New Social Paradigm Is Vital After Marx
[Reprinted from Land & Liberty, April-May
MOST ANALYSTS, in commenting upon the recent events in Eastern
Europe, seem to take it for granted that two alternatives only are on
offer: ''capitalism'' or ''socialism''.
There has indeed been a certain amount of speculation that new forms
of economic organisation might emerge, but these, it is assumed, would
be pick-and-mix systems, favoured, perhaps, as a means of easing the
transition from socialism, by societies fearful of exposure to the
full rigours of capitalism raw in tooth and claw.
Liberals in the West, hoping that something better could evolve in
the post-communist world, might envisage a system like that in Western
Europe, but with a higher proportion of "socialism" in the
Not everyone would agree that Marxism is finally and unequivocally
discredited. It remains a powerful force in Africa and Latin America.
Ideologically, the African National Congress appears to be committed
to Marxism and Nelson Mandela has declared he is in favour of
widespread nationalisation in South Africa.
Elsewhere, Marxists are attempting to retrieve their intellectual
position by claiming that what has been happening in Eastern Europe is
a perversion; if only the doctrine had been followed as laid down by
Marx himself, all would be well.
Marxists, therefore, are urged to hold fast to their faith and await
a fresh opportunity to put his ideas into practice.
THE MARXIST project was an attempt to remedy the evils of "capitalism",
a system of economic organisation which led to exploitation of the
masses. Although Marx tended not to be explicit in defining his terms,
this understanding of what is meant by "capital" and "capitalism"
is almost universally accepted.
Like most economists since, Marx appears to have conflated capital
and land, and seems not to have regarded land as an entity in itself.
Crucial to Marxist economics and social theory are two hypotheses.
The first is Marx's Labour Theory of Value, which asserts that the
value of an object was directly related to the labour that had gone
into its production. The second is the belief in the perfectibility of
human nature: given an ideal environment, humans would be naturally
Both ideas are seriously flawed. Take the labour theory of value.
Objects which no--one wanted could be very valuable merely because
they had taken a great deal of effort to produce.
Although it is common experience that the value of an object is
usually proportionate to the labour that had been put into its
production, the labour is not in itself the cause of the value. Labour
and value are indeed related, but the value of an object is the
labour which someone is prepared to give in order to acquire it.
Marx's labour theory of value allows of no mechanism for the direction
of production. Instead of markets, production has then to be managed
by "the community -- in practice, by bureaucrats.
The Marxist belief in the perfectibility of human nature poses even
greater difficulties. Let us accept, for the moment, the idea that in
a perfect society, people would be naturally good. But the only people
available to create such a society are the imperfect humans of our
present society, and how could such imperfect creatures produce the
ideal environment? The Christian notion of Original Sin encapsulates
This does not leave us in a situation that is without hope, but makes
it essential to acknowledge that people attempt to satisfy their
desires with the least effort and, as a corrollary, that they will not
exert themselves unless some desire is satisfied in doing so.
People might climb mountains, but they will travel to the foot of the
mountain by the easiest route. On this view, the best economic
organisation which could be achieved would be one in which people
stood to gain as little as possible from being dishonest.
IF CAPITALISM has succeeded in delivering the goods, it is because it
has allowed the market mechanism to operate relatively freely. Prices
act as a signalling device, directing both production and consumption,
and allocating productive resources in ways which most closely satisfy
Of course, not all desires can be satisfied by the market mechanism.
It would not be possible to construct a decent society by relying
solely on the market, which, of its nature, is unable to produce what
might be termed "public goods". It is not within the power
of any individual to purchase a road, a frequent train service, a
sewerage system, clean air, universal access to the law, and so on.
Nor can the market be relied upon to deliver goods such as education
for the poor or care for the dying. At this point, the market
mechanism fails, and hence capitalism also. Undiluted capitalism does
not deliver public goods.
But recall our definition of "capital": "man-made
goods set aside for future production", "land" is a
To recognise land as distinct from capital provides a useful analytic
tool, as it becomes possible to discern a further element in the
economic systems of the West, related to the institution of land
Although, in most countries, the use of land is governed by
limitations such as planning control, the allocation of land is,
broadly speaking, governed by the market. Farmers grow crops. to suit
their soil, and the most intensively used land is that in the centre
of cities. To this extent, the market promotes the most efficient use
of land as a productive resource.
It is the presence of a community which gives value to land. Whenever
people occupy land in a settled manner, rent arises, because everyone
recognises that some sites are better than others. In the past, some
societies have managed to even out the differences by holding the land
in common and allocating it so that everyone had portions of both the
best land and the worst. A similar result might be achieved by
collecting all the rents and sharing them out equally among all the
members of the community.
UNDER THE economic systems of the West, the rent of land is privately
appropriated. This leads to a partial failure of the market mechanism
when it becomes advantageous to hold land out of use speculatively, as
if it were a commodity.
This deprives everyone of its use. A variety of harmful phenomena
follow as a consequence: boom/slump cycles, periods of large-scale
unemployment, low pay, scarcity of housing and great disparities in
Indeed, most of the problems of concentration of power and claims on
wealth can be attributed to the private appropriation of the rent of
land -- all of the evils of what is termed "capitalism".
It is significant that the greatest poverty is to be found in those
countries that possess the richest natural resources. Natural
resources give rise to rent, and if this is privately appropriated,
those who claim it are in a position of great economic power.
IT IS particularly unfortunate that Marx, in his critique of
capitalism, considered land and capital as a single entity. This
served to obscure the nature of the "capitalist" system.
Marx was then forced to aggregate the wages of supervision, interest
and rent, and regard them all as "profit" -- surplus value,
the fruits of exploitation. From this source, there arose also the
Marxist confusion over the rights of private ownership of property.
If the two elements of "capitalism" -- free markets and the
private appropriation of the rent of land -- are separate and
distinct, it is possible to envisage an economy organised to permit
the first but not the second.
It would not be any kind of mixture of "capitalism" and "Marxism";
such a concoction would be rather like being slightly pregnant,
because, in the final analysis, Marx's Labour Theory of Value allows
no place for markets.
From what has been said, it should be clear that, so far as economic
organisation is concerned, capital and production should be privately
owned and controlled. Markets deliver the goods that people want,
which include many things that bureaucrats can never even begin to
Yet the private appropriation of the rent of land is something which
ought not to be tolerated, because the rent of land is created by
society as a whole. The community dimension must be applied to land,
which, in reality, belongs to the people. "Landowning is, in any
case, no more than a "bundle of rights" and a legal fiction.
So far as economics is concerned, the most important of these rights
is the landowners' claim on rent. In this connection, it is of
interest that, in Britain, the Sovereign holds the land on behalf of
the nation, and freeholders are precisely that: "holders".
Formal public ownership of land is not required to put matters to
rights, since the important thing is what happens to the rent. As much
of the rent as the community desires can collected through the tax
system. The rent of land could, indeed, be the main source of public
The allocation and use of land is, on the whole, probably best left
to the market, with an effective planning system to enable the
community to intervene as it desires - which is, in any case, much
more easy to achieve if a system of land value taxation is in
Moderate levels of land value taxation are levied in a number of
countries, and experience indicates that the higher tax, the greater
the benefit and the more widely distributed the economic
opportunities. The Hong Kong system of Crown Leases has, to some
extent, achieved a similar result and is a major reason why be the
colony has prospered.