Freedom and Economic Order

by Linda C Raeder

  Philosophical materialism, such as advocated by Marx, rejects the primacy of abstract ideas and values and posits instead that concrete or material factors of one kind or another ultimately determine human experience. The young Marx was greatly influenced by Hegel, particularly his dialectic view of historical process. He came to believe, however, that Hegel’s work was flawed by a fundamental error—philosophic idealism. To assume the primacy of ideas, Marx believed, is to put the cart before the horse, as the saying goes. In Marx’s own metaphor, Hegel had it “upside down”; Marx would correct his error, as he said, by turning Hegel “right side up.”[94] Hegel had rooted experience in ideas. The truth of reality, according to Marx, is that personal and social experience is rooted not in “abstractions” such as ideas, ideals, and values but rather concrete material forces.

  Marx’s revision of Hegelianism is embodied in his materialist philosophy of history, the dialectical materialism discussed in a previous chapter. Marxist materialism teaches that particular material facts prevailing in any epoch, namely, the existing status of so-called “productive forces” (technological development), conjoined with existing “relations of production” (freeman/slave; guildmaster/ journeyman; capitalist/worker, and so on) are the primary and ultimate determinants of human experience. Human consciousness—abstract ideas, ideals, and values—is a mere “epiphenomenon,” that is, a byproduct of the concrete relations of production prevailing in any given society. As Marx put the leading idea, “[i]t is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness.”[95]

  Morality, religion, metaphysics, all the rest of ideology and their corresponding forms of consciousness, thus no longer retain the semblance of independence. They have no history, no development; but men, developing their material production and their material intercourse, alter, along with this their real existence, their thinking and the products of their thinking. Life is not determined by consciousness, but consciousness by life.[96]

  Marxist materialism is a species of philosophical determinism, a general class of philosophical viewpoints united by a common conviction that human experience is “determined” by one or another force or forces beyond human control, that is, by something other than individual choice. In the case of Marx, the force in question is economic. Marxism is based upon a thoroughgoing economic determinism: the economic relations and productive forces prevailing within society are said to “determine” (cause) not only the general course of history (dialectical materialism) but also the particular beliefs and values held by members of a particular society. Members of Western society may imagine that they autonomously value individualism, freedom, justice, the rule of law, peace, God, family, and so on, in-themselves and for-their-own-sake. According to Marx, however, this is an illusion. Such ideas and values, he claims, are actually determined or caused by prevailing economic (capitalist) relations and forces of production, by economic status and class interest. The capitalist ruling class, he further maintains, is the actual ruling power in Western liberal society; it thus possesses the power to form its prevailing ideas and values. The dominant ideas and ideals of liberal society, such as individual freedom and individual rights, have actually been devised and propagated by the capitalist ruling class to further its own interests, interests that conflict with those of the workers, the great majority of the populace. Marx recognizes, however, that the capitalists themselves are not fully responsible for the ideas and values they promote; they too are pawns of history, and their views too are determined by prevailing economic relations. Capitalists hold the particular beliefs and values they hold because of their class position, a position which itself is determined by the objective laws impelling history towards its final goal, the establishment of communism. The values of the capitalists, then, are as much the byproduct of their historical class position as those of the hapless workers. All ideas and values, including and especially the ideological propaganda of the capitalist class, can ultimately be traced to the economic forces and relations of production prevailing in a society or epoch.

  Marx’s theory regarding the causal relation between material forces and abstract ideas is related to another well-known Marxian concept—so-called “false consciousness.” False consciousness is a consequence of economic determinism. An individual’s ideas and values are determined by his historical position in a particular economic class within a society characterized by a particular set of productive or technological forces and particular relations of production. Capitalist relations of production, for instance, will lead many individuals raised within a capitalist economy to embrace the value of private property. Indeed they may cling to such a value even though Marx believes he has demonstrated its immorality as well as its transitory or provisional nature in the movement of history. The stubborn refusal to abandon one’s attachment to private property, indeed to claim such property as a natural and unalienable right, is a classic instance of Marxian false consciousness. On the Marxist view, there is no such entity as a trans-historical or natural right to private property. The concept bears no substance but is rather a mere epiphenomenon, a byproduct of prevailing capitalist relations of production, an ideological construct designed to protect the interests of the ruling class. It is mere propaganda.

