Actual economic surplus has been generated in all socioeconomic formations, and while its size and structure have markedly differed from one phase of development to another, its existence has characterized nearly all of recorded history. The magnitude of the actual economic surplus—saving or capital formation—is at least conceptually readily established, and today is regularly estimated by statistical agencies in most countries. Such difficulties as are encountered in its measurement are technical, and caused by the absence or inadequacy of statistical information.
Potential economic surplus, i.e. the difference between the output that could be produced in a given natural and technological environment with the help of employable productive resources, and what might be regarded as essential consumption.3 Its realization presupposes a more or less drastic reorganization of the production and distribution of social output, and implies far-reaching changes in the structure of society. It appears under four headings. One is society’s excess consumption (predominantly on the part of the upper income groups, but in some countries such as the United States also on the part of the so-called middle classes), the second is the output lost to society through the existence of unproductive workers, the third is the output lost because of the irrational and wasteful organization of the existing productive apparatus, and the fourth is the output foregone owing to the existence of unemployment caused primarily by the anarchy of capitalist production and the deficiency of effective demand.
The identification and measurement of these four forms of the potential economic surplus runs into some obstacles. These are essentially reducible to the fact that the category of the potential economic surplus itself transcends the horizon of the existing social order, relating as it does not merely to the easily observable performance of the given socioeconomic organization, but also to the less readily visualized image of a more rationally ordered society.
II
This requires a short digression. Indeed, if looked at from the vantage point of feudalism, essential, productive, and rational was all that was compatible with and conducive to the continuity and stability of the feudal system. Nonessential, unproductive, and wasteful was all that interfered with or was unnecessary for the preservation and the normal functioning of the prevailing social order. Accordingly Malthus staunchly defended the excess consumption of the landed aristocracy, pointing to the employment-stimulating effects of such outlays. On the other hand, the economists of the rising bourgeoisie had no compunctions about castigating the ancien régime for the wastefulness of its socioeconomic organization, and about pointing out the parasitic character of many of its most cherished functionaries and institutions.4
But as soon as the critique of pre-capitalist society lost its urgency, and the agenda of economics became dominated by the task of rationalizing and justifying the victorious capitalist order, the mere question as to the productivity or essentiality of any type of activity taking place in capitalist society was ruled out of court. By elevating the dictum of the market to the role of the sole criterion of rationality and efficiency, economics denies even all “respectability” to the distinction between essential and nonessential consumption, between productive and unproductive labor, between actual and potential surplus. Nonessential consumption is justified as providing indispensable incentives, unproductive labor is glorified as indirectly contributing to production, depressions and unemployment are defended as the costs of progress, and waste is condoned as a prerequisite of freedom. In the words of Marx, “as the dominion of capital extended, and in fact even those spheres of production not directly related to the production of material wealth became more and more dependent on it, and especially the positive sciences (natural sciences) were subordinated to it as means towards material production—second rate sycophants of political economy thought it their duty to glorify and justify every sphere of activity by demonstrating that it was ‘linked’ with the production of material wealth, that it was a means towards it; and they honoured everyone by making him a ‘productive worker’ in the ‘narrowest’ sense—that is a worker who works in the service of capital, is useful in one way or another to its increase.”5
Yet “capitalism creates a critical frame of mind which after having destroyed the moral authority of so many other institutions, in the end turns against its own: the bourgeois finds to his amazement that the rationalist attitude does not stop at the credentials of kings and popes but goes on to attack private property and the whole system of bourgeois values.”6 Thus from a standpoint located outside and beyond the capitalist frame of reference, from the standpoint of a socialist society, much of what appears to be essential, productive, rational to bourgeois economic and social thought turns out to be nonessential, unproductive, and wasteful. It may be said in general that it is only the standpoint which is intellectually outside the prevailing social order, which is unencumbered by its “values,” its “practical intelligence,” and its “self-evident truths,” that permits critical insight into that social order’s contradictions and hidden potentialities. The exercise of self-criticism is just as onerous to a ruling class as it is to a single individual.
As can be readily seen, the decision on what constitutes potential economic surplus, on the nature of nonessential consumption, waste, and unproductive labor, relates to the very foundations of bourgeois economics and in particular to what has come to be called the economics of welfare. Indeed, the purpose of this—perhaps most ideological and apologetic—branch of economic theorizing is to organize our knowledge of the conditions that determine the economic welfare of people. Needless to say, the first and foremost prerequisite for such an effort to be meaningful is a clear notion of what is meant by economic welfare and of the criteria by which states of economic welfare may be distinguished. The welfare economists meet the issue (or, rather, believe they meet it) by referring to the utility or satisfaction experienced by individuals. The individual himself, with his habits, tastes, and preferences, is taken as given. Yet it should be obvious that such a view of the individual is altogether metaphysical, in fact misses the most essential aspect of human history. As Marx remarked in a passage devoted to Bentham: “To know what is useful for a dog, we must study dog nature. This nature itself is not to be deduced from the principle of utility. Applying this to man, he that would criticize all human acts, movements, relations, etc. by the principle of utility, must first deal with human nature in general, and then with human nature as modified in each historical epoch. Bentham makes short work of it. With the driest naiveté he takes the modern shopkeeper, especially the English shopkeeper, as the normal man. What is useful to this queer normal man and to his world is absolutely useful. This yard-measure then he applies to past, present and future.”7
Indeed, in the course of history the individual with his physical and psychic requirements, with his values and his aspirations, has been changing with the society of which he is a part. Changes in the structure of society have changed him, changes in his nature have changed society. How are we then to employ the utility or satisfaction accruing to an individual at any given time as a criterion by which the conduciveness to welfare of economic institutions and relationships is to be judged? If we refer to the observable behavior of an individual, we are obviously moving in a circle. His behavior is determined by the social order in which he lives, in which he was brought up, which has molded and determined his character structure, his categories of thought, his hopes and his fears. In