the Hs ‘World Wargives the E ih adeunion percentage of employe member. i ypicaly cyte magpie a seta dre etl ag al tara ction ety Bin Cyc, Forse mo strongest component ef which has feiod of abst nie take ee70 Gan Capitalism Survive? the prewar time to 19 inclusive. In the postwar time and in most Rite unemployment war mony at an abnormally high level Geen'befoe nggo- But this and sill more the unemployment daring {Het alte accounted for on grounds that have noting to do Mia's Tongan tendency of unemployment percentages to increase Yn tote inherent in the ceptaliat mechentsm ie. 1 have met eed nbove those ints revolutions which are so characterise Sf the captaist proces. Supernormal unemployment Is one of the fx Ghee of the perods of adaptation dat follow upon the “prosperity See ofeach of them. We observe fein the 18:08 and 18705, andthe Dero fer tuo singly noe of hve prod. 8 a te Peymenon eoentialy temporary in the sene that nothing ean name boat efor the fate, But there were a number of other tess ic tended to intensify Rear eects, dislocations of foreign facGr age polices, certain intqtional changes that swelled the {Cnt ge, in England and Germany fiscal policies (also impor A i the United State sine 1993) abd 90 on- Some of thse are no Gave aymptoms of an *asmesphere™ in which cptalism will work Sith actedang ficiency. ‘Tat however i another matter which will “ngage our attention later on. Ba Cheer lating or temporary, geting wore or not, unm ployment undoubtedy sand vas has been a scourge. Tn the next Plo this book we gal have to Ist fs poole elimination among Fat ls of tue soils oder to superiority. Nevertheless, 1 hold that {Re geal agedy not unemployment per se, but nenplopment As, "the imgontblicy of providing adequately forthe unemployed Put inpuiing the condition of further economie development: {or obiownly the sufering and doradadon-—de destruction of human ica uhien we aseint with tnemployment, though not the waste Triprogucive sours, would be largely eliminated and unemploy- shebe would Tose pratally al is teror if dhe private life ofthe on ‘ployed. were not seriously afected by thee unemployment. The Stile sands that in the patsy, roughly, 1 the end of the Aisccenth century-the callie ordet ‘as not only unwilling But {lo quite incapable of guarantecing this But since i will Be able to do atiric keeps up ie past performance for another, ball century Betadicimentevould in tat Cave enter the Iino fled by the srry {Meters ofehild labor and sinteenhour working days and five persons {Ring'in one oom which ii gulte proper to emphasize when we a Bidlag bout the past socal cost of capitalist achievement but ‘hich are'not necesanly relevant to the Balance of alternatives fot Ue tie. Our own tne ls somewhere between the disabilities of tice sages in captain evolution aod the abies ofthe estem in {Gilman Ines country atleast the beter pat ofthe tank could ‘Sen'uow be accomplished without onde stain on the system, The ‘The Rate of Increase of Total Output 71 ice do noe szem const omc nthe lick of a sup su rent to blu out the dank he the pure: they cose e tne hand, inthe fact thatthe unemployment gue han ben Se Stowe bysiteapai plea boon what eve been te tides and, onthe other hand hte fet tat publi opin 2 sep tea all ve te dyn gusto, eit fest on economically iationa method of acing ele a Jax and wasteful methods of administering it. SEE ‘Mich the ane argument apne fe—and to get cq he frp ed ue by capi si or teva he i dk for ccton nd gn ao an inteaing number of soohmodes might Tessonably Be ox ested the sano ot the nae lo as chs of economie oot ant be avaiable rately vp sity poin, This cul be bought abou eller by avanccment Beira pic agence an proting entero y mation or manipalson qradal ogi th Which woul of eu be a feauure of the future development ever 2 ere of the fae deep of an otherwise unfeteredPLAUSIBLE CAPITALISM “Deseret tai ming aero te et Chat a damaging a8 Ws obvios ‘The ar: eas oul ast proton tht obtained rig the Sy yeas oreeding oe fn be orate escapist develope eee thn in hia procdae that could have sodked the ll cocince ts soon ab {implied chat te lowing fy em acy dpa aerate of roe a {eyo ata ceo eure, der at et “ecord of production over ay given pet city Sy curapelson a ate ne an xrapoltion ever Pal a ce HE teretve sear to emphonos gain that my extapl tn unc intend forecast bhava of opt hh fe ere aie a quaminaie Hen of what he apa mel oseyt concaably accompli i for anotber ball Entry reece pnt permancewtih a yery dilrent matey ron whether i cam be expected to dso willbe answered duc independently of the extrapolation isl For cis purpose ANS anf emie upon slong nieve oe aca the chance of eapitalism repeating i soma mt shen ty to Bn on hat ens the Ose ser a ona realy measures tha past performance, NO “Bele pero tht trish our ata was on of compar fevered capitalism, But this fact doesnot in iuelf provide a sufene HiaCecern the efron snd th api gine node teria i an undrmanabl elaon teen ce apie ra Upc bverved te of ireae in output, second, tha, given se isi at of incense was actually due 10 ad Otto me ne pn te se ac i st eo Ee con gi oe eee i ‘ey Seiten onan a 2B particularly favorable conditions which had nothing to do with cap. falls, “These two problems must be solved before the problem of a "repe tition of performance” can arise at all. The ehitd point then reduces to the question whether there is any reason why the capitalist engine should during the next forty years, fail to go on wotking as it did inthe pat, ‘We shall deal with these three points in turn, Our frst problem may be reformulated st follows, On the one hhand, we have a considerable body of statistical data descriptive of @ rate of “progress” that has been admired even by very eteal minds, On the other hand, we have a body of facts about the structure of the economic system of that period and about the way it functioned from these facts, analyst has elated what is techvially called 4 “model” of capitalist realty, Le, a generalized picture ofits esentiag features. We wish to know whether that type of economy was favor able, relevant, or unfavorable tothe performance we observe and, i favorable, whether those features may be restonably held to yield adequate explanation of this performance. Waiving techuialitian at much as possible, we shall approach the question iit & commonsense spirit, 1. Unlike the clas of feudal lords, che comiaercal and indus bourgeoisie rose by business seces, Bourgeois society has been east jn a purely économie mold: its foundations, Beams and beacons ate all made of economic material. The building faces toward the com. nomic side of life. Prizes and penalties are measured in pecuniary {erms. Going up and going down means making and losiug money. ‘This, of course, nobody can deny. But I wish to-add that, within ie own frame, that social arrangement i oF a all events was, singularly effective. In part it appeals to, and in part it creates schema of ‘motives that is unsurpassed in simplicty and force, The promises of ‘wealth and the threats of desutution that it holds out, it redeems ‘with ruthless promptiuide, Wherever the bourgeois way of life aiert, itself sulficientiy to