  False consciousness arises from regarding such capitalist propaganda as truth. The reality, according to Marx, is that concepts such as natural rights are illusions deriving ultimately from the prevailing economic forces and relations that determine ideas and values. Accordingly, the only way to pierce the illusions and delusions of false consciousness is to change the prevailing economic forces and relations that gave rise to them in the first place. The communist revolution will accomplish precisely the needed change. In particular, it will abolish capitalist relations of production, which not only cause false consciousness but, according to Marx, have been rendered historically obsolete by the massive growth in productive forces unleashed by capitalism itself. Because human consciousness is a byproduct of prevailing economic relations, a change in such relations will change human consciousness, will change the way people think, their beliefs, values, philosophy, religion, and so on. The replacement of capitalist with socialist relations of production will not only eliminate all class distinctions, capitalists and workers, bourgeoisie and proletariat, but liberal and capitalist ideas and ideals as well. The causal force of economic relations means that newly established socialized relations of production will ultimately transform the ideas, beliefs, and values of the populace in the direction of socialist ideas and ideals.

  Marx thus anticipates a dramatic and beneficial change in human being. Socialism will produce not only more equal material conditions and a new ideology for the masses but also a new kind of human being. As previously mentioned, “capitalist” man will be superseded by “socialist man”—unselfish, unattached to possessions, willing to employ his unique abilities for the general good. The joint contributions of such newly born men will form a pool of resources unhesitatingly shared among all members of society, according to their need. Human behavior under capitalism—selfishness, possessiveness, individualism, greed, materialism, and so on—is not natural or inevitable but rather a result of capitalist economic relations and ideological indoctrination. Only individuals who cling to the false consciousness developed by their experience under capitalism will have difficulty imagining the glorious future of the human race under socialism. Indeed such individuals may experience not only a dearth of imagination but a variety of other difficulties in adjusting to the new socialist order; in such cases, “reeducation” may prove of value. If educational efforts should fail to transform hearts and minds, those who insist on obstructing progress toward History’s final and inevitable goal may have to be dealt with in other ways.

  The Redistribution of Wealth

  We have seen that many persons persuaded of the moral superiority of the socialist ideal came to realize that
collectivist goals could be achieved not only by revolutionary violence and abolition of private property but also peacefully, especially by a widening of democracy. The central element of the socialist ideal—greater equalization of wealth and material resources—could also be achieved by democratically supported tax and regulatory policy within a framework of nominal private property. Classic communism envisioned exclusive governmental production and distribution of material resources as the best means to realize that ideal. Fabians, Progressives, and fellow travelers came to realize that redistribution of privately produced wealth by a democratically elected government can achieve the same end. The command-and-control procedures of classic economic centralization could be jettisoned in favor of progressive taxation, appropriate regulatory controls on economic activity, and legislative enactment of various entitlement programs.

  Contrary to Marx, then, the attempt to achieve greater equalization of wealth across society does not require the utter abolition of private property and exclusive governmental distribution of resources. A politics of wealth redistribution in the context of nominal private property can also serve that end, at least in the short run. The crucial issue is not the nominal ownership of property—whether assigned to the individual or the state—but rather who actually and ultimately controls the direction and use of resources. Individuals may retain legal rights to their property but have little say in how it is actually employed. In the United States, for instance, elected officials determine tax and regulatory policy and also enact programs that provide material benefits (entitlements) to certain citizens. Government determines not only the amount of income citizens are permitted to retain (tax policy) but also how taxed wealth will be spent (government spending) and perhaps even how retained income must be employed (regulation and other legislative mandates). Despite retaining nominal ownership of the resources affected by such governmental policies, the individuals who produced them no longer have actual control over their allocation or use. Such decision rights have rather been transferred to government. We have previously noted the inadequacy of the textbook definition of socialism—“public ownership of the means of production.” Socialism exists, in practice if not in name, whenever government, and not private individuals, controls the direction of resources within society. The fact that private individuals may retain nominal ownership of such resources is irrelevant. The great insight of the English Fabians, American Progressives, and their modern-liberal descendants was to recognize that socialism by any other name is still socialism.

  Redistribution may be formally defined as the transfer of wealth from net taxpayers to net tax beneficiaries by means of the political process. Net taxpayers are those who pay more in taxes than they receive in government benefits; net tax beneficiaries, conversely, receive more in government benefits than they pay in taxes. Contemporary governments in the United States and many Western democracies are essentially huge machines of redistribution so defined. Governments, federal, state, and local, collect enormous amounts of taxes, micromanage economic activity through tax and regulatory policy, and devise myriad entitlement programs. So-called “entitlements” are more or less equivalent to positive rights to various material goods and services, for instance, welfare, food stamps, Medicaid, public housing, Aid to Families with Dependent Children, and so on. Such programs are financed by transferring revenue obtained from taxpayers to those persons eligible for the government benefits. The two groups may, in principle, coincide, that is, it is theoretically possible that every taxpayer receives as much in government benefits as he contributes in taxes. Such coincidence, however, is highly improbable and thus the definition of redistribution previously stated, that is, legal transfer of wealth from net taxpayers to net tax beneficiaries. Some people pay more in taxes than they receive in benefits, and vice versa. The former group materially supports the latter; the latter benefits at the expense of the former, receiving the fruits of the net taxpayers’ productive activity in the form of legislated entitlements, subsidies, bail-outs, and so on. As previously remarked, there are winners and losers in a politics of redistribution. The ascendancy of such a politics over the course of the twentieth century has thus created a “class struggle” in American society but not the kind envisioned by Marx. The relevant class struggle in contemporary society is not between capitalists and workers but rather net taxpayers and net tax beneficiaries.

