Capitalism and socialism and the problem of monopolisation
The monopolisation of the capitalist economy at the turn of the 20th century led to social tensions due to the growing gap between the level of remuneration of the labour factor and the profits from capital. Economists, faced with the increasing role of large companies in manufacturing, sought to find ways to solve the problems of poverty and unemployment resulting from the business cycle by calling for income redistribution or state activity to maintain the investment level ensuring full employment.
Hansen argued that in the 19th century the lack of restrictions on the activities of small manufactories and crafts gave people a chance to succeed economically, but in the 20th century this success was increasingly dependent on the possibility of finding a job in great enterprises based in large cities (Hansen, 1947, p. 14). These changes contributed to the increase in the popularity of socialist thought among intellectuals in some parts of the world.
Monopoly was seen as an adverse agent from the point of view of resource allocation in the capitalist and later also in the socialist economy, which was analysed by Zieliński, additionally paying attention to the impact of large enterprises on society.
Zieliński’s approach to this issue is multidimensional and modern, as he analysed the advantages and disadvantages of both private and state monopoly ownership, which is still the subject of discussion held by economists. He also saw the impact of the so-called big business on society, demonstrating the dangers of promoting teamwork skills and sharing common values serving corporations at the expense of individualism. His way of perception of economic phenomena was characterised by a high level of objectivity, thanks to which he did not fall into doctrinairism. In addition to the advantages of socialisation of great enterprises, he called for the introduction of the market mechanism in some specific sectors of the socialist economy.
According to Zieliński, monopoly allows for offering such a quantity of goods, which provides the most profitable price, but by its nature, it does not extort this kind of activity. It is in the capitalist economy that there is a natural assumption that the monopolistic position is accompanied by a monopolistic policy of supply and price, but in the socialist economy, the central planner had the opportunity to order the monopoly, for example, to lease land at prices that ensure the use of the entire land fund to balance supply with demand (Zieliński, 1989, p. 51). In fact, it is in the capitalist economy that the state has a limited impact on the activities of monopolists, whom it cannot force to increase supply (Zieliński, 1989). From this point of view, the state ownership of a monopoly has an advantage over private ownership, provided that the purpose of state officials is to guarantee balance between supply and demand. In real terms, the motives driving the directors of state-owned enterprises did not always coincide with the public interest. This issue will be presented when discussing Zieliński’s view of the misconception of the political economy of socialism concerning human nature.
Zieliński emphasised the advantages of state ownership of monopolies in view of the fact that in the capitalist economy they lead to a wrong allocation of resources by limiting production in order to maintain high prices, which means that the number of factors of production employed in the monopolised industries is smaller than it could be under the conditions of ideal allocation (Zieliński, 1989, p. 126). In this connection, the unemployed factors of production must be employed in other sectors of the economy, where they have lower marginal productivity or remain unemployed. This raises serious social problems in the form of forced unemployment.
Moreover, Zieliński believed that in the socialist economy it was possible to eliminate typical monopolistic practices and even to launch an effective competition mechanism as a means to obtain data for economic calculation (Zieliński, 1989, p. 54). He claimed that creating a competitive environment in socialism could be easier than in capitalism (free competition should be understood as close to a model of perfect competition within the neoclassical paradigm). If it is accepted that an ideal allocation of resources means their use as ensured by perfect competition, the capitalist reality differs significantly from it, mainly because of the aforementioned monopolistic phenomena, the existence of differences between the individual and social costs of the management process and the use of advertising, which will be discussed later (Zieliński, 1989, p. 125).
It should be indicated that Grzelońska, who was a member of the Wakar school, thinks that both Zieliński and the other Wakar school followers were quite naïve in their belief in the existence of wise and objective authorities who know what is rational and who want to take rational assumptions into account when making economic decisions. According to Grzelońska, none of these occurs in real life. Perhaps Zieliński’s opinion on this issue would have been modified had it not been for the premature death of the scholar.
Zieliński, however, believed that only the nationalisation of large enterprises could bring the expected results in the spheres of production volume and employment. He criticised state interventionism in the capitalist economy: “An effective control of the economic life on a national scale without ownership of basic means of production is extremely difficult. There is only one alternative, either control becomes fictitious, or the rights arising from private property are increasingly violated and restricted. Even if there is no formal nationalisation, this kind of ‘private property’ increasingly goes away from what we used to associate with this concept” (Zieliński, 1989, p. 62).
Zieliński saw that the state in the capitalist economy can distort the market performance by affecting the decisions of private enterprises, which take into account also regulations in addition to economic data. The objective of maximisation of profit (or value of the company) as well as the public interest understood in this case as the maximisation of supply by the monopolist is not fully achieved. That is why Zieliński considered it necessary to nationalise monopolies. In particular, he claimed that the uncontrolled market mechanism never guarantees full employment (Zieliński, 1989, p. 126). Interestingly, he also claimed that unemployment does not only have disadvantages, but also an advantage. It facilitates human resources policy in large corporations, which is in favour of increased labour productivity (Zieliński, 1989, p. 21). However, this kind of productivity could not dominate the social objectives of the planned economy.
