‘People’s Capitalism’

September 17, 1956

The Voice of America has recently been pointing out that capitalism in the United States today is a “people’s capitalism.” Even in the special sense that millions of Americans now share in the direct ownership of industry, and many more millions in its indirect ownership, the phrase is amply justified.

The major facts were summarized in Newsweek, July 30. This country now has some 10 million direct share owners in business. Nearly 70 million Americans hold savings accounts and 115 million, life-insurance policies.

The new campaign of the U.S. Information Agency, judging from the angry reaction it has provoked from Soviet sources, must be effective. A “people’s capitalism” takes over their own favorite adjective (without falling into the childish tautology of a “people’s democracy”), and boldly defends what the Communists have always vilified as their real archenemy, capitalism.

VARGA’S ARGUMENTS

The Soviet leaders have now called on their top economist, Eugene Varga, to step in and lead the fight against American capitalism. This year he has written two articles in a weekly journal called the New Times, published in ten different languages. As these articles total more than 5,000 words, it is impossible here to deal in detail with his tortured statistics and arguments. Insofar as his arguments are capable of any summary, they reduce themselves to two: (1) It isn’t true that ownership of American industry is widely spread. (2) But if it is true, what of it?

In the first part of this argument he collides hopelessly with solid facts. In the second part he trips over his own contradictions. It is particularly unwise of him to argue that: “[Private American stock] ownership is of course illusory; the workers have absolutely no influence on the operation of the corporation as a whole or of its individual plants, including those at which they themselves are employed.” Such an argument is dangerously likely to call the Russian workers’ attention to the completely illusory character of their own supposed “people’s” ownership of the factories in which they work, and to the lack of influence they exercise, as workers or individuals, on the overall Soviet production plan or on the conditions of their own employment.

“But even if a worker does own some shares,” continues Varga, “can he be considered a capitalist? Of course not. Dividends are a negligible quantity in the budget of any worker, however highly paid.” In fact, he might have continued, dividends are not only a small percentage of the workers’ income, but of the whole nation’s income—precisely because wages bulk so large. Out of total U.S. personal income of $306 billion in 1955, only $11 billion was in the form of dividends, while $217 billion came in the form of wages and salaries.

It is at this point especially that Varga gets snarled in his own Marxian dialectics. He considers it outrageous that the salaries of half a dozen U.S. corporation executives should range from $213,000 to $686,000 a year. But as an undeviating Marxist he would have to argue that even so these executives must be underpaid, because they are after all hired hands, and the corporation owners must be withholding for their own profit the “surplus value” that the salaried officials produce. And as Varga does in fact insist on the long-discredited Marxist fallacy of “surplus value,” he should never forget that his logic compels him to regard a television star getting $500,000 a year as being “exploited,” and the owner of a barbershop with one hired assistant as being an “exploiter.”

MAXIMIZING INCENTIVE

But wholly apart from the preposterousness of Marxist theory, I hope the Voice of America will extend its argument to show not merely that present-day American capitalism is a “people’s capitalism,” but that all capitalism (in the sense of a really free, competitive private enterprise society) has always been a “people’s capitalism.” It tends to give to labor what labor creates, to capitalists what capital creates, and to entrepreneurs what their coordinating function creates. And by doing so it maximizes the incentives to production and increases individual freedom as it multiplies the total wealth to be shared.