  The United States, like most other Western democracies, employs a system of progressive taxation, which involves taxing relatively higher income at a higher rate than the rate applied to relatively lower income. The political redistribution of wealth is generally thought to involve a transfer of resources from more affluent to less affluent members of society, accomplished, in part, by progressive taxation. In 2012, for instance, the top one percent of all income earners in the United States paid about forty percent of all federal income taxes; it is unlikely that this one percent received forty percent of the benefits distributed by the federal government. The top five percent of all income earners paid about seventy percent of all federal income taxes; it is again doubtful that this five percent received seventy percent of federal benefits. Almost fifty percent of all Americans pay no federal income taxes at all yet many persons within this group probably receive federal entitlements of one form or another. Those with relatively lower income also receive additional federal subsidies in the form of the so-called “Earned-Income Tax Credit” and similar devices. Such are the results of a progressive federal income tax and a democratic legislative process. By such means wealth is routinely transferred from one group to another by both federal and state governments (insofar as the latter also engage in a politics of redistribution). Political redistribution of wealth is an effective tool, at least in the short run, for advancing the classic socialist goal—greater equalization of material wealth—or, as one high official in the American government recently expressed it, “spreading the wealth around.”[97]

  The public generally believes that the political transfer of wealth flows from the “richer” to the “poorer,” a belief often encouraged by the rhetoric of politicians and political parties. Such, however, is not necessarily the case. Wealth can be politically redistributed to any group designated by the government, whatever its economic status. Such can be achieved not only by tax and entitlement policies but other governmental measures as well, including direct legislative subsidy, awarding of government contracts, expansion of the federal work force, foreign aid, and many others. The redistributive apparatus of government is not confined to transferring income from the relatively wealthy to the relatively poor but also transfers wealth from relatively poorer to relatively wealthier citizens. We previously discussed the so-called “corporate-welfare state” in the context of crony capitalism. Certain major industries receive enormous governmental subsidies and bailouts, funded by taxpayers, many of whom possess relatively limited income. Massive amounts of taxpayer funds, for instance, are redistributed from taxpayers to politically influential corporations, campaign donors, and special-interest groups (e.g., Solyndra, AIG, General Motors, Fiskars, private military contractors, agribusiness, and similar beneficiaries of governmental largess). Organized or “Big Labor” is yet another major beneficiary of political redistribution. Labor unions are comprised not only of industrial and service workers but also increasingly of governmental workers such as employees of federal, state, and local governments, teachers unions, police unions, and the like, all of whose income is paid for by taxpayers, many of whom earn far less than those on governmental payrolls. The relatively poor, like all other members of society, also pay state sales taxes, which are generally regressive, that is, represent a larger percentage of a poorer person’s income than a wealthier person’s income.[98]

  The essential point is that redistribution of wealth in the United States, commonly thought to involve a transfer of wealth from “rich” to “poor,” is not in fact confined to that result. Tax revenue is also used to send well-compensate
d IRS agents on lavish taxpayer-funded jaunts to exotic places, to bail out wealthy corporate giants like AIG, and subsidize the risky ventures of a Solyndra and other politically privileged corporate interests. Hence the importance of differentiating net taxpayers from net tax beneficiaries. A working mother of limited income may conceivably be subsidizing the activities of mega-corporations controlling multibillion dollars of assets.

  The Funding of Government

  To further understand how redistribution of wealth is achieved in a liberal-democratic political order such as the United States, it is necessary to discuss the means by which the activities of government are funded. All government programs and policies, from salaries of Supreme Court justices to government-funded research on the alcohol consumption of Argentinian homosexuals, must somehow be financed.[99] Government is neither a god who creates ex nihilo nor a magician who waves a magic wand and creates resources out of thin air. If government is to provide entitlements or other material assistance it must obtain the financial means to do so. If government is to engage in “public works” such as building bridges and repairing highways, it must obtain the material resources needed to build a bridge, repair a highway, and so on. Resources, as has been extensively discussed, do not grow on trees. The fact of scarcity or limited resources applies to government or public resources as well as private resources; as the popular expression has it, “there is no such thing as a free lunch.”[100]