WHO BENEFITS? WHO PAYS?
Discussion of the distribution of goods and bads in society is too often unproductive because of excessive reliance on abstract nouns—democracy, communism, socialism, exploitation, rights, justice, and the like. These great abstractions have been used for so long by so many people with so many different axes to grind that their continued use leads to more cant than sense. (Pardon the use of this antique word, but it is one that should not be allowed to fade away: it is a modification of the word “chant,” and aptly describes a discussion in which sacred words are chanted with little or no thought of their operational meaning. Most public discussions of “responsibility” are mere cant.)
To cut through the cant of “responsibility,” we must ask the double question “Who benefits? Who pays?” This is the first question to ask when a politico-economic system of distribution is proposed. It focuses our attention on operations and their consequences rather than on words. The answer to this double question largely defines the properties of a system. We take it as axiomatic that every social action entails both gain (profit) and cost (loss). We can indicate the way profit and loss are distributed by three alternative verbs: privatize, commonize and socialize. These verbs operationally define the three major distribution paths. Privatize. Profit or loss is privatized when it accrues wholly to an individual (or, with less precision, to a collection of individuals called a legal person, e.g., a corporation). Commonize. Gains or costs that are spread out indifferently over a whole population are said to be commonized. The “commons” of the Sahel, discussed above, is an “unmanaged commons,” in contrast to the type to be mentioned next.
Socialize. When profits and losses are differentially distributed by managers (bureaucrats) among the group that owns the common property we say that the property is socialized. The system that does this may be called “socialism”; it is also called a “managed commons.” A managed commons, though it may have other defects, is not automatically subject to the tragic fate of the unmanaged commons.
(In passing, note that the word “communism” will not be used here because of its ambiguity. Sometimes it refers to socialism, sometimes to “commonism,” a system in which losses are commonized, as defined above. In terms of their consequences socialism and commonism are radically different; we should not allow ourselves to be befuddled by the term “communism,” hallowed though it be by usage.)
What we call private enterprise or “privatism” is a system which, in its pure form, privatizes both profits and losses. Since the decision maker “answers to” himself for the consequences of his decisions, he is responsible in the operational sense. In pure privatism the system may be said to benefit from intrinsic responsibility. (But, as we shall see, pure privatism is rare.)
In sharp contrast to privatism, commonism privatizes the gain but commonizes the losses. The herdsman keeps the gain (increase in his herd) for himself while pushing the losses (in the form of environmental degradation) off onto the entire community. Such a system fails to meet the operational criterion of positive responsibility.
Criticism of the commons may be made even stronger by enlarging the concept of responsibility, following an example set in mathematics more than two thousand years ago. The power of the number system was greatly increased when the human mind conceived the paradoxical idea of negative numbers. The real world presents us with no example of a negative quantity of things or substances. Negative numbers may not be “real,” but they are a great aid in thinking about practical affairs. How would we manage financial transactions without the concept of debt? A debt can be thought of as a negative amount of wealth. We have been so long accustomed to this insubstantial concept that it takes imagination to picture the mental distress of the people who were first confronted with the newly invented negative numbers. The history of mathematics shows that each significant expansion of the idea of number was met with passionate resistance.
The idea of negative responsibility is likewise a paradoxical concept, but an immensely useful one. The unmanaged commons exhibits negative responsibility, since it actually pays the individual decision maker to make the wrong decision. It is this negative responsibility that generates the tragedy.
In socialism both gains and losses are socialized. At first glance this system might appear to be almost identical with private enterprise, with the community replacing the individual as both the actor and the acted-upon. In practice, however, the properties of this system are different, because “the community” is an abstraction, and abstractions can neither make decisions nor be rewarded.
“The state,” “the nation,” or “the community” cannot make decisions: only individuals can. Under socialism, individuals have to be delegated to carry out tasks for the community. That being so we must ask, are the motives of the delegates identical with the desires of the rest of the community? We dare not assume this identity. The uncertainty is basic to socialism.
THE WEDDING OF COMMONIZED COSTS TO PRIVATIZED PROFITS
What is the free enterprise system? Our stereotype of it is of fair competition in the marketplace, in which enterprisers win or lose on the basis of their efficiency in running factories, effectiveness in managing labor relations, ingenuity in devising sales campaigns, and honesty in delivering quality. Some enterprisers win, some lose. Calling the system a “profit system” is misleading, because it is truly a “profit-and-loss system” as far as the competitors are concerned. The general public wins because competition ensures low prices. The great fortunes made by some enterprisers can be viewed as commissions for helping to keep prices down for everyone.
Unfortunately, the truth is not always so simple. A comprehensive history of great business fortunes would show a disconcertingly large number that were made in a quite different way: the enterpriser devised a silent way to commonize costs while continuing to privatize the profits. We will encounter this explanation repeatedly as we probe deeper into the workings of society. The system just described needs a label.
The hidden rules of the game are these: Commonize Costs and Privatize Profits. The result we may refer to as the “Double C-Double P Game,” or even more briefly as the CCPP Game. Such a union of privatism and commonism is not even hinted at in the official apologies for free enterprise. Those who cling to an exalted view of free enterprise should view this union as something of a morganatic marriage. Though unblessed by authority, it is rich in consequences.
Enterprisers never broadcast the information that they are playing the Double C-Double P Game: it would not be in their interest to do so. It generally takes an outside observer to be aware of the truth. An early exception to this rule may be found in the 1556 work of Georgius Agricola, who, in De re Metallica, gave a fair summary of the arguments against mining (from which activity Agricola himself profited). The following translation is by Herbert Hoover:
The strongest arguments of the detractors [of mining] is that the fields are devastated by mining operations, for which reason Italians were formerly warned by law that no one should dig the earth for metals and so injure their very fertile fields, their vineyards, and their olive groves. Also, they argue that the woods and groves are cut down, for there is need of an endless amount of wood for timbers, machines, and the smelting of metals. And when the woods and groves are felled, then are exterminated the beasts and birds, very many of which furnish a pleasant and agreeable food for man. Further, when the ores are washed, the water which has been used poisons the brooks and streams, and either destroys the fish or drives them away.
Commonize costs and privatize profits—but don’t tell anyone. This has been a formula for success for centuries. Though Agricola was not aware of it, some of the most distressing costs of mining are health costs. Until the development of nationalized schemes of compensation in the twentieth century the costs of deteriorated health were “paid” by the miner himself, partly in medical bills but even more in reduced capacity to work and enjoy life.
Premature death has characterized the vocation of mining from the earliest days. Particular causes include chronic lead poisoning, mercury poisoning, the “black lung disease” of coal miners, and poisoning by radon gas in uranium mines. The list is a long one. From prehistoric days to the present, mining enterprisers have prospered at the expense of those who did the actual work. This is true in countries like the United States, where subsurface resources are private property, as well as in countries like Mexico, where the federal government claims all wealth beneath the surface.