Ethics of Capitalism and Socialism
Added: 2017-10-30
Added: 2017-10-30

 [from:] A. Heydel, Kapitalizm i socjalizm wobec etyki, Kraków 1927.



Another set of facts that are morally troubling for us are the phenomena related to the inequality of property and income. Apart from misery – the extreme poverty which makes life an agony – we also commonly encounter vast differences of wealth. While some people “do not know what to do with their money” and are satiated and bored, others lack the resources to satisfy their most justified needs and have nothing to lighten up or sweeten the grey toil of everyday life.

It is obvious that this state of affairs also raises doubts, makes our conscience uneasy and causes jealousy, thus introducing anxiety into social relations.

The removal of wealth inequality in practice is not difficult. It would be enough to divide all property and give everyone an equal share. Further, by exerting the necessary pressure on some (e.g. taxes) and giving subsidies to others, one can preserve this levelled state, maintaining roughly perfect equality.

Should this be done?

Looking at the problem of poverty, I am of the view that the levelling of property should not be implemented. By hindering economic development, this would impede the elimination, or at least alleviation, of poverty. However, one could take another ethical position. It could be argued that eliminating inequality is a moral postulate of greater importance than eliminating poverty. Justice is quite often understood in this way. “Justice would be secured if all were equally unhappy, as well as if all were equally happy” – these are the words of Bertrand Russell. One could go even further and ask if human happiness does not arise out of equality.

I would like to consider these ethical arguments. The question facing us is as follows: is economic inequality between people wrong? And should we attempt to eliminate this inequality? I want to narrow down the area of my study as far as possible and therefore I ignore elements that are only indirectly related to the issue at hand, i.e. all further political, social, cultural and educational consequences of the relationships discussed. I will not deny that there are phenomena that are more indirect results of economic inequality and that raise serious doubts. From the point of view of a sociologist, politician, philosopher of culture or educator, we could of course cast doubt on the moral value of great fortunes and incredibly high incomes. One would like to ask whether they are not just as dangerous and demoralising as poverty. It appears that humans are not fit to live in extreme conditions. Similarly as there is a narrow temperature range in which a living organism can thrive, and similarly as temperate climates have proved to provide the best basis for the development of culture, likewise moderate wealth, which enables us to satisfy our cultural needs but does not liberate us fully from work, is the best guarantee of a man’s moral health. This was put very well by a doctor who said: “Wealth is not harmful only to those rich who live like the poor by maintaining moderation and continuing to work”. – This is all true. However, the above considerations are rather political and social in their nature than strictly ethical. Temporarily disregarding these issues, I would like to return to the heart of the matter. It is a question whether and within what limits is inequality of property and income permissible – not because of its further effects, but directly from the point of view of justice.

Let us take a closer look at the positions taken on this matter by both opposing camps – those of capitalism and socialism. Capitalism, as we well know, takes the position that a free-market economic system, which is based on private property, distributes wealth among individuals fairly. As a result, it rejects any schemes aimed at the artificial levelling of property and income. In contrast, the socialist camp unanimously condemns the present system of wealth distribution and wishes to restructure it. As concerns the manner of division itself, two essentially different postulates have been voiced within this camp. Collectivism considers it appropriate to give everyone the amount of goods corresponding to the work they perform, while communism proposes to distribute goods not according to the individuals’ work but according to their needs. All socialist fractions seek to remove differences in the individuals’ economic status. Theoreticians consider the “economic levelling programme” to be “the proper fabric of socialist doctrines”.

But is there no conflict between this programme and the division rules mentioned above? What is the relationship between these principles and the goal of economic equality? To what extent can they eliminate economic inequality once implemented?

