The Open Society and Its Enemies (Princeton Classics)

by Karl Popper

(c) A policy of telling them that there is only one way to improve things, that of the complete conquest of power.

Such a policy amounts to doing the work of the enemies of the open society; it provides them with an unwitting fifth column.

It is high time for us to learn that the question ‘who is to wield the power in the state?’ matters only little as compared with the question ‘how is the power wielded?’ and ‘how much power is wielded?’

We must learn that in the long run, all political problems are institutional problems, problems of the legal framework rather than of persons, and that progress towards more equality can be safeguarded only by the institutional control of power.

The defence of democracy must consist in making anti-democratic experiments too costly for those who try them; much more costly than a democratic compromise … The use by the workers of any kind of non-democratic pressure is likely to lead to a similar, or even to an anti-democratic, counterpressure—to provoke a move against democracy.

After all, since the revolution was bound to come, fascism could only be one of the means of bringing it about;

the destruction of democracy through the fascists could only promote the revolution by achieving the ultimate disillusionment of the workers in regard to democratic methods.

Fascism was, essentially, the last stand of the bourgeoisie.

According to Marxist doctrine, capitalism is labouring under inner contradictions that threaten to bring about its downfall. A minute analysis of these contradictions and of the historical movement which they force upon society constitutes the first step of Marx’s prophetic argument.

Marx believes that capitalist competition forces the capitalist’s hand. It forces the capitalist to accumulate capital. By doing so, he works against his own long-term economic interests (since the accumulation of capital is liable to bring about a fall of his profits). But although working against his own personal interest, he works in the interest of the historical development; he works, unwittingly, for economic progress, and for socialism. This is due to the fact that accumulation of capital means (a) increased productivity; increase of wealth; and concentration of wealth in a few hands; (b) increase of pauperism and misery;

production on a very large scale is in general capable of employing more specialized machinery, and a greater quantity of it; this increases the productivity of the workers, and permits the capitalist to produce, and to sell, at a lower price. ‘Large capitalists, therefore, get the better of small ones … Competition always ends with the downfall of many lesser capitalists and with the transition of their capital into the hands of the conqueror.’ (This movement is, as Marx points out, much accelerated by the credit system.)

the capitalist is forced to accumulate or concentrate more and more capital, in order to survive; this means in practice investing more and more capital in more and more as well as newer and newer machinery, thus continually increasing the productivity of his workers.

the concentration of more and more wealth in the hands of the various capitalists, and of the capitalist class; and along with it goes the reduction in the number of capitalists, a movement called by Marx the centralization4 of capital (in contradistinction to mere accumulation or concentration).

three of these terms, competition, accumulation, and increasing productivity, indicate the fundamental tendencies of all capit...

The fourth and the fifth terms, however, concentration and centralization, indicate a tendency which forms one part of the conclusion of the first step; for they describe a tendency towards a continuous increase of wealth, and its centralization in fewer and fewer hands.

The other part of the conclusion, however, the law of increasing misery, is only reached by a much more complicated argument.

The tendency towards the accumulation and concentration of wealth, which Marx observed, can hardly be questioned. His theory of increasing productivity is also, in the main, unexceptionable.

But in regard to the tendency towards the centralization of capital in fewer and fewer hands, matters are not quite so simple.

we can now concentrate our attention entirely upon Marx’s derivation of the other conclusion, the prophetic law of increasing misery. Three different trends of thought may be distinguished in his attempts to establish this prophecy. They will be dealt with in the next four sections of this chapter under the headings: II: the theory of value; III: the effect of the surplus population upon wages; IV: the trade cycle; V: the effects of the falling rate of profit.

Marx’s theory of value, usually considered by Marxists as well as by anti-Marxists as a corner-stone of the Marxist creed, is in my opinion one of its rather unimportant parts;

The idea of the so-called labour theory of value9, adapted by Marx for his purposes from suggestions he found in his predecessors (he refers especially to Adam Smith and David Ricardo), is simple enough. If you need a carpenter, you must pay him by the hour. If you ask him why a certain job is more expensive than another one, he will point out that there is more work in it. In addition to the labour, you must pay of course for the timber. But if you go into this a little more closely, then you find that you are, indirectly, paying for the labour involved in foresting, felling, transporting, sawing, etc. This consideration suggests the general theory that you have to pay for the job, or for any commodity you may buy, roughly in proportion to the amount of work in it, i.e. to the number of labour hours necessary for its production.