dim the beacons of other social worlds, thee promises are strong enough to attract the large majority of super: hhormnal brains and to identify uccess with business ecess: They are not proffered at random: yet there isa suficiently enticing admiscure of cance: the game is nat like roulette, itis more like poker. They are addressed to ability, energy and aupernormal capacity for’ work, but if there were a way of meaturing either that ability in general oF the personal achievement that goes into any particular sicees, the premiums actually paid out would probably hot be found. propor: tional to either. Spectacular prizes much greater than ‘would have ‘een necesary to call forth the particular effort are thrown to 2 small ‘minority of winners, thus propelling much more elicaciously than @” Can Capitalism Survive? aaa deserted a tak pre pe a noe een el ey ie yf tan oh ee fur att ee ches fg cel Sty, eas a incre, gh een en ne mee ai Se cin er ee siping op eran mv me ae he ue pry vt, caine fl ey ae a sre rani eines br eo ee ie el ad a a ene cece a i Be cma a toute negra remnant e cee i i a opt Ta oa re ding dhe ics ei n+ a of ur mcr, mn pg hl ce a nic ee cp a ot sein a ape go gy eee Le cra ly gem en ta kin tng en pa ys oe sen Tl tin eed Se tera pl of cain oe a en sino cre oped lk ae germ cal ees oa rs at fe ean ie tei te si. 0 oe hy cnn a ee wom gen het a eae eo Fe a Plausible Capitalism 6 indy and which nn cre ie mor han tot Ieaton net and pati or eth Te a incensed our factual knowledge and anajtie ‘powers so hat tie =e ton we ett ly ws ie pte gh sn sa epg ee “Togo ol Turther bck, de walled claw economia? were : ‘hing abe ton: of thet epoch and abot the way those ints tao worked. They fought Ended Inert aed spot oe ‘elon tacory gon tn pre at ace a at He of lates fa hey ere gue comines st wae Intnl Iamowork of pgs the manatee te trader liner ade for agin serie ite of all. Confronted with the problem we are discussing, tt ould hve had lie hesitation in atrbuting the bierved re of ees ‘in total output to rels se pt tore fared Steet tie ea ae perhaps they would have mentioned “beneficial legiation” as a conan bat by they would he men ea a ‘Specily the ronal of seuaon 6 pees a ne sien cere Te excedingy cul, at his Rou ofthe ay, to dj : ofthe dy, 0 janie to thse views, They were of eouise the typical views of the English Bourget cand Borgel linker ei ide aah tye Fe the el suhet wrote No et a a ‘tats Lind the clas ened in ter fs png hee Staton which icy unestly etc tear ones Mare ray gence. Mont of them mene Se MEE, scan intr of the Eagle ach a et tine Thi eth reo vy inter snd ee ee tiie te xno unto the pea aes demand i Bath wl do vo donke hee sie freon A pandas ayy began ek Pr ow devel om spe ey be eal a sheen tn a fhe tad nd Ee a ie ‘not fever binken tnd renal, ey ein ee Wage diferent but not lem special cacy net ane ceri an hopin he me cms nc pling lg na ay Shee ee ‘the naive idea that economic activity te capitaling sort” beesnee t ‘ab Tis |Gm laa teams wi a ths Bok be wed to designate {ng Eat enone whone wrk appeared eee 78 ah SHE, Ades Bt Malin sein and Jot Rese Mi vet oan ats Hy Inova to es hin in and enue x ch bode the es Bs76 Can Capitalism Survive? tur the pre mosv, mt By vee of that fat atone meee Sry fun counter tothe intrest of consumers oto put ic die ‘EU, te moneymaing esa dstocs produc tom ts oa SRE eh hc pce poy ot thematenand hou fEelatonon tthe Cone prcs they Suc are always ne eta cpg te’ nb ce dein sid wo here ‘eesti be raped by saciaton ve lok tthe EBC kaa tints propos which ne ated ono Bee ough of tending he cama rteton may wel seem ‘ts soom we lok a all he sors and gas whch Sheouly of saonousy nly them and whi re once br sarap day. we sal fe moe ep fo ha achievement. Le Jeeta once atte csc waite nbo Cay pred, tong ‘Bey muy hove eungersed the role of saving and accumulations sey ed ang tote vue of progr they observed ina ‘Bese at was unde only appreciate ere Aloe mien was grace wants nba tr down, response Tempra We tml tone that conat favre with men hee. put between realizing that hunting for » maximum of prof and aching ge mania’ podocvefrtrance are not nce re ie tg proving tat te former wil nce he the ec joni af cesinply the inter, there 2 gl mich nian es tought. Aa they never seceded ring Shoemaker o wonder how at pte for ten so be sie wh thet segment 0 to Inia thse arguments for prot: inthe light of Inter analy their Theo was seo bea hose of crs whatever mewsre Fuh the may have ben nthe eons Se Ts souyt neil take in wo skdermas much of ander we need oder o ly ave problem, ioral, che tt Saftey‘ imo the st deede of thn onary, the second Sit dea of the pmvar developmen of sete eeonomi Pubs do nt now how mvch yoo ti wil do the non proe ou end ite erry eter brant of tr knowledge, ecto Sera anal enpnengrnes moves ally ay fom chat apy Saad ieUhcn A protien ethos and rete etd be mae SoS te every ciuated pom witout Sect ining. Xa ere day bot "The te may be ait with egret names revered to he reel yao te Sinn, ie en SLSR a Gina Wt te pee aon koa enn ay een ely af ve wv we hy 2 a ore act ep then whee enone Beh eas peng’ ete ra pton oe Plausible Capitalism 7 this day by numbers dicpls—so far at est a the ater do not tn al Tom espn anno aya ‘which many of them ebvisuly do-altred Marshal Tels Their theoreti struc hte in common Slnior“showgh Maral dd is be toh theft am Serves the case proposition tha inthe cre of perfec competition the profit intreatof the producer tends to maxtinie produon. Te vex supplied smo stitaetry pot. Only the proc a being mote ebay ted aud pve the propio ft much of contentit dacs emerge fot the operation to be sure but I ene ‘radiated, barely alive® Sul canbe shown, within the general ar Simptions of the Marshall Wiksell analy that fs which cannot by the own invidua action exert any infvence upon the price of heir prods of of the factors of production they employ that {here would be no pone in thei weeping ovr the fac hata cf in ruin tes fo dene theme a oes the trl expand thelr ontput unl they reach the point at whi {he addon that mst be inte inorder to produce soar sul increment of product (rarginal cox) jst equals the price they “hr pi tin tn ght ta ivi aetna, ae tes ee SINE OS GO SAS oracs bit pia ter ean Sy San raat Es oe coe ue So roe ed Gene ona Sams perf TE a means peta yen oriyrecrn cst Laat emt sis a Seed erie can uantnarth ac ed lf eles stupas which ede toe ese tha» ta, rated ne se a ane rte a ai om tat fee ‘Se performace of compete enterpre, the quation wheter i wou 12 Tae pnp a ted by Wt wee popottin that though ina areted orm, co be found hr Mana ie ng of an-nerabie pry signed, level son to Uo wy Ce ie the eve of any gen statin, Io fae i hos Jown to 3 defion atonal er ie gered mee aa enna cosa i Su ere8 ‘Can Capitalism Survive? can get for that increment, ey that they will produce a much ax {hoy can without tanning foto Tos. And this cam be shown to be 38 Sicha is in general "tocally desirable” produce. In more tech ial language, in that cove prices re, from the standpoint of the Invidual Be, not varuabls but parameters and whete this 1 0, there exss 2 sate of equilibrium in which all ousputs are at their Shandonany an all factors lly employed. This