The State

Anthony de Jasay, courtesy of the author
Jasay, Anthony de
(1925- )
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Indianapolis, IN: Liberty Fund, Inc.
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5. State Capitalism

On the Plantation


Money, markets and the habit of choice are best weeded out by shaping the social system as a well-run plantation.


The universal employer, not content with pushing string, will have to end up owning his employees.


Completing mastery over civil society in maximizing discretionary power can be seen as a chain of corrective moves, each one being aimed at making the social system both amenable to the state's purpose and internally consistent, although these two requirements are not necessarily or even probably compatible. Each corrective move is consequently capable of creating some new systemic inconsistency and of necessitating other corrective moves. This sequence drives in the political dynamics, such as it is, of state capitalism.


The first and perhaps most decisive of these moves, whereby civil society is purged of decentralized capitalist ownership and the state becomes the universal owner and employer, removes the inconsistency between political and economic obedience involved in serving two masters. As I argued at the beginning of this chapter, however, the fusion of political and economic power into state power is in turn inconsistent with electoral competition for its tenure. Having to run for office would involve the universal employer in soliciting his employees to keep voting themselves more money for less work. The next corrective move, therefore, must be one from competitive to monopolistic politics, to match the corresponding changeover in the pattern of ownership. Classical "bourgeois" democracy needs to be transformed into socialist or people's democracy, or whatever else it may be called as long as it is a set of adequately enforced rules under which consent to the tenure of the essentials of power is not subjected to electoral tests.


Under the resulting system, then, the tenant of the state is not menaced by recall; it cannot be unseated by non-violent means; it owns all capital, though its subjects continue to own their labour. Inconsistency, however, manifests itself again, calling for new moves, new adaptations of the social system.


The state alone owning or hiring all factors of production, it must alone take (or delegate) all the who-does-what decisions, whereby inputs of capital and labour are allocated to produce various outputs. This is not only a responsibility but also a satisfaction; to direct resources to chosen uses, to cause certain goods rather than certain others to be produced, is a natural component of any plausible maximand, of any worthwhile employment of discretionary power. Its prosaic symptom is the state's (and its ideology's) treatment of "planning" as a coveted prerogative rather than a chore.


Jointly with factor allocation, the state must make the matching distribution decisions. The two sets of decisions are mutually entailed. This is so if only because various people must be rewarded for performing various allotted tasks. (It is probable, though not certain, that the state as sole employer can get them to perform their tasks for less than private capitalists, competing against each other, would have ended up conceding. The relative wage under the two systems would depend, in part, on how much labour of what kind would be wanted under either arrangement. Our argument does not require that the particular "subsistence wage" which a rational monopsonist would agree to pay, should always be less than the wage competing capitalists would have offered.)


The interdependence of the allocation and distribution decisions means that the two need be consistent and not that they are bound to be. If under the set of distribution decisions, wage-earners get sums of money to be spent as they choose, nothing ensures that they will choose to spend them on the stream of goods the set of allocation decisions is causing to be produced. There is no built-in mechanism stopping them from (unwittingly) repudiating the plan.


Inconsistencies between the supply of goods and the demand it entails, manifest themselves differently under flexible and fixed prices. The symptoms under the latter—queues, quotas, black markets and (on the road to abundance) piles of leftover goods—seem to be less repugnant to socialist states than those under the former—waltzing prices. Regardless of its symptom, however, the inconsistency will subsist and react back on allocation and distribution, frustrating the state's plan. If it allocates workers to produce guns and butter, and they want more butter than they are producing, the sub-plan dealing with gun production will run into difficulties which may be only a little more (or is it a little less?) manageable if butter is rationed than if its price goes up.*72


How, then, can consistency be ensured? "Market socialism" is the most frequently recommended solution. It amounts to adjusting output to what people want, in return for the effort they agree to exert in producing it. This can be done, without further ado, by banks of computers feeding on market research and production engineering, solving some very large number of simultaneous equations and using the results for enticing people into the activities which will produce the precise pattern of supply of goods which people engaged in those activities can usually be relied on to want. All that is required is that the equations should correctly express enough of the relevant relations between people's tastes, capacities and skills, the capital equipment and materials available and the known ways in which all possible inputs can be combined to produce given outputs.