But there is, or so at least it appears, always something more stable behind these prices, a kind of average price about which the actual prices oscillate10, christened the ‘exchange-value’ or, briefly, the ‘value’ of the thing. Using this general idea, Marx defined the value of a commodity as the average number of labour hours necessary for its production (or for its reproduction).

The next idea, that of the theory of surplus value, is nearly as simple. It too was adapted by Marx from his predecessors. (Engels asserts11—perhaps mistakenly, but I shall follow his presentation of the matter—that Marx’s main source was Ricardo.) The theory of surplus value is an attempt, within the limits of the labour theory of value, to answer the question: ‘How does the capitalist make his profit?’ If we assume that the commodities produced in his factory are sold on the market at their true value, i.e. according to the number of labour hours necessary for their production, then the only way in which the capitalist can make a profit is by paying his workers less than the full value of their product. Thus the wages received by the worker represent a value which is not equal to the number of hours he has worked.

This surplus value is appropriated by the capitalist and is the sole basis for his profit.

The capitalist possesses a monopoly of the means of production, and this superior economic power can be used for bullying the worker into an agreement which violates the law of value. But this solution (which I consider quite a plausible description of the situation) utterly destroys the labour theory of value. For it now turns out that certain prices, namely, wages, do not correspond to their values, not even in a first approximation.

With the help of another simple but brilliant idea he succeeded in showing that the theory of surplus value was not only compatible with the labour theory of value but that it could also be rigidly deduced from the latter. In order to achieve this deduction, we have only to ask ourselves: what is, precisely, the commodity which the worker sells to the capitalist? Marx’s reply is: not his labour hours, but his whole labour power.

Marx thus arrived at the following result. The true value of the worker’s whole labour power is equal to the labour hours needed for producing the means of his subsistence. Labour power is sold for this price to the capitalist. If the worker is able to work longer than that, then his surplus labour belongs to the buyer or hirer of his power.

the more a worker can produce per hour, the fewer hours will be needed for the production of his subsistence, and the more hours remain for his exploitation. This shows that the basis of capitalist exploitation is a high productivity of labour.

my criticism of the theory will show the way in which the value theory can be eliminated from all these investigations. I am now going to develop this criticism; its three main points are (a) that Marx’s value theory does not suffice to explain exploitation, (b) that the additional assumptions which are necessary for such an explanation turn out to be sufficient, so that the theory of value turns out to be redundant, (c) that Marx’s theory of value is an essentialist or metaphysical one.

(a) The fundamental law of the theory of value is the law that the prices of practically all commodities, including wages, are determined by their values, or more precisely, that they are at least in a first approximation proportional to the labour hours necessary for their production.

the buyer simply buys as cheaply as he can, and that the seller charges as much as he can get.

it is a mechanism of supply and demand which, under free competition, tends to give force16 to the law of value.

an excessive supply of labour power on the labour market; and it is this excessive supply which, according to Marx, prevents the rise of wages18:

(b) Now this passage shows that Marx himself realized the necessity of backing up the law of value by a more concrete theory; a theory which shows, in any particular case, how the laws of supply and demand bring about the effect which has to be explained; for instance, starvation wages.

On the other hand, it is clear that the laws of supply and demand are not only necessary but also sufficient to explain all the phenomena of ‘exploitation’ which Marx observed—the phenomena, more precisely, of the misery of the workers side by side with the wealth of the entrepreneurs—if we assume, as Marx did, a free labour market as well as a chronically excessive supply of labour.

(What is not so clear, and not explained by Marx either, is why the supply of labour should continue to exceed the demand. For if it is so profitable to ‘exploit’ labour, how is it, then, that the capitalists are not forced, by competition, to try to raise their profits by employing more labour? In other words, why do they not compete against each other on the labour market, thereby raising the wages to the point where they begin to become no longer sufficiently profitable, so that it is no longer possible to speak of exploitation? Marx would have answered—see section V, below—‘Because competition forces them to invest more and more capital in machinery, so that they cannot increase that part of their capital which they use for wages’.

(c) Before leaving this discussion of the value theory and the part played by it in Marx’s analysis, I wish to comment briefly upon another of its aspects. The whole idea—which was not Marx’s invention—that there is something behind the prices, an objective or real or true value of which prices are only a ‘form of appearance’20, shows clearly enough the influence of Platonic Idealism with its distinction between a hidden essential or true reality, and an accidental or delusive appearance.

the tendency towards increasing misery operates, according to Marx’s own analysis, only under a system in which the labour market is free—in a perfectly unrestrained capitalism.

once we admit the possibility of trade unions, of collective bargaining, of strikes, then the assumptions of the analysis are no longer applicable, and the whole prophetic argument breaks down.