cae usually refered qoras perfect competion, Remembering wha as been said about the sleeve procem which operates on all and their manages, we {igh in fac conceive a very optimist idea of the results to be ex Donte fom a highly selected group of people forced, within that Pfvtrn, by their prot motive to stain every neve in order to ma Pige output and to minimize cons In pervclar i might sem at Time sight that a system conforming to! this patiern would display femarlable absence of some ofthe major sources of sodal waste. As 4 tic relston should show, this realy but another way of stating the content ofthe preceding sentence “Tex us take the second stride, The Marshall-Widsll analysis of cose didnot overlook the ioany ces that fail to\conform 10 that ‘Soe. Nor for that mate, had the asic overlooked them. "They Reogined ave of monopoly” and Adam Smith himsll carefully ued the prevalence of devices to restrict competition? and all «he Uiterences i Bexby of peice eslingtherelrom. But they looked don those ever as exceptions and moreover, as exception that could TRE" vould be done avay within te. Something of that wort i rue Sho of Marhall Although be developed the Cournot theory of SHonopoly" and akhough he aniipated later amass by caling Trend tothe fact that most Arms have pecal markets of theit at wich they sx pce tend of merely accepting them? he Stell a Wielull famed is general conclusion on the pattern of per [ect competition soa o suggest, mica the eases, that pesfect Snperton wes the rue, Neliher Marshall and. Wiceell nor the ‘ssa that perfect competition isthe exception and that even if {i tere the rule there would be misc les reason for congratulation than one might chink, we lok more dosely at dhe condtions—not all of them explicihy stated of even cesly sen by Marshall and. Wiksell—ehat must be fuel in order produce pesfect competition, we realle imme: ‘na mone wry gos of peep ale he een emp eel amee tere a cy de thee of te plead sear eater who he ors mh ge SIG Biemel sans Pry #Rbgarn Cron 18 een er aay of impves competion may fail be ted 0 na ice ste he she phenome ne ey ae ree ti lt par ed or exngete mporan Plausible Capitalism 79 ‘sausages, vegetables and many dairy Products for instance, And as So ate gee anni a ene rete cae ‘hry haben one of te major conatns to pena economia amin indusa raw materials and em inihed produc such a mute irioees Suma mene ‘Again the monopoly schema, suitably adapted, seme © Bt thi pe ee rece nee rae SSS ees Sp rasardecnemene ee Se, n pata, B.S. Chambetin, Theory of Monopliie Competition, and Joan Rebinton, The Eso of Infect Conpetion reation80 Can Capitalism Survive? rags rey the Rta se i cn (Pere oy Seatac tent Dod fo exo acm 2 eel of ome eo that TRaximum mark, because profitcomerving strategy, imposible in tn we mee ip oer the street (unless a a ov a te me a nen (oh et eo inte a i pe fichier ens ieee Se errata THE PROCESS OF CREATIVE DESTRUCTION wie theories of monopolistic and oligopoitic competition and "Titer pata variant nay ino way be mae toe the vi chat capitals reality is undivrable to maximum performance: in production. One may hold that it siwaye has been fo and that all slong output has heen expanding in spite of the secular sabotage perpetrated by the managing bourgeoie, Advocates of this propane tion would have to produce evidence to the efect thatthe observed rate of increase can be accounted for by 4 sequence of faverable ce Clumstances unconnected wth the mechanism of prfate enterpbe nd strong enough to overcome the laters rsisanct This i preccly the question which we shall disse in Chapter IX. However, those who espoute this varine at least avoid the trouble about hstrieal fact that the advocates of the alternative proposition have to face, ‘This avers hat capitalist realty once tended to favor maximum pro: ductive performance, or at all events productive performance 80 fon Siderabe as to onsite a major element in an serious appratal a {he spmems but tha the Tater spread of monopolit stractfe, bling Competition, has by now reversed that tendency. Fis, this involves the éreation of an entirely imaginary golden age of perect competition that at some time sontehow metamorphosed its into the monopaitie age, whereas ie quite Gear Unt perfect competition has at no time been more of a reality han tbat presen Secondly, itis necessary to point oat tat the rate of inceae tt outp id not decrease trom the nines from which, 1 suppose, the previ lence ofthe largestsize concer, nt lest in manutactaring industry, would have to be dated; that there ix nothing in the behavior of the time series of total output to suggest "breakin trend" and, most important of all, that the modern standard of life of the tases volved duting the period of relatively unletcred "big busines” I we list he items that enter the modern workman's Budget and fom +899 on observe the course of ther prices notin terms of money but {in terms of the hours of labor that will uy theme, each years money prices divided by each yeas hourly wage rater—we cannot fal to be suck by the rate ofthe advance which, considering the epee tacula improvement in qualities, seems to have been geeter and aot smaller than it ever was before. If we economist were given las to ‘wishful thinking and more tothe observation of fat, doubes woulda2 Can Capitalism Survive? immediately arise as to the reali virtues of athe would Hive ted uo expect very diferent rll. Nor i thin all. AS soon Bivre go ito details and inguie foto the fidual items in which ropes wes most conspcuots, the tril Teads ot t0 the, doors of SES wr iy of empl om ition but precy 10 the the lange concerno—whichy Eihe'cae of apattral machine, alo account for much of the progres in the competitive seclor=and a shocking suspicion dawns ‘pet us that ig business may fave had more to-do with creating ‘lg standard of ile than with keping ie down. “The concleions alluded toate en of the preceding chapter are fn fc st completely fle Yet they follow from observations and theorem tae are almost completly! tue- Bath economists and orl is hve one or um aay dh ome agen of Faliy they happened to sc fragment theives were Tow seen corte. Thet formal proper were mostly developed Torrey. But no eouclaions abou cptalis reality asa whole follow {fom such fragmentary analyses It we draw them nevertheles we fn'be right only by agent. That has been done. And the Lacky ‘Seidene did noe happen. ‘The csenual ptr to grasp i dat in dealing with capitalism we ae dealing will an evlionary procs. Te may sem strange hat Biome cot fail to sce ap obviode fact whidh moreover was long ‘mphasted by Karl Marx. Yer that fragmentary analy which Eas the bulk of our proptions abou the functfoning of modern Topi persistently negects Let us Testate the point and see ftw it beat upon out problem. ‘Capitalism, ten, By nate a form of method of economic change arnt hot only never is but never can be stationary. And this ever onary character of the aptalitproce snot merely due tothe fat that clonomi fe gos on'n a sal and natural environment which ‘hunge snd by f change alters the dita of economic action: this face Ss important andthe changes (was revolutions and’ 0 on) ‘ten