If this suggestion is ruled out as facetious, recourse could be had to real, non-simulated markets and to letting their feedbacks reconcile allocation and distribution. This is done (to summarize the workings of delicate mechanisms rather radically) by the touch of the invisible hand acting on some out of a large number of separate, decentralized decisions, each of which had best be relatively small. Under state capitalism, the marginal touch of the invisible hand can only perform what is expected of it, if the managerial bureaucracy is made severally to maximize the separate profits of a large enough number of "profit centres." This, in turn, means that bureaucrats must be exposed to the incentives and penalties dealt out by the sellers of labour and the buyers of goods, rather than by the state. Asked to serve two masters, the success of the bureaucracy would then depend on how well it served one of them.*73


Bureaucrats would increasingly find themselves in the anomalous position of quasi-owners, deriving a measure of autonomy and security from the market success of the enterprises or profit centres they managed. No totalitarian state in its right mind can risk condoning such an evolution, the less so as the resulting political threat is to its tenure while the advantages of greater economic efficiency accrue in part, if not wholly, to its subjects. The on-again-off-again history of experiments with decentralization, markets, self-regulating mechanisms in the economic management of socialist states, is strong circumstantial evidence that totalitarian regimes seldom lose sight for long of the "primacy of politics." They do not, except in absent-minded moments, let their security of tenure be jeopardized for the sake of pleasing shoppers.*74


Yielding to the temptations of market socialism would take care of the consistency of allocation with distribution through decentralized decision-making, inspired by money and markets. This, in turn, would generate a new inconsistency between the imperative need that people (including the managers) should be dependent on the state, and the economic mechanisms which would restore some independence to some of them.


Any mechanism, however (even if it could be politically neutral and innocuous, in the manner of networks of docile computers), under which resource allocation is subjected to what people want, is at bottom a surrender of some of the state's hard-won power. The rational state, finally possessing and intending to hold on to the extensive power afforded by the joint monopoly of arms and capital, should seek a method of adjustment involving no such surrender. Rather than letting junk food, porno-pop video, amphetamines, socially wasteful private motorcars and other deleterious trash be produced because people wanted them, it can produce "merit goods" and cause people to want them instead.*75


Adjustment to the resource allocation the state wants must then take place, if at all, through the bending of people's tastes, mode of life and character to what they are offered. It may be a slow process to make them actually like, say, wholemeal flour, national defence, Schönberg's music, sensible hard-wearing clothes, public transport (and no traffic-choking private cars), fine government buildings and fully standardized housing. While letting time and habit do such slow work as they will, the state can advance more rapidly towards these objectives through a short cut. It can directly attack the habit of choice itself, from which many of its troubles are derived, by no longer paying people with the universal voucher, money.


Having money provides wide scope for choice and trains people in its exercise. Specialized vouchers you can only spend on a much narrower class of goods, only on lunches, the education of children, transport, vacation accommodation, medical care and so on, restrict the scope of choice; they also help unlearn the habit. As a perhaps secondary convenience, they render consumer demands somewhat easier to predict for planning purposes. More fundamentally, they transfer part of the power over the disposal of incomes from the recipients to the state, which can within reasonable limits vary the "mix" of vouchers and can, consequently, shape the kind of life people will live. Vouchers, therefore, provide direct satisfaction to the state which wishes to have its subjects live in a particular way, say healthily, for whatever reason, because it is good for them to be healthy, or because they work and fight better when healthy, or because it just values health.


Anything special vouchers do, the truck system will do better. A luncheon voucher or a food stamp at least leaves the choice of the actual food, and an education voucher the choice of school, to personal whim. It recognizes and to some extent even encourages a consumer sovereignty of sorts. Factory and office cafeterias, a range of basic and nourishing foodstuffs at giveaway prices, an allotted dwelling, the sending of children to a designated school and the sick to a specific dispensary, remove some of the remaining occasions for choice and affirm the state's prerogative to decide. Life for the subject becomes simpler, its conundrums fewer and his communal (as distinct from individual and family) existence more all-embracing.


