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Artificial Scarcity
Technological capacity to produce enough to satisfy everyone's needs already exists globally and
has done so for many decades. Yet needs continue to remain unmet on a massive scale. Why? Quite
simply because scarcity is a functional requirement of capitalism itself.
Production today is not primarily geared to satisfy human needs but "effective demand"--when
"consumers" are able to buy goods at a price which will enable enterprises producing them to realise
a profit. If what people can afford falls short of what they need, increasing output to satisfy the latter
would cause prices to fall--to the detriment of profit. So the need for profit conflicts with the
satisfaction of human needs.
Profit is not essentially a measure of technical efficiency. It is sometimes argued that the market's
"hidden hand" guides enterprises towards the most efficient allocation of resources by bankrupting
those failing to respond appropriately to its price signals. According to this argument, resources are
inherently scarce and the market provides the best, if not the only, available mechanism for
ensuring they are not wasted (which would aggravate scarcity). But the yardstick of "efficiency" used
here is not something external to capitalism but intrinsic to it. An enterprise is judged to be
"efficient" to the extent that it is profitable.
That means its revenue exceeds its cost. However, this can create the illusion that profits are made
in the market--by raising prices to more than cover costs. But capitalists cannot just arbitrarily raise
their prices--that could mean losing business to their competitors. In any case, one enterprise's price
increase would constitute another's cost increase (insofar as enterprises supply each other with the
inputs they require), with the resulting reciprocal losses and gains balancing each other in the long
run.
In fact, profits are made in the sphere of production (but only "realised" in the market). The source of
all wealth is human labour applied to natural resources. Those who apply their labour to create this
wealth today (the workers) are employed to do so by the owners of the means of wealth production
(the capitalists). The value of the wealth workers create necessarily exceeds the value of their
working abilities for which they are paid a wage (or salary)--the difference between these two values
being "surplus value", the source of the capitalists' profit.
So profit depends on restricting workers' consumption to what is needed to develop and maintain
their working abilities at the level required. More than that only adds to the wages bill without
producing a commensurate increase in productivity. But what is so vital about profit that makes this
necessary? Not only does it afford capitalists a lavish lifestyle; more importantly, it is the source of
their capital. The more capital they can accumulate out of the profits accruing to them the more
effectively can they compete--by investing in more productive technologies to undercut their
competitors--and thus claim a larger share of the market for themselves. If they did not do this then
their competitors would, and could knock them out of business.
So economic competition between enterprises fuels the drive towards capital accumulation. This in
turn necessitates profit maximisation which expresses itself as a continuous downward pressure on
wages (reinforced by competition between workers on the labour market), insofar as these
constitute costs which subtract from the capitalists' profit. This downward pressure on wages was
once widely thought by Leftists to lead to a chronic and ever-deepening depression. According to this
theory of "underconsumption", the development of the productive forces would result in increasing
quantities of consumer goods swamping the market which workers would be unable to buy back,
thus precipitating capitalism's collapse.
However, any decline in the workers' share of total wealth must represent an increase in the share
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appropriated by the capitalists and hence also their potential demand for consumer goods. It might
be argued that rather than increase their consumption of consumer goods the capitalists could divert
more of their wealth into investment instead, thereby enhancing the productive capacity of industry.
But since such investment will only proceed when there is the expectation of profit this presupposes
the existence of consumer markets capable of absorbing the potential increase in output.
Nevertheless, while growth in productive capacity and market demands tend to balance out in the
long run their normal state is one of "disequilibrium". This generates a continuous process of mutual
adjustment which takes the form of the capitalist "trade cycle". In the run-up to a boom enterprises
expand their productive capacity to meet the surge in market demand. However, blind competition
between them leads to overproduction in some sectors of the economy at first, resulting in falling
prices and a squeeze on profits. Workers are then laid off in these sectors thereby reducing their
demand for the goods provided by other sectors. A ripple effect is thus created which takes its toll on
an expanding range of industries resulting in a generalised recession which only comes to an end
when the conditions for profitable production are restored. As Marx put it: "the last cause of all real
crises always remains the poverty and restricted consumption of the masses as compared to the
tendency of capitalist production to develop the productive forces in such a way that only the
absolute power of consumption of the entire society would be their limit" (Capital III, p.30).
Artificial needs
As well as desiring things we need, we are also encouraged to desire things that we do not need.