condion indutial change, but they are not its prime mover Ss cwohionary character due to's quasiautomatie inctease lal or to the vagaries of monetary systems af 11s a mater of lacy tote abteraons and Donen ae Sot completely al ‘acy, Ts tot cxpatons of th dace f pete competion fll i eam es ave de pcan cote mony and Importance In hich, ere a sal a cy ampere empeiionspproumate the reat of Pret oimeatin. Theses aes inten i doe ot this but of cn teach ett coasing 4 utpat Index, et contra to what Freer Ty 2 ini ast toon ined to meneretbe cnt ty which ‘nents ip mart! iy abhi me for quit ad sie for anc, wee i atc, We ante fe ih ie ‘The Process of Creative Destruction 83 which exactly the stme thing holds tr. The fundamental impulse Uae sts and heeps the capitalise engine in motion comes from the row consumers goods, de new methods of production or transport: tion the new market, the new forme of industrial organizaon dat Caplin enterpie eats ‘AS we hve seen in the preceding chapter, the contents of the taborers budge, say from 1760 fo 190, dil not simply grow on te cianging line but they undervent'« proce of qualitative change, Similar, the history of the productive apparatus of a typial fam, ‘Hom the beginning of the rationalization of crop roman, plowing and fattening to. the mechanised thing of tods)linking’ up. with levator and railroade=is history of revolutions. So isthe history ff the productive apparatus of the ion and set industry fom the Charcoal furnace to our own type of furnace or the hisory of the Apparatus of power production fom the overhot water wheal to the ‘modern power plant or the history of transportation from the mai teach to the airplane. The opening up of new marke, foreign oF ‘domestic, and the erganzational development fom the eaft shop land facory to such concerns as U. 8. Stet ikttae the same process ‘of industal mutation-if I may ute that biological tema Incer Sani revolutionize? the economic siructure from fh, incsaly Atestoying the old one, incemantly creating a new one: This proces fof Creative Destruction it the estental fact about captain, Te ‘what capitalism consns in and what every capitalist concern has got {o lve in. This fact bears upon our problem in two wayse is lace we are dealing with a proces whove every clement takes comidrable tine in reveaing te featres and wtinate eee, thre sno point in appraising the performance of that pres cx it fof a given point of time: we most Judge iu performance over me, 38 ic unfolds Uhrough decades or centuries A system=any tem, Ceo omic of other=that at every given point of time fly ules Te posites to the ex advantage may yt in the long run be inferior i tm hat doc a ng po on, bce the nes lure to doso may be a condition forthe level or speed of Tongan PSone eating with cond, since we are dealing with an organic proces, analysis of ‘what happens in'any particular part of ey, in'an individual cone fem or indwtry~may indeed eaify detals'of mechani Dut inconclusive beyond hat. Every piece of busines strategy acquires it true significance only againet the background of that proses hind * Tha teolaons age nosey nceant they ecu nce rabies which ‘alters nesnty hove fe atte ebay eb ett Sr ghexgion of he ei of ream, bth tp forming wt ae ‘mown84 Can Capitalism Survive? wknd msn ee yt com ey a in he Caen ee nat be tabeae ie reo he one ta a eee eae ne soe ge cle ee aeey wee 2 aE mame Cont Sh wt ae ed fore fp i at as apt sed CT ee eo de Soe aeee ne sa ee 2 Pe Ea etn a pL peti epee me Oe ee ty a Sela san tel ee See tae ee Fe ee ies hb wea ee Fe ee ee eng eras thoes ee ee ee ee, ia ee ee Ne ce tet ae ca en lal me fal fe Sates cae ee Sa an a pon f te mode Se ae een Pi ae pee pct ee ee Ae a i atl phe cel Cee Te ee cae oof ton Ce a Sa om a ancy ft Ce er a Cab en ar dn ma nar ily ie Se fo Pe ty oe tat tak ofa rey epee eet ea some apd hh ta may Ee ey Te ern a cg ae 11 sould te understood tat oly our appre of economic performance ante er el ent i a aa Ovo ioe ml “pyro or Gpproel erly ndepensent four aprasal et wc (o any EEEtouts anes we happen to nope 2 move sytem suc as wlan which makes mara approval i appro tn on them ex define ‘The Process of Creative Destruction 85 sa tems aes pere ope eehnatiienene ca ‘ouput and brings down prices iin any cae made of Sher sta EY eat dt he Sys neriar tee byietier brat te Pees asa ase Sen eter eaten though nos in all his wil inthe Tong rum enforce ehavior very saint eee ae Ske cere ee pommelaten Shh See creer aa Saran omen nome re SASL Goals oi scars oe eee ney ameacerd moss Sa cane tt nage ma rer gt fn Bick niobate iat iS oeiectenn ore cane race SE Rh re anette Sond omarion ae Ena mt er tat cou Ht “This bo shown bya theorem we fequety set with in expos of the eory of inpese compan, ric te theta tnt under code [vtec competion, proding cr ting tinea: tend toe iain tra, Siac impart women i he ame me held "0 be a eusanng hae terns of modem sadutty we afe set t wondering hat werd thee ear lien anes a sated above, agent cr area they bv in mind ie aw three sto he pate len vic he Yor nal man to mach ampere by hi ea reread, Howe86 Can Capitalism Survive? vn eel enn pet een te era cs cee qo oer ahs Beate alo wa Dani prince. " ‘Sale way manage yin Hr icapale Thao te an weer apt Hi SSr oo he mata of tmp io Gn afr to oe at he poe at ch ebay MONOPOLISTIC PRACTICES uxt hasbeen sido far is really sulicien to enable the reader Wooveat wit te lage majriy ofthe pace es he tly to mect and to realize th inadequacy of mot of thas ecioms of the profit economy which, diectly or indirectly, rely on the absence of perfect competition. Since, however, the beating of our argument on foie of thue critics tay not be vious at ganar willbe ‘worth our while to elaborate a lite in order to nake & few points nore explicit. te We have jus seen tat, both a fact and ata threat, the impact of new thingenew technologies for instance—on the existing sue ture of an indastry considerably reduces the longrun scope td it tance of practices that aim, through restricting output a conker Ing established positions and a¢ maximising the profs accruing from theen. We mast now recognne the farther fact that recive practic ofthis kind, as far as they are elective, acquire «new significance in the perennial gale of creative destruction, significance which they ‘would not have ina stationary state or in state of slow and balanced growth. In ether of thse cues restrictive strategy would produce no Fest other than an increase in profits a the expense of buyers except that inthe case of balanced advance, i might sll prove to be the casi and mout effective way of collecting the means by which to finance additonal investment? But inthe proces of creative destve tion, restrictive practices may do much to steady the ship and to ale: vate temporary diffu, This in fact a very familar arguinent ‘which always tarns up in times of depression andy as everyone know, ins become very popular with governments and their economic visers—witnen the NRA. While it has been so much missed and {© fauly aed upon that most economists early despise i, thow “theories te apt t nok pon anyone who adn this polity a lly of gener nd roving orig Et owes of an Income at ir mch mee