Beyond paying people less money and more selected goods, lies the limiting case where they are not paid at all, but just get their specific needs provided for by the state. Exclusion, with people's access to goods regulated by the money or vouchers they earn, is then replaced by free access: subway tickets are abolished, hospitals do not charge, there is free milk, free concerts and free housing (though not everybody gets all the houseroom he would like), and certain goods which people need but do not want, such as safety helmets or edifying printed matter, are given away to all comers pending the time when all have to come and get them. The frontier between public goods and private goods, ill-marked at the best of times, becomes unguarded, and state planning displays a steady bias in favour of public goods, which will be "over-produced" (at least by the standard of a Pareto-optimum satisfying the taste of a "representative man"—the useful fiction allowing us to pretend, without saying so, that everybody is like everybody else and all are unanimous).


Public goods by their intrinsic character and private goods by virtue of the progressive atrophy of money and markets, are supplied to people as a function of who they are and where they are situated (e.g. citizen, town dweller, mother, student, member of the hierarchy of a given "collective" such as a place of work, school, or housing development, a police officer or bureaucrat of a given rank, etc.), their place in life largely determining their access to goods. Somewhat sweepingly, we can say that they all get what the state considers appropriate to their existential situation. Putting it more directly, they get what they need. It is in this way that the state's rational interest ultimately converges upon the matching ideological tenet—which is a prediction and a command as well—of giving "to each according to his needs."


As ever larger numbers of people get things primarily as a function of their nominal life-situation and rank, rather than as a function of how well they do what they do, however, one systemic inconsistency is resolved at the cost of provoking another. There are always those who positively enjoy certain kinds of effort, say teaching or driving in traffic, and have the good luck of being entrusted with a classroom or a taxi. But why should the rest do what the plan of resource allocation calls for them to do, and why should they do it well when they would rather shirk and bludge? The shape the evolving social system is taking at this point encourages, or at least fails to deter, shirking. Moreover, where people work in groups, the group imposes shirking, a slow rhythm of work or poor workmanship on its members on pain of ostracism, contempt or retaliation against the Streber ("striver" does not convey the ironic hostility of the German term). This phenomenon is an upside-down replica of the sanctions a group needing a high level of group effort will use against the free rider who will not exert himself.


If this inconsistency between the need for effort and the lack of any built-in reason for exerting oneself were not corrected, the state sitting on top of this social structure would be maximizing its potentially accessible ends no better than if it were pushing string.


The corrective move is to enforce the quid pro quo that goes with the provision of needs. If the state looks after people's subsistence, it is hardly justifiable for them to continue owning their labour, withholding it partly or wholly as the mood takes them, and devoting it, if at all, to jobs of their own choosing. In equity, they owe their capacity for effort to the state, so that it may fully be used for the common good.


With general obligations arising from people's status crowding out specific ad hoc contracts, the state ends up owning its subjects. Its task becomes more ambitious and more exacting. Its attention must now extend to matters that used to be non-political concerns settled within civil society (as well as to questions that cannot arise at all except in a totalitarian system), rather along the lines of the all-embracing concerns of the rational plantation-owner in the ante-bellum South:

No aspect of slave management was too trivial to be omitted from consideration or debate. Details of housing, diet, medical care, marriage, child-rearing, holidays, incentives and punishments, alternative methods of organising field labour, the duties of managerial personnel, and even the manner and air assumed by a planter in his relationship with his slaves...*76


Most of the implications of having to run the state as a large, complex and self-reliant plantation, are fairly evident. Some are depressingly topical. They need not be laboured, but only touched upon. There has to be a degree of direction of labour to where it is needed rather than where it wants to go. Educational opportunity has to be allocated to raise and train the people needed to fill the future roles and situations the state expects to create. Armed force, surveillance and repressive capacity have to be doubled and redoubled, as they have to cope not only with political disobedience, but also with sloth, waste and free riding. The state cannot tolerate strikes. Nor can it tolerate "exit," voting with one's feet; the frontier must be closed for keeping its property in, and perhaps secondarily also for keeping any alien, discordant influence spoiling the condition of its property out.


Is this social system at last well-rounded, efficient in operation, perfectly consistent? Is no part of it geared to rub against, let alone clash with the working of another, ultimately breaking up vital innards? Does it deliver the satisfactions of governing—tempting the state to sit back and contemplate its finished design, concerned only with the enjoyment and preservation of its place within it, willing history to stop?