The principle “to everyone according to his needs” will of course not lead to equality if applied by individuals. If, on the other hand (and this is what is intended under communism), it is applied by a coercive organisation, it will not be enacted at all, since it is impossible to set standards that meet the individuals’ subjective needs. Moreover, this principle, which completely severs the relationship between the individuals’ production and their participation in the wealth produced, is obviously so absurd in practice that it can be disregarded. This is not a road to economic equality. In ethical terms, it has little to do with that postulate as well. This is simply Utopian wishful thinking which would bring paradise on earth if implemented; however, it does not account for a fundamental economic fact, which is that human needs are unlimited while goods and production capacity are scarce. Any attempts to apply it would result in nothing but a wave of laziness and idleness submerging the entire society. Idleness is the only need that we would really fully satisfy in this way.

Of more importance is the other, collectivist, principle – to everyone according to his work. This principle could be applied in practice more or less. But does it lead to economic equality? In one aspect, it certainly brings us closer to economic levelling. Namely, its application, which results in means of production being socialised, precludes the private accumulation of capital. The accumulation of capital is among the basic factors driving economic inequality, so this principle would hinder great economic differences. Does it, however, also remove the possibility of serious differences in income? This depends on how we view work. If we understand work as effort or discomfort associated with gainful activity then undoubtedly the individuals’ income would have to be levelled to a great degree as well. The range of limits to effort (i.e. subjective discomfort) is relatively narrow. I do not think that individual capabilities (bar a few exceptions) could be too different in this respect. A man can probably endure a few times as much effort as another individual, but no more. However, work efficiency is something different. Individual productivity, the ability to deliver useful results, render services and produce objects that others need or desire almost cannot be compared between individuals. Edison’s inventiveness, Matejko’s painting talent or even Kiepura’s voice cannot be replaced or decomposed into units of work performed by thousands of run-of-the-mill technicians, poor painters or untalented singers. The same applies, probably to an equal degree, to all, even the most “economic” work. In a system built on private property, reward for work is dependent on the individuals’ needs and on free competition, which results in huge income inequalities. Can these be reduced by introducing a different reward system? Socialism proposes a plan-based framework under which work would be rewarded by the society understood as a whole.

The main difficulty in implementing this plan is that results are impossible to measure using any kind of scheme, even if proponents of socialism claim otherwise. But even if we ignore this fact and assume, against all evidence, that approximate standards of social value of work can be determined and the value of an hour’s work can be measured applying these standards, even then rewards for work would necessarily be so unequal that any economic levelling between individuals would be out of the question. The distribution of income according to the value of work results does not lead to equality. Should we not rely on the amount of effort instead – on the cost of the disutility of work as it is called by economists?

Such a distribution of wealth would remove the differences arising from the individuals’ innate abilities and would result in the elimination of so-called “personal rents”. Would it be ethically justified? The answer is not easy.

From the point of view of an individual, it may appear justified that the discomfort, the energy expended and the damage to health that accompanies his work should be compensated. But is this position acceptable to society as a whole? Should society compensate the individual for the losses suffered or rather reward him for the services rendered? When discussing economic phenomena, we do not face any problems that would be unknown in other areas of social life. There is a perfect analogy here with the assessment of the individuals’ merits and the awards received by them for their non-economic work. Honours, orders, titles and annuities are the rewards one can expect from society. But for what? Are they given for merits understood as the sum of the individual’s toil and discomfort? This element is only accounted for to a limited extent. A bureaucrat who expended a great deal of effort to prepare fair copies of documents for several decades can only expect a modest medal of merit. On the other hand, an artist or scholar who enjoyed his work greatly and an inventor who had just one moment of inspiration or otherwise chance allowed him to make a great discovery may expect the highest honours and the public will be outraged if their achievements are not sufficiently appreciated. Even where subjective effort is taken into account, it always plays a secondary role. Of decisive import is talent, invention and creativity – all those qualities that are not related to an individual’s moral merits.

All these reward-related problems have an interesting analogy in the area of negative rewards for human deeds: in the field of punishment.