atonal en i Ecancing few sry Fron collet tregh a rocive ply Ror ome pers of tan ey ‘Beiqute night Fer tue they ate que wong Pele tn tah cpt {ut ommunim of he Raion pe ton ie ae cee Boe eet ort ements Thscnee ves abough they ste te thon ath pebion srl we sa eta ot pa88 Can Capitalism Survive? sae tn ve a ce el iy a mec olen ca a cet cpm n,n let i eri Laer en Py an cece inte ecm io oe ce cn ove a i a ie ig, Hens He mee ea a al ee ae fee neg nec re ny, aa meme Tene ae ah pt omen eee coals Sat te oe shai rennin omecedn gem te ri a ak ca ee redise gorithm oe Seat cn ey pe Ge ad ie BE ee a rc, nal il ra pe he a a ie Stet er a ne er smerny el ei of i ea he inandiyung such business strategy ex vis of a given point of time, canting nes ey agit como apn oe iam i a ee cee Serre oO re colt oc at wl nce len wo eno ge Fe Samim oh ey rs hl he Soe i Paty a cee ender hat even thote devices are obsructions Sa re cei rm i re WP TEitaone “There some tush ft ise doa he pope erst centoe tance a propelling and nae a bing te po eve, ao plenty of ken @ ‘Monopolistic Practices 8 4 Thi wand ou mo clay nthe ate foe seca of he economy which at any ine happen to embody the impact of new things a methods om the existing inde al structure: Ee bee wey af geting vivid and vel et of indus taegy i indeed ‘istalize te bchavior of te cone of industres hat ode New tommoies or process (ch asthe aluminum indusy oe eon faze a part ofthe whole of am indtry (ouch af Sern te Std Standird Oil Company) ‘As we have ste, auch conceros are agreson by nature and wield the rally efecive weapon of competion, Ther ntuson can only in he rarest of eases fal t9 improve total output in quanthy ey aay, both chrough the new metho ele if at né tne acd {full advanageand hough the pressure i exets on the prea ing fos Beh agen aes dusted to ee for Ditposs of attack and defense, so pce of armor eter than pole nd quality of their product which, moreover, man be srategealy Ianiplatcd all longo that at any poi of me they ser te Be bing nothing but resting he output and keeping ces igh ‘On the one hand, langestaale plans ould in many ees nt nae: altel aC twee hot town fom the over Hat competion te’ lacouraged by heavy capital requirements or lac & ex Fence, or that means are avilable to iseurage or checkmate 10 2s to gun the tine and pace for further developments Bren the com ‘quest of financial contd over competing concent in other nar Sila postions othe securing of adage hat ran counter tthe Inblc's Senseo ae playrattoad reste move, mf a Tongan Secs on otal output lone are envsiged, into’ diferent ghee they may be methots for removing absaces that the Inttien of private property put inthe path of progres. Tn a weal sek that tine and sptee would be no lest necatary. They would have to be secured by order ofthe central authority. ‘On the other hand nterprie would in mow cases be impossible it The gualcaon sed senor 1 hak ay jst ase tor eee tat the sore prpolion might concen ene iach ti uaigaton oot Se 1 ie ig ara be a ps ct fe inteey an, entrty waned By a enone agua forte te [et the reader ret tat een i dealing Wt inbaly emia tons cre lid jue and erry cued fury fake teat of the los porpoes of hic ie a cel lo eden mia theta ‘eon thr fea ees otha nt abo et hey conser soa ace ‘anther ejctin would be more to te pol Han antaprte om mceed selrby sack eam, dos tah roe tn a that i cot pel sl at ‘er sin ue be ed In onto he: Bat jee {ose step provi That tay tds fo oases ehh ee In mt ‘len dng the prac of eae don “apse Fel On feecton wi be seen tht the talgy of the pracy une dis ‘tn Wat pens ecient Stow eng, he oP90 Can Capitalism Survive? ic were not known from ihe oust that exceptionally favorable sitar tions they to are which if exploited by pit, quale and quan ey munipultion wil produce profs adequate to ide over excep {hati uniavovaie atone proved tee ae sly managed in a eguite srtegy taf the short run often eve ‘the majorly of suceoa cases this taegy Just manage 1 serve {5 purpost. In some cave, however, it 60 suceaful as (0 yield fobs far above what acenary in order to induce the coreponding Ervenment: These eases then provide the baits that Ture capital on to wnlrid wal Their presence explains in par how itis powble {beso lange a setion ofthe expt World to work for noting: in the mide of the prosperous ientes jst abou half of che business Ciporations in te United Seats wee man at los at eo pro or Fepwotts which if they had been foreseen, would have been ina Chatter the er and expendi ole ir argunent omever exten beyond the cach of ew concerns smehods and’ indasrict OM concer and. established industry, Aether or not divealy stacked, sll Ive in the perennial gale Mints emerge inthe procs of creative destruction in which many hus iany have'to pers thac nevertbeles would be able to ive on ‘igotoul and wetlly i shey could weather parulr storm. Sho ‘uch general bes or depron, seal situations arse in which She rap change of data that characteristic of that, procs 0 ‘Morgane tn ndustey for the tie being att init faneonles fouckand to create avoidable woemploymen. Finally, there is cr ‘Giniy no_poine in uring t conserve oboolsent industries inde Sey, Bape fo porntin tying avid hei coming down with ch and fn atemping to orn out, which may beebme 8 center SxLamelaivedepresive eect Into orderly reweat Corepondingly {hese inthe eof indus that have sown thelr wild cats but seers paning nod no losing round, wch a thing as orderly Sdvance? ill ice el aagtad th ale pee shred i ren sea i ee to eo Bova aoe money a nb are fics fe Seen cette Sa Soe ee nn re aa org ma ipl ci rac ce ie Sora Sire cre tate at ear ey ‘hnpeteee Amen themselves he tree copes behave ia a way which should Sti nn cn 9 Carat en Seek peo ater Ba Pe or epward often yan an iw vious tat cond But eee reat cn a od ae Monopolistic Practices o All this i of course nothing but the ertst common sense, But fis being overlooked with a pertence x0 stubborn as vretimcs to re the question of sincerity. And it follows that, within the proces of creative destruction, all the realities of which theorsu aren the habic of relegating to books and courses on busines eyes, tere fs another side to industrial seltorganization than that which thee theorists are contemplating. “Restraints of tade™ of the carl Ope aswell a5 thove which mefely consist intact understandings about price competition may be elective remedies under conditions of de: preston. As far as they af, they may the end prodee not only Steadier but alto greater expansion of total oupat than could Be Secured by an entirely uncineoll onward Ys that cannot fl to be studded with edtatophe. Nor can it be argued that hese Satasuophes oaur in any ase. We know what hs happened in tach historial case. We Have a very imperfect iden of what might have happened, considering the tremendous pace of the proce if sch pegs had Been entirely absent ‘Even as now extended however, our argument does not cove all cases of restive or regulating sttategy, many of which no doubt hive that injurious elect on the longrun development of cua ‘whichis unerially auribated to all of them And ren in the eles furargument does cover, the net effec a question f the cecum Stancesand’of the way in