If there is a plausible answer to the question, another and equally speculative book would be needed to argue it. At first glance, however, the prospects for any definitive settlement of outstanding affairs between state and civil society look doubtful—perhaps reassuringly so. In the event the state's striving for self-fulfilment were successfully to issue in a well-managed totalitarianism, the human types (the addict no less than the allergic) which such a system is apt to breed, would before long quite likely frustrate and disappoint the state's expectations. That may indeed be its inescapable predicament, just as it is probably the inescapable predicament of civil society to be disappointed in the state.

The End

Notes for this chapter

If the inputs of all butter-making and gun-making efforts depended on the output of butter alone, there would be (at least) one ideal allocation of the labour force between the dairy and the armaments industries (which, incidentally, would have to start way back with the training of young people to be dairymaids and gunsmiths), ensuring the maximum output of guns. Putting too many people in the armaments industry would reduce the outputs of both butter and guns.

However, gun production is only one of the ends entering into the maximand of the totalitarian state; some of its other ends may conflict with giving people the amount of butter they want, particularly if eating butter makes them more rebellious, or raises their cholesterol level and hence the costs of health care. Beyond these pragmatic considerations, the state may feel that indulging people is bad, and it is not for them to say how much butter they should have.

It could be argued that managers of private capitalist enterprises are also serving two masters, the owner and the customer. However, those who are very successful at serving the latter do not, by their success, endanger the tenure of the former. Managers are not the owners' rivals.
The case of Hungary which despite occasional backtracking has, since the late 1960s, gone quite a way towards decentralized profit maximization, meaningful prices and even the toleration of an undergrowth of private enterprise, is paradoxically enough a possible confirmation of this thesis. If the country is living proof that "market socialism works," it is so by virtue of the trauma of the 1956 rising, suppressed by Russia, which has created a tacit understanding between the regime and its subjects. After its reinstatement by Soviet armour, the Hungarian state had the intelligence to grasp that its security of tenure is assured by geography and need not be doubly assured by the belt-and-braces of a social system where everybody's livelihood is precarious. Civil society, having learnt its lesson, is treating politics with a shrug. Thus, although more and more managers of enterprises and spurious cooperatives, professional people, small businessmen and peasants are building independent livelihoods, there is no parallel rise in demands for political participation and self-government.

In these rare and propitious circumstances, the Hungarian state can safely afford to concede as much economic freedom as it can get past its neighbours and especially, of course, Moscow. The one real constraint is Russian devotion to a number of socialist principles and the mounting irritation of Russian visitors at seeing their conquered colony wallowing in superior standards of life.

Moscow, which has no larger neighbour's friendly tanks to invite in and "normalize" matters should the leading role of the party be challenged by self-confident technocrats, fat peasants, perpetual postgraduates and all the other independents who proliferate without control when the vestiges of decentralized economic power begin to reappear, would no doubt be rash to listen to all the expert advocacy of "economic reforms." It has more at stake than the greater efficiency of a self-regulating economy.

On the other hand, it is less clear why Czechoslovakia, whose peoples received in 1968 an albeit bloodless but no doubt nearly as effective lesson in political geography as did the Hungarians in 1956, refuses to let in the invisible hand to wake up the economy from its comatose sleep. It must be supposed that the national propensity to stay on the safe side, is attracted by the double security of dependent subjects and fraternal aid.

"Merit goods" are considered by the state good for people. If A is a merit good, its supply is to be arranged in such a way that no one should be able to increase his consumption of any non-merit good B by reducing his consumption of A. It must not be possible, for instance, to swap school milk for lollipops, nor for beer for the child's father. This is achieved when school milk is on tap, with every child drinking as much as he wants.

When beef cattle are fed from self-filling feed bins, they are believed to eat just enough. Likewise, when merit goods are on tap, the presumption is that people will consume just what they need. With some important merit goods, this leads to ambiguous outcomes. Free health care and free university education are notorious cases in point. Because of emulation, jealousy or other reasons, the consumption of these goods tends to get out of hand and seems almost impossible to stabilize, let alone to reduce.

Robert William Fogel and Stanley L. Engerman, Time on the Cross: The Economics of American Negro Slavery, 1974, vol. 1, p. 202.

End of Notes


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