The problem of unemployment was a very important argument for Zieliński in favour of the state ownership of large enterprises. According to the political economy of socialism, attempts made by capitalist governments to prevent unemployment posed a threat of strengthening monopolies through public funds. Therefore, it was thought that nationalisation was a better solution. This opinion seems justified in view of the fact that, during the First World War, and in particular during the crisis of the 1930s, corporations began to cooperate more closely with governments (Pirou, 1939, p. 106).
Zieliński emphasised that in market economies monopolisation also leads to an unequal distribution of wealth and income (Zieliński, 1989, p. 128). Government funds to prevent falling production and employment levels often get to the richest, reinforcing inequalities and the strong position of monopolists on the market. The nationalisation of monopolistic enterprises gives the opportunity to control those sectors of economy which are far from the perfect competition model and are not conducive to the efficient allocation of resources (taking into account all the shortcomings of state ownership of manufacturing factors, as described by J.G. Zieliński).
The issue of eliminating inequalities through nationalisation is controversial and unacceptable today, but worth noting, especially in the light of Poland’s economic situation in the pre-World War II period. In this context, it is the views of J.G. Zieliński that should be analysed.
In Poland at that time, the monopoly position belonged to landowners, and the industry had only just begun. The industrialisation of Poland after World War II was a huge challenge due to the war damage, which only added to the previous economic problems, in particular regarding the agrarian nature of the Polish economy and the role of craftsmanship. In this connection, Zieliński indicated that the introduction of a centrally planned economy in Poland was not entirely in line with Marx’s views: “Contrary to Marx’s indications that the prerequisite for successful nationalisation is a previous high degree of concentration of industry, during the first three years of the six-year plan different, small private companies were nationalised or they were taken over by ‘labour cooperatives.’ Even the craft sector, which was really significant in less developed countries of Eastern Europe, was not spared, not excluding Poland, and burdened with excessive taxes” (Zieliński, 1981, p. 23).
According to Zieliński, in order to solve the problem of shortages and poor quality of goods, proper conditions for the development of small private companies and crafts plants should be created, which would launch natural market forces. The author noticed that small businesses responded quickly to market signals, thanks to which they efficiently adjust prices and production structure to the needs of consumers. The introduction of a centrally planned economy in an agricultural country and a limited role of the private sector, in which large industry did not play such a role as in developed countries, contributed primarily to failures in the area of meeting the needs of the population. Consequently, from the late 1950s, a discussion was held, with some short breaks, on the adopted reform of the economic system; Zieliński also participated in it, criticising the application of direct calculation.
The lack of a long tradition of entrepreneurship and individualism in Poland and the emergence of large state manufacturing plants, where careers were largely dependent on the submission of employees to authorities, made the society passive and deprived of initiative which otherwise generates increased productivity.
Zieliński believed that the development of large corporations in the capitalist system caused problems similar to those found in the socialist economy. These included the issues of human relations, which contribute to efficient production, appropriate management staff and the relative advantages of centralisation and decentralisation in decision-making (Zieliński, 1962, p. 5). He emphasised that large companies combine the hired staff (indispensable use of a complex system of incentives) and the size excluding the possibility of personal control by the owners (Zieliński, 1962, p. 20). The management staff of large capitalist and socialist companies often did not know the specificity of the production process. In the case of entities in the centrally planned economy, the management staff could be politically nominated. On the other hand, in the capitalist economy, some threat was associated with the companies being put under the management of finance specialists in place of technicians, which led to the focus on profit from speculation rather than on profit from production (Pirou, 1937, p. 90).
As the size of companies grew, there was a problem of an increasingly fuzzy ownership structure and an increasing share of the stock market in financing their activities, which was not in favour of the stability of the market economy. It also had specific social effects. Zieliński stated that a traditional entrepreneur was displaced by “the organisation man,” overwhelmed by the understanding of the needs and aspirations of the corporation, which entailed the creation of a new social ethics corresponding to the requirements and needs of the age of corporations, the age of collective-bureaucratic giants (Zieliński, 1962, p. 12). Corporate collectivism in the socialist economy understood as a view opposed to individualism, treating the community as an elementary social unit, is no different from the collectivism of corporations in the market economy. An individual is only an element that creates a larger, “more important” whole, to the interests of which all its activities must be subordinated: “… with the growth of an organisation, there is a natural, not groundless, tendency to proclaim the thesis “a collective body means everything – an individual nothing.”In view of enormous tasks, the contribution of even the most outstanding individual does not affect the final results much, the team is almighty (Zieliński, 1962, pp. 95–96).
One can risk the thesis that the world of individualism, which classical economists fought for, passed away with the emergence of corporations. Zieliński believed that they were characterised by aversion to strong individualities, who are a value to society, and that great production fosters conformist attitudes: “There are a number of questions that socialism, as a system based on a great production, cannot avoid: is this a right trend [demand for conformists], or should it be counteracted and how? (…) What kind of society will develop in the environment considering conformism an asset as well as a sought-after and required feature?” (Zieliński, 1962, pp. 96–97).
This view, in the light of Zieliński’s life experiences, acquires a special meaning because it shows the attitude of a scientist who was far from conformism. The mere fact of working with Wakar proves the lack of willingness to uncritically submit to the dominant doctrine.