which andthe degree to which indotry regulates isl in each individ cae. It i Certainly a8 eonelvale {ae an all pervading cartel system. might sabotage’ all progres {cis that it'might realize, with smaller socal and’ private costal, that perfect competition is supposed to realize This why our argue tment doesnot amount to a cue again sate regulation 1. does shew that there isno general case for indiscriminate “trast busting’ of fr the prosecution of everything that qualifies as a vestaint of ade ational at distinguished fom vindictive regulation by public a shart try out be an extronly delat poem whi at very fovernment agency, paticalrly when in fll cy again big busines fm be trusted to solve® But our argument, framed to relate pres: ‘2 Gcper cs would noe be alee fo the pul higher wag and mare or ‘Stceremplayment tothe workmers The tjonlndary had fe bimeom tee ier wena pens the feature dosent inves commodity ts fete Tally cccpled bios and the pce tht aporethenses ch ral tion sil ore st then ots the vate Inde. Ant thee see's sos ‘Cother dierent ‘Bat Tandamentaly the est Is dla "Te Capnon fe Seen ant tno pon nr crm aod Yt re Ply [ride aver this etpension cach india peo le, infty, the aatemen almost eBecive sat agtecmen on pl chnghing Sei of oy for cet een sn 4 In tne may ember dnamn, Dellican poi oScers wa eeeowt cn sands yy tt, chy sein fen ree ‘he lea mind at work ate mich more dea for ter92 Can Capitalism Survive? veh an hin eo ero he kn hse or care fh Ee et reece ne prt om Hero ai tenon Se Rl mk wh en vinegar ana hearse spain enn eS Seay i Pele Mpa hn tgs Sela ire aa oP a asm ttc ttn veel a Segttn te a Meet et orice Soeut elt clan deeicsos iterate mats aioe se Ihe iach crea he ie io SOP orn tee er othe ao a a ata edt eh Teper men ot ae Ae aca Se ow age aera pce teen opine errs re ay tc Some rd ay fla a den eee Se eater ie es Pe yen pc Tae ats Satin ecard em a ee pe a hk nt en i me a es ln ow SNPS eet al at tel ae BAe Wee st eect 7a one ot ecu eee oe eo vast oe ee Se 0B Mersin the Recs of ronomie Sate ay 93 fe i aa creme el Monopolistic Practices 93. ro which ig tops ott aa mater of basins oly Shieh remain unchanged beet ee dete to change ea pee GS he oat sgn Inner pb ‘Staci on de tng dome oops ot Oia ecaty tine hate sgh Cenc ere, Shomer, rhe won naps ane of omgies plat Pi Whither mani ide ot guy mae fils of any Ingres ne dow slr overt nod ot ue pty sey nd tet fhe ova pis ot tno aap hemelve tetas’ ey yt spec ha topos to htlan deal Reva pel oases ben ag ig wiih eel be ket in cn ty Sp trol coon cacy ese hangin ui a potted? Aelaurpcsine a owe mite win he foe Capitalist evolution this must be so. Peer ret iin in na stay ilo ely in wal, case, that it can achieve to avoid seasonal random and ec! icon i pee td to map ony Te foper' heer Kismat alte thc fant unl tse tom Sc oe fonda cans ae tine te eng tke thine moog dst) By dhe eps Sco SS wl ey Src eae ge el Mien neha gone sigy St mag Gat + oy {uneion that will approniate trends And that is what genuine a coun rk Sly most ea ‘dnt ia ea by olan ot ooh sone of ee mens sou ly wei a woes he Pesomenon SE's linge ett mane mom ah aes og Unt pl fyi a chi pe a Sune pt toy mere wd tae pitely yal ‘igi ted capectly the fac hat many pele done, of ot pty tin selon an den he ea quai "yom tlm hl en pte on pa Se SAS re i ae tt Kat sh yee return to it below 6, a Ta Sp rape e+ dle i fom ara tet ec an fo ae Sal nt a op Fe vie a setae mien fetee cect Tete doar hasan, SEER Ge ial mat tee wee aa pet Stee eta ea at ‘Gbined eect of increasing ficebes in al tne of preduction they should not4 Can Capitalism Survive? fore ow this shrezon rig” my aes the logan denlopment a eet iin ge, he ny ey mga {iis prs tay up Sy erenion or depron no doubt ie fluence fie busine station in tho pases of the ches i that IMucnc i song ijerioor'aking maters mc Wore chan ‘aay vould berth pote Bex all-round™the Wesrction whee ine mg abo fetta te sega ‘MesSeaprospertier al hor permanent seduce the eof eee ‘oat Sete elo what fe would Be nthe absence of thse oie, Teo snpments have Ben put fort in favor ofthis vw onder to pute fine no the mong pose ih Tet us anu thin wih reo tele rn sc Sling cx hese qantey of prt which I wo STi had reduced them, Buyer are therefore out of pocket by {ie amount to hich ee ity pose Hom he rig thee nye are the Kd of pepe wb spend ail they can ed the uso thse to wh is nee rns go ous not spend the iReeméat gets bo iter keep lle or Fepaye tank Jonny thon teat capenre in the eomany may be raced thereby. ith ‘Sppan?eher uns ovr say sar and Hf Uheapon they sare arn we may get comulacon of deprive ees. In Sher word rigily may uo iene the amount snd dibuion silnhdost acne se decree tants oo nee le balances ite adopt popular nomen, sings Such a ese cocci Shit Riche eal thule He dei oti it thas pascal portance syn smal “Tne second argument euros on the dstcatng effects price rigidity ‘seri inthe indvdel industry fal. or sree, fleas we ations rewrton of oops ey to rowlion greet than du which moat nny ae oor ding dresion, Sine the ‘Roe portant emo of the ec he Seen incense in ichglnensavon of employment i fac the ind scan, hve sage th sr on me Tt et sci rami i enh ene et ot ey Sane eso ing stn Oe at it mene Ss ea et Site eye nec or npr cof eS te eh ke fl of ear ne erent Telrad on mio en = Neen et rats ed tS oe te ee Canc dn oa ct cat le samp vst le Sac ht he pe fw SUES MoE not ma be ren at se pa ema a ig te aati ined eno hee mh i ot acts low ans pute eaten baltimore stone Monopolistic Practices 95 sx: mx ml else yan he ce ee cea ae ate ee os SUA. hate Wp seca eel SR eet a a nh TS er te ily ta a oir als een wi ae ihc gata Spee tr SEG IOC IS IPs She ep pra geri SEP ALTA Etter ie opt Ware nce i ara anc rm sr eon ee SSE aL Sat SE Se ee tt att at SESH tae pase ten oh ie is a alsa Wee ate Ppa dna meet hr a dare Stee oa Ena hte PESTA) ely Set sy ae Be sts Ho wy we elo CORA APE Sk a se et Hae ee ee a Ste na ti AE eS ey LNT OS ae as ey tyes! att nese Co a a rem of sie Oi ck cea i ee he ey ti ae ae ned ie SPSS etn ne a Cr el ie aN Ma A oe te oerghe ett i seer96 Can Capitalism Survive? SE I ee dog, vn a in he ot ee te melee oe ee ee ee ee oink enataca te ce Tn ees keene 238 we have sen, destruction of capital value in the sta with which the new commodity oF method of production “Competes In petect competition the old faveuments must be adapted Sta becrice or abandoned; but when there i no perfect competition and when each industrial eld is contofed by « few big concerns these cain varios ways Sight the threatening atc on thls captal Structure and try to swoid loses on their capital accounts, that (0 hey ean and wil ight progres sell "Go fr as this doctrine rely Jormulates a particular aspect of x sericive busines strategy, there fs no need wo add anything to the Ergument already steed in this chapter: Both a6 othe Limits ofthat Suegy and sto fs funeions inthe proces of creative destruction, ‘Me aioutd only be repeating what has been said before: This beomes Nil move obvlow ie oberve that conserving capita values i the Shine thing a eonserving profs Moder theory tends in fact to use ihe onep rn Ne Vv ok Ae (= eal ae) plac of he conecht of Profie out ast valves and pros aze of course