Today, as in the past, the marginalist supporters of the “free market” claim that only the market can rationally assign the labor available to society among the various branches of production. Why? Because only the market can price commodities of different use values according to their relative scarcities. They even have a term for it—“consumer sovereignty.” Under capitalism, these bourgeois economists proclaim, the consumer is king.
Among the supporters of this view was John Maynard Keynes. Not just the young economic liberal Keynes, but the Keynes of the “General Theory.”
He wrote in the last chapter:
“…I see no reason to suppose that the existing system seriously misemploys the factors of production which are in use. There are, of course, errors of foresight; but these would not be avoided by centralising decisions. When 9,000,000 men are employed out of 10,000,000 willing and able to work, there is no evidence that the labour of these 9,000,000 men is misdirected. The complaint against the present system is not that these 9,000,000 men ought to be employed on different tasks, but that tasks should be available for the remaining 1,000,000 men. It is in determining the volume, not the direction, of actual employment that the existing system has broken down.”
Paul Baran in the “Implications” strongly disagreed with Keynes on this point as far as monopoly capitalism was concerned, though he seemed to believe it was more or less true for competitive capitalism. According to Baran, even if monopoly capitalism could achieve, with the help of “Keynesian” government spending, something like “full employment” of workers and machines, it would not come close to meeting the rational needs of consumers. In contrast to Keynes, Baran believed that under monopoly capitalism whether nine million out of 10 million workers are employed or the full 10 million are employed, their labor will to a considerable extent be misdirected.
Why did Baran believe that this was so? During the epoch of “free competition”—according to Baran, corresponding to the time of Adam Smith through the time of Karl Marx—the wages of labor were close to biological subsistence, just enough to keep the workers alive and allow them to raise the next generation and little more. This meant that the workers’ consumption was extremely limited. What commodities the workers did get to consume had simple straightforward use values that met their needs to stay alive and raise a new generation. If they hadn’t, capitalism wouldn’t have been possible at all. To this extent, the market mechanism did its job.