If we now accept a pure labor theory of value, or what might better be called a “theory of the total product of labor,” then we must deny the productivity of capital ownership. That is, we must deny that the capitalist, through the kind of ownership or control they enjoy, can increase society’s product by means of their activities.
In fact, Marx stated that there was a kind of “labor of management” that contributed to the product like any other labor. However, he denied that the institution of private property contributed to the product, and this is in fact the core of the controversy. If we regard the total product as mechanically produced by the aggregation of specific acts of labor, then, evidently, property as such has no function, although management may have a role to play.
We saw earlier that the definition of a structure of implicit grants is based on the concept of a norm, from which the existing system of welfare distribution represents a divergence. The real problem in the Marxist controversy, therefore, is whether there are other forms of social organization that are as productive as the system of organization based on private property.
This question cannot really be answered a priori. In fact, it may not be suitable for a definitive answer, simply because we do not know all the alternative forms of social organization. We certainly cannot rule out the possibility of some social invention or mutation, not yet emerged, that could in fact be more productive, in some acceptable sense of the word, than an organization based on private property.
For the moment, the case against private property, at least in some limited and controlled form, must be regarded as “not proven,” in the words of the old Scottish verdict.
For now, a wide range of types of social organization are developing. The ideal types of pure capitalism, based on the minimum necessary public sector to provide limited public goods and security for private property, and pure socialism, based on state ownership and administration of all economic resources, are abstract concepts with no examples in the real world.
Instead, we have a great variety of intermediate states, which are in fact quite difficult to classify within this simple range. In many respects, for example, capitalist West Germany resembles communist East Germany more than it resembles the United States, or East Germany the Soviet Union.
Of course, the critical question is: what do we mean by the productivity of institutions? We must answer this question in dynamic terms. One test is whether institutions produce real economic growth. This is not necessarily the same as an increase in GNP per inhabitant, although that is at least a point from which to begin attempting to measure the realities of true net welfare growth.
Since some countries with a high degree of capitalism and other countries with a high degree of socialism have experienced economic growth, it is clear that the evaluation of economic and social institutions by these criteria may easily be highly ambiguous. In reality, our evaluations may depend much more on criteria that do not enter economic statistics than on those that do.
With respect to equality and the distribution of real incomes, especially the real economic welfare of households, free-market societies and what might be called “enterprise socialist” societies, such as the Soviet Union and Eastern Europe, and even North Korea, are not significantly different once differences in their levels of development are taken into account.
In some respects, income equality depends more on the nature of the product mix and the technology of society than on its formal institutions, or even on its grants economy. A society with automobiles for almost everyone, mass-produced clothing, developed agriculture with abundant food, and mass-produced housing is almost inevitably egalitarian compared with a society at earlier stages of development, in which only a very small proportion of society can even be middle class.
With respect to consumer goods, it is quite likely that socialist countries are less egalitarian than capitalist countries, simply because the latter are generally richer. Socialist countries are still at the stage in which an automobile, for example, is a privilege of the few.
Housing built in the 20th century, both in capitalist and socialist countries, is clearly egalitarian. We now build apartment blocks or large suburbs rather than palaces, and it is likely that both socialist and capitalist countries at the same level have approximately the same proportion of people living in what might be called “below-standard” housing and “below-standard” environments.
Historically, the entire discussion between capitalism and socialism, at least of the conventional kind, seems to have ended in a draw. The reason for this is that the labor theory of value is simply wrong. The product is not produced merely by labor, but by an enormous interaction of people within the communication system, some of which may be organized through private property and exchange, and some through an economy of public grants.