not being simply conserved bat maximised : “But the poine abou the sabotage of coxtzeducing improvement sil call for comment in pasing. Ata ide reflection wl show, iti Salient to consider the ease of concern that controls a technological {eviersome pateny,sythe se of which would avolve scapping Some or allots plant and equipment, Will inorder to camerve Ft eapital yates, felrin from otng this device when a management foc Teucred by eapialiae Invressich at a socal management Conk and wou och adeamtge of a "Agu iy tempring to rae the guealon of fact. The fest thing a mistern concen docs as son as fc that ic ean allord is (0 stblsh a research department every ember of which Knows that fs reed and butter depends on his sce n devising improvements {This practice does wot obviously suggest aversion to technological ‘progr Nor can we in sep be refered tothe ees in which patent cegutred by business concer have not heen used promply oF not teen ised stall For there may be perfectly good Feasons fr this {or example, the patented proces may turn out to be no good or at Teast not tobe in shape to warrant application on commeril bs Neither the inventors themselves or the investigating economists Monopolistic Practices 97 ‘or government oficial are unbiased judges of this, and from their ‘envonstrances or reports we snay easly get a very distorted pictare® ‘But we are concemed with @ question of theory. Everyone agrees that private and socialist managements vil ingodsce Improvements FE, with the new metho of production, the total cost per unit of prod ‘uti expected to be smaller than the prime cot pet unit of product ‘wth the method actually in ws. If this condition is not felled, then it held that private management will not adopt a estredacing rmethod until the existing plant and equipment i endely writen fo, whereas socialist management would, tthe soc advantage, se: pice the old by any new contreducing method as soon as tech 8 Inethod becomes avalable, Le, without fogad t capital value, This however nt a0 Private management, if actuated by the profit motive, cannot be interested in maintaining the vals of sy given building or anacine mny more chan a socialist management would be, All that pivate ma agement ties to do is to maximize the prevent net value of total ‘ses whichis equal to the discounted value of expected net recurs, ‘This amounts to saying that i will alwaye opt a new method of production ‘which it believes will yield lager steam of fature Income per unit ofthe coresponding srcam of future outlay. both discounted to the present than does the method actly fn ae, The ‘ale of past investment, whether or not paralleled bya bonded debe that has fo be amortized, does not enter at all except fa he sense and to the exten that it would also have to enter into the calclaton une derlying the decisions of a socalit management. So far as the use of the ola machines saves fucore cons a8 compared with the immediate lntroduction ofthe new methods, the remainder oftheir service value isof course an element ofthe decison for both the capital and the socialin manager: otherwise bygone ate bygones for both of them nd any attempt to conserve the value of pat investment would com fic as auch wid the rues following from the prob motive fe ‘would confit with the rales se for the behavior of the Stony had be id ht the ha ef rete pace wer Peto ects on so wear th fac Se me ers, Whe th aa ‘Stotge’of proge a the atme time emp the scl loses facet the [sce of capa popes, parley the employee whch that ect ea Se which sower‘admnce might mile to ome etn” Wall, cinco ‘ropes 0 dick er to dow for thet? They had ete ake op thelr me cout be obeved tha even ifthe alent ere coe it woul sl ‘be lnadequate © sappot the Uest that cpt under the condone aged, “incmpatle with tedhnlogel pope” Al tate wou prove oe Some che pee fag fori mode length nthe en8 ee eee eT It is however not «rue that private firms owning equipment the ralue of whichis endangered by a neve method which they 50 con {Wolnif dey do not conto theres no problem and no indictment vl adopt the new sntod only if worl wot cost with itis smaller jan prime unit ent with the old one, or if the old investment has been completly writen of accoding to the schedule decided om before the new method presnted itech For if the new machines ‘when insaled are expected 10 outlive the Text of the period prev Duty set forthe use of the old machine, thei discounted remainder Sal sof that date is nother asset to be taken account of Nor i Ttmue for analogous reasons, at sociale management, i acting rationally, would always and immediaely adopt any new method Thich promises to. produce at smaller total unit cots oF that this Would be to the socal advantage "There fs however another element'* which profoundly affects be havior inthis mater and which Is being invariably overlooked. This fe what might be called cx ante conservation of capital in expect tion of further isprovement. Preqently, i notin mos ass, 2 Ring Concern does not imply face the queso whether of not to sdopt 2 definite new method of production that i the best thing out an, in the form finmedaely available, can be expected to retain that posi tion for some length of time. A new ‘ype ol machine i in general bc a link ina chain of improvements and may presently Become ob- sole Ina eae like this i would obviously not be rational to fallow {he chainlink by link regards of the capital lst to be sufeed each time, The real question then isa which ink the onecre should take fcton, The ster must be in the natute ofa compromise between Considerations tht rest largely om pene. ut it will aru involve Some waiting in order tose how the chain behaves, And to the out Scr this may well lok like ying to ste improvement inorder {o conserve exiting capital values Yet even the most patient of com fades would revolt ita sodalst management were #0 foolish to {allow the advice ofthe theorist and to heep on scrapping plant and caquipment every year : MT have envided this chapter at T did because most of i deal with the facts and problems that common ‘parlance asocites with {monopoly or monopolistic practice. So far I Nave a mitch 38 possible Telinined from using thowe teraw in order to reserve for a separate Section some comments on a few topics speifally connected with then, Nothing will be said however that we have noc slexdy met in tone form or another. {@) To begin with, there ete term isl, Monopo {Thre ae of se ny oer mest The rater vl ple sndenand shat Tn il ws fr quis of pac Ks Spoleto dal Mew ay ie tp tuted om 1 means Single Monopolistic Practices 99 Seller, Literally therefore anyone is a monopolit who sells anything that is notin every respet, wrapping and location and serve cluded, exactly Ike whae other poople sll: every grocer OF every huaberdaher, of every seller of "Good Humor” on a toad that i noe simply lined with sellers ofthe same brand of icecream. This how ever isnot what we mean when talking about monopolist. We can nly thov single sellers whose markets are not open tothe intrusion ‘of Wouldbe produces ofthe same commodity and of actual provers ‘of similar ones o, speaking slightly more technically, only Use single