For collective bargaining can oppose capital by establishing a kind of monopoly of labour; it can prevent the capitalist from using the industrial reserve army for the purpose of keeping wages down; and in this way it can force the capitalists to content themselves with lower profits.

But we see, too, why this cry must open up the whole problem of state interference, and why it is likely to lead to the end of the unrestrained system, and to a new system, interventionism25, which may develop in very different directions.

The derivation of the historical law of increasing misery is thus invalid. All that remains is a moving description of the misery of the workers which prevailed a hundred years ago, and a valiant attempt to explain it with the help of what we may call, with Lenin27, Marx’s ‘economic law of the movement of contemporary society’ (that is, of the unrestrained capitalism of a hundred years ago). But in so far as it is meant as an historical prophecy, and in so far as it is used to deduce the ‘inevitability’ of certain historical developments, the derivation is invalid.

The amended theory of surplus population and of the trade cycle may be outlined as follows. The accumulation of capital means that the capitalist spends part of his profits on new machinery; this may also be expressed by saying that only a part of his real profits consists in goods for consumption, while part of it consists in machines. These machines, in turn, may be intended either for the expansion of industry, for new factories, etc., or they may be intended for intensifying production by increasing the productivity of labour in the existing industries. The former kind of machinery makes possible an increase of employment, the latter kind has the effect of making workers superfluous, of ‘setting the workers at liberty’ as this process was called in Marx’s day. (Nowadays it is sometimes called ‘technological unemployment’.)

If we assume, to start with, that for some reason or other there is a general expansion of industry, then a part of the industrial reserve army will be absorbed, the pressure upon the labour market will be relieved, and wages will show a tendency to rise.

But the moment wages rise, certain mechanical improvements which intensify production and which were previously unprofitable because of the low wages may become profitable (even though the cost of such machinery will begin to rise). Thus more machinery will be produced of the kind that ‘sets the workers at liberty’. As long as these machines are only in the process of being produced, prosperity continues, or increases. But once the new machines are themselves beginning to produce, the picture changes.

But the disappearance of many consumers must lead to a collapse of the home market. In consequence, great numbers of machines in the expanded factories become idle (the less efficient machinery first), and this leads to a further increase of unemployment and a further collapse of the market. The fact that much machinery now lies idle means that much capital has become worthless, that many capitalists cannot fulfil their obligations; thus a financial crisis develops, leading to complete stagnation in the production of capital goods, etc. But while the depression (or, as Marx calls it, the ‘crisis’) takes its course, the conditions are ripening for a recovery. These conditions mainly consist in the growth of the industrial reserve army and the consequent readiness of the workers to accept starvation wages. At very low wages, production becomes profitable even at the low prices of a depressed market; and once production starts, the capitalist begins again to accumulate, to buy machinery. Since wages are very low, he will find that it is not yet profitable to use new machinery (perhaps invented in the meanwhile) of the type which sets the workers at liberty. At first he will rather buy machinery with the plan of extending production. This leads slowly to an extension of employment and to a recovery of the home market. Prosperity is coming once again. Thus we are back at our starting point. The cycle is closed, and the process can start once more.

In Marx’s day, nobody ever thought of that technique of state intervention which is now called ‘counter cycle policy’; and, indeed, such a thought must be utterly foreign to an unrestrained capitalist system.

Marx investigated an unrestrained capitalism, and he never dreamt of interventionism. He therefore never investigated the possibility of a systematic interference with the trade cycle, much less did he offer a proof of its impossibility. It is strange to find that the same people who complain of the irresponsibility of the capitalists in the face of human suffering are irresponsible enough to oppose, with dogmatic assertions of this kind, experiments from which we may learn how to relieve human suffering (how to become masters of our social environment, as Marx would have said), and how to control some of the unwanted social repercussions of our actions.

The standard of living of employed workers has risen everywhere since Marx’s day; and (as Parkes31 has emphasized in his criticism of Marx) the real wages of employed workers tend even to increase during a depression (they did so, for example, during the last great depression), owing to a more rapid fall in prices than in wages.

None of the Marxist theories so far discussed do even seriously attempt to prove the point which is the most decisive one within the first step; namely, that accumulation keeps the capitalist under a strong economic pressure which he is forced, on pain of his own destruction, to pass on to the workers; so that capitalism can only be destroyed, but not reformed.