Indeed, insofar as there is theoretically no limit to what we are capable of desiring this allows procapitalist economists to argue that scarcity is the "condition of the world". To question why we
should desire such things over and above what we need is to encroach on territory that falls beyond
the scope of traditional economics; it is thus deemed inadmissible from the blinkered perspective of
the economists themselves.
Not that that prevents them from adopting the assumption that human beings are fundamentally
driven by insatiable desires. In fact, the attempt to universalise that assumption by grounding it in
the very nature of human beings was, as Marshall Sahlins argues in his Stone Age Economics, the
ideological by-product of an emerging bourgeois society. Not coincidentally, it went hand-in-hand
with the attempt to downgrade and dismiss earlier cultures as "primitive" and "backward" for not
exhibiting the insatiable desires characteristic of bourgeois society itself. As Sahlins points out, the
bourgeois axiom of scarce resources and unlimited wants can be neatly reversed in the case of our
hunter-gatherer forbears for whom an excess of possessions was not merely disapproved of but
viewed as a positive encumbrance to their nomadic way of life.
It was with the appearance of private property, particularly in its individualistic capitalist form, that
the ideology of scarcity took root. In his perceptive book To Have or To Be, Erich Fromm notes that
private property derives from the Latin word privare meaning "to deprive of" because "the person or
persons who own it are its sole masters, with full powers to deprive others of its use or enjoyment". It
is such deprivation that engenders the pathological desire to possess. For within this individualistic
world-view it is through one's possessions that one attains the power and freedom to be oneself;
one's sense of self-identity and self-worth--in short, one's social status--is tied up with, and
expressed through, one's possessions. This is what Fromm means by a "having" mode of existence
as opposed to a "being" mode.
Crudely speaking, this means that the better-off one is materially speaking the more status one
accrues. However, since it is not the absolute amount of one's material possessions as such that
determines one's position in this status hierarchy but rather what one has compared with what
others have, it follows that economic inequality is a basic precondition for such a system of status
differentiation to effectively operate. In this respect, capitalism not only provides the yardstick by
which this concept of status is measured but also works to ensure an unequal distribution of wealth,
enabling such a system to operate.
So it does not matter how modest one's real needs may be or how easily they may be met;
capitalism's "consumer culture" leads one to want more than one may materially need since what
the individual desires is to enhance his or her status within this culture of consumerism and this is
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dependent upon acquiring more than others have got. But since others desire the same thing, the
economic inequality inherent in a system of competitive capitalism must inevitably generate a
pervasive sense of relative deprivation.
What this amounts to is a kind of institutionalised envy. This is ironic inasmuch as socialists are often
accused of being motivated by the "politics of envy". Nothing could be further from the truth. In fact,
such envy is merely the flip side of the same coin as greed. And it is the idea of greed which
underwrites the myth of scarcity which, in turn, serves to justify the existence of a market which
socialists oppose.
Socially useless production
Socially useless production constitutes a large and growing proportion of economic activity within
capitalism and, as such, contributes significantly to the perpetuation of artificial scarcity--in this case
from the standpoint of supply rather than demand.
Of course, capitalism does not and cannot distinguish between socially useful and socially useless
production. The reason for this is that both are functionally necessary for the realisation of profit. So
for anyone not looking beyond the parameters of capitalism such a distinction will remain obscured.
If socially useful production comprises any form of activity that goes to satisfy real human needs,
socially useless production represents any activity that does not satisfy such needs. The needs that
the latter satisfies are the system's needs. These include not only status needs but operational
needs arising from how the system operates. There is a tendency for capitalism to develop towards
ever-increasing complexity with the consequence that over time its operational needs tend to soak
up ever-larger quantities of resources and human labour. This is exemplified by the growth of moneybased activities to facilitate market transactions (from banking to retailing), reactive/remedial
activities to cope with the social problems thrown up by capitalism (from social workers to trade
unions) and coercive activities to protect or promote the interests of capital (from weapons research
to security firms).
Estimates vary as the proportion of total labour and resources devoted to systemic needs but there
can be little doubt that, particularly in the advanced capitalist economies, well over half the total
labour force is involved in one or other form of socially useless production. This represents a massive
waste of human effort and resources which, if redirected towards socially useful production, could
effectively eliminate scarcity as far as the satisfaction of real needs is concerned. To eliminate
scarcity, however, requires a fundamental switch from production for profit to production for
use--from capitalism to socialism.
ROBIN COX
Wednesday, 1 April 1998
Source URL: http://www.worldsocialism.org/spgb/socialiststandard/1990s/1998/no-1124-april-1998/artificial-scarcity
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