Seles who face gen demand scheile that is ercly independent at ee ost wel a fay sao thet aon by er foneerns The traditional Cournot Marshal theory of monopoly at texted and amended by later authors holds only if we deinen this way and there is 0 it scems, no point in calling anything = ‘monopoly to which that theory doesnot spp. iM hut i accordingly we do define it ike th, then it becomes evident immediately that pute cscs of longran monopoly must be of the rarest ocurence and that even tleable approximations to the re ene oe onc me la than ec fos impatiion. The power to exploit at pleasure a given pater of tdemand—or one that changer independently of the, monopoln's acon and of he eon rook -cn er he cnn of Intact capitalism hardly persist for a period long enough 10 matter {or the analysis of tol output, unles butresed by public authority, for insancy in the eae of fil monopolies A modern busines con cern no so proteted~Le, even it proteied by import dues. oF import prohibitons—and. yet wielding that power (except temper iy) not easy to find or even to Imagine. Even raloads tnd power and light concerns had fst to create the demand for thsi sees and, when they had done x, to defend thelr market agaist compe: tition. Outide the eld of public wii, the postion of a single selier an in general be conguered™and retained for decades tn the condition that he doesnot behave like 2 monopolist Shore ‘un monopoly wil be touched upon presen ‘Why then all dis talk about monopoly? The answer i not without interest for the student of the paychology of pital dscusion, Of course, the concept of monopoly te beng Ioosly used jus lite any ‘the, People speak of countrys having + monopoly of fmeting of ‘other even ifthe industry In question highly competitive aid so Thee ral ninpas hae of ae came wo the fo i etn wh he Propo to withnl erain mats fom agree none ‘The ton ot {i istsion bape sme tring upon oor preien byway ef aay Ah ‘much a thought of the poste of at weapon, Thee Tekin ‘vey ‘StU people foun for Ith of ih nates 0 6 shh hone ‘fete tne den tat there ae ey Tow thing ta eee Se ‘Proce o aubatted fo n he aex quedo, An! Says pos Se100 Can Capitalism Survive? con, But this nt all Bonomi, goverment agen, journalists and Mota in scone obvonly love the word beense has come Face gapgraliam which sure to roe the publics hasty sets interes able. In the Anglo-American word monopoly ioc arsed and aoc wih fanctionles exploitation ever Tien the ssteonth and seventeenth centri, te -was English Milne practice to eente monopoly pontoon lage mute in chon the one hand, answered fey well tthe theoretical ttt of monopoti behanfr nd, om the otber hand aly jstifod TiS of idioation tat mpresed even th gest Ela. ‘ng is 0 ftentie as & noms memory. Our time ofers other andor inortan inane patos eon wo wat happened Tres age The pair made te Englihoperking public 50 SSonopetyesnacious afar it aopured a habit of aurbuting to that Tad power praaially cephing eiiked sbout busines. To the ypial Ha bourgesn i prtelr ronopely became the fasher aoe nfl ebsites bese hs pt bogey. Adam Sith ‘toatl prmarily af monopoles of the Tador tnd. Stare tye, Rona them’in fl gt. Sir Robert Feel~who like est CGueteaes ccasinaly knew how to borrow from the arma of er eeagogue in his famous epilogue to Dis Ive period of ce thacgave‘se mach offene to hi sci, spoke of'@ monopoly of SES ene though Eng gain provcon as of out per BSG) Shape i spite of protection And inthis country meso i RSs made practslyfyonyenous with any lagesale business To) Tit iery bt smpleaed Gssiinatng monopoly teaches hat, exch ating exes monopaly price B higher snd monopoly seh taster than competane price and competitive output, This 2Bue provided thatthe method snd orgaization of production— Sol ercyining elevate excl the nein both ese. Actually howe nw w the eat Gat oe hough some prowe an be eed on de 8 Wc anctongum desupoets ight evenly Soy pray sll Tic ae mone exe fort wae aia i the ce of Adam Seth ‘Siac i our sen had not han emerge. Bet evn they went ofr Tn Bae tha act ha hy no ts ey of nop we ea then not only to appiy the tr satber promtcvoy(Adnm Sait id'Sen Sor inerpreted frites the reat of land at 4 monopoly alt) it Stoo lock upon te menopolir power of eploiaton as racially Ue Tinted web of couse wrong even fr the ost eteme xs. eth inane Swat the way heh the eon Bee en eeping nD seine us Pseion of agile 0d a meno ot apaton pred srtieydtzent tinge The avgle wa over protection and wot eet 2 non Elica cme af ter tndoyers oe amare Bot i ftng reecton Ht for at alto tea wp for apne. And tere wo evidently mo snper mean of {lng so tan by ealing procoaonine monopali Monopolistic Practices sor ver there are superior methods available to the monopolist which Sterne ns swale atl scm of competes ae not available wo them so readily: for there are advantages which, though hot strictly unattainable on dhe competitive level of enterprise, are 4s a matter of fat secured only on the monopaly level, for Instance, because monopolization may increase the spiere of influence of the Sewer and decrease the were of nance of the terion, brains oF because the monopoly enjoys a disproportionately higher fancial Sanding. Whenever thi i then that roposion fs ne longer tre. Jn other words, this element of the case for competition tay ail somplely bese monopoly ‘prices ue not, nearly ig or ‘monopoly outputs smaller than Competitive prices and outputs would be atthe levels of productive and organizational cficicney that ate within the each of the type of frm compatible with the competitive Iypothes ‘There cannot be any reasonable doubt that under the conditions ‘of our epoch such superiority is a matter of fact the outstanding feature of the typical largescale tnit of control, though, mere site is neither necesaty nor sulicent for it, These units wot only arse i the process of creative destruction and function in a way entvely dif- ferent from the stati schema, but in many cases of decisive importance they provide the necesary form for the achievement, ‘They largely create what they exploit. Hence the usual concusion about. eit influence on longrun output would be invalid even if they vere genuine monopolies in the technical sense of the term. ‘Motivation is quite immaterial. Even if the opportunity to set sonopolis prices were the sole object, the presure of the improved methods or of a huge apparatus would in general tend to sit the Point of the monopois’s optimues toward or beyond the competitive ‘ost price jn the above sense, thus doing the work—partly, wholly, ‘of mote than whollyof the competitive mechanism, even if re ‘The reader should lurve that wile ae» oad rule tat prtear peo super sin lap he lferar Dain peal the Sense emt ciate a i sl and te pe oe omthing to do wth ene) Yodan the cote gush sivas ogee ‘Sewepla combination Uae ha pret av prone ar vat the Seaggeon ‘ttn inthe tpi propane sanouncnent et spomon of uch aie ened bore, among eke tens este i ha Sl ap ded Sihedle whic tut wth to exude 2 Shaver conforming tthe Cece ‘seal em, Bu mo coe i'n he Sth genes ‘Fthetse prolctotsnge ser fl Mout te fe eer a ee fret outer tol nom pe tts ue Fe yc eh isp Argent tom ets and pots neem af th "woke mt