The theory of retribution applied in criminal law closely corresponds to rewarding individuals not for their effort but rather for the results of their work. It proposes that the punishment fit the harm done to society without considering the offender’s intentions. Today’s theory of criminal law distances itself increasingly from this point of view, demanding that intentions be taken into account (was the act deliberate or unintentional?) as well as elements that affect the offender’s liability (environment, education, mental faculties, etc.); this corresponds to some extent to taking into account elements such as personal merit, effort, etc. when rewarding individuals. Nevertheless, the harm principle cannot be replaced by another that only accounts for the perpetrator’s personal guilt.

If this is not possible in the case of offences, an analogous system for rewarding desirable actions will be even less feasible.

Indeed, any attempt to compensate for innate differences and to reward effort instead of efficiency would result in heavy losses from the point of view of society as a whole. This system would induce all outstanding individuals to remain idle. Given our current scientific knowledge, the only measure of effort could be the time worked. Under these circumstances, the only benefit for more talented individuals would be working less within the same number of hours, earning a “laziness rent”. However, even assuming that the development of psychological techniques, etc. could remove this obstacle, we must still take into account that the principle of rewarding effort rather than results is unacceptable from the point of view of society, since it would result in adverse selection, discouraging talent. It is impossible to apply in the same way that students at school cannot be classified solely according to their diligence rather than ability. Such a method of selection, whether at school or in social and economic life, would result in the domination of swots with little talent, which would be extremely detrimental to culture.

So much for work, but it needs to be kept in mind that work is not the only factor that results in the multiplication of wealth. Other such factors are completely immeasurable:

so neither justice nor social utility can justify the complete levelling of incomes. “Absolute equality of incomes… would indeed be a typical application of the shallow precept fiat justicia, ruat coelum” [Dalton, The Inequality of Incomes, London 1925].

One of the most important ethical issues in economic life is related to another principle, which only partly coincides with the principle of equality.

According to Walras, society should ensure that individuals have equal starting conditions, but individuals should strive for inequality of their position. This looks like an aristocratic point of view, but is in fact democracy understood properly. From the perspective of culture – its sustainability and development – it is important that creative and talented individuals achieve a fitting social position and rewards.

Thus the principal ethical postulate is that society reward the results of work rather than the discomfort and individual cost caused by it. A system that can ensure such adequate rewards is a just one. Those who receive little in this system, i.e. those who are incapable and do not work skillfully, can only blame fate – or themselves. Current social arrangements are equitable.


Adam Heydel (1893–1941) – economist and political writer, representative of the so-called Cracow Economic School in interwar Poland, a critic of statism and advocate of liberal solutions. He was born on 6 December 1899 in Gardzienice near Radomsko. He studied law at the Jagiellonian University where he gained his PhD in 1922. In parallel with his studies, from 1919 to 1921 he worked at the Ministry of Foreign Affairs and then dedicated himself to academic work, obtaining a habilitation in political economics in 1925. From 1927, he taught economics at the Jagiellonian University and in 1929 he became associate professor. He also taught at the School of Political Sciences and at the Cracow Higher School of Commerce. He was a strong supporter of economic liberalism, whereas politically he was associated with the moderate wing of the nationalist camp. He was a vocal critic of the statism and interventionism that dominated the economic policy of interwar Poland. In the years 1930–1931, he was president of the National Club in Cracow. His university chair was taken away from him in 1933 for his harsh criticism of the Piłsudski camp and he only returned in 1937. From 1934, he was the Head of the Institute of Economics of the Polish Academy of Arts and Sciences. In November 1939, he was arrested by the Germans together with a group of Jagiellonian University professors and spent several months in the Sachsenhausen camp. He was released in February 1940, but in January 1941 he was arrested again and sent to the Auschwitz concentration camp where he died on 14 March 1941.Most important works: Podstawowe zagadnienia ekonomii [Basic Issues of Economics] (1925), Kapitalizm i socjalizm wobec etyki [Ethics of Capitalism and Socialism] (1927), Czy i jak wprowadzić liberalizm ekonomiczny? [Whether and How Economic Liberalism Should Be Introduced] (1931) Pojęcie produktywności [The Concept of Productivity] (1934), Teoria dochodu społecznego [A Theory of Social Income] (1935).

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