Read this article to learn about the views of Fabian Socialism on Economy!
A common charge generally levelled against the Fabians, and it is correct, that they did not approach the subject coherently or systematically, rather eclectically.
Some of the members of the society adhered to the market economy, others flatly rejected it. In the thirties of the twentieth century, when Keynes adumbrated certain principles to fight depression and arrest growing unemployment, some Fabians did not hesitate to show allegiance to the Keynesian economics. Simultaneously, others were sceptical about it.
Some of the Fabians were convinced that state control was the only way out and hence planning was essential. Many refused to pin their hopes on planning and state control.
Elizabeth Durbin is perfectly right when she says in her essay Fabian Socialism and Economic Science that there is no consistent body of thought which could properly be described as Fabian economics. Nonetheless, continues Elizabeth Durbin, a distinctive Fabian approach to economics can be traced.
In the middle of the eighties of the nineteenth century Sydney Oliver, Bernard Shaw and Sidney Webb first made a concerted effort to thrash out certain principles which would guide the socialism of Fabian brand. But at the very outset the point they made clear was that they were rejecting Marxian economic principles. Graham Wall as later joined the group and whole-heartedly supported the anti-Marxian approach. The leadership fell upon Webb and Shaw. Originally, Shaw laid his faith on Marxian economics and later on he shifted his allegiance. The tangible result of the efforts was Fabian Essays.
In the introduction to the essays Shaw categorically announced that the writers of the essays were all social democrats. Shaw also explained in the introduction the Fabian economic basis for socialism.
He said that the members of the society proceeded “with a common conviction of the necessity of vesting the organization of industry and the material production in a state identified with the whole people by complete Democracy.”
Shaw propounded the theory of marginal productivity. He accepted the Ricardian theory of economic rent or surplus value. He said that rent or surplus value could accrue to all the factors of production, to land and labour.
He rejected the labour theory of value and advocated the exchange value. He wanted to say that the value of commodity was determined by the free play of demand and supply and not by the amount of labour needed for its production.
What Shaw said about Fabian political economy is nothing new. He took the side of Ricardian economic theory and rejected Lockean labour theory of value. Whereas, Marx accepted it. The fact is that Shaw’s views about economic functions of state do not suggest socialism.
Shaw has summarized the Fabian socialist economic policy in the following words:
“What the achievement of socialism involves economically is the transfer of rent from the class which now appropriates it to the whole people. Rent being that part of produce which is individually unearned, this is the only equitable method of disposing of it.”
What is the method which purports to transfer the wealth concentrated in the hands of a few to the hands of the whole society? This is the common ownership of property. Let us quote Webb “the gradual substitution of organized cooperation for the anarchy of competitive struggle.”
Webb’s words “anarchy of competitive struggle” is very significant. The Fabians admitted the evils of capitalist economy and monopolistic competition. Capitalism, according to Fabians, was the chief source or cause of large scale poverty and suffering of men. But they did not predict that capitalism would collapse.
They had no intention to recommend an intensive class struggle for its destruction. Socialism could be achieved through gradual process, parliamentary initiative and, finally, people’s conscious efforts arising out of propaganda launched by Fabian Society.
The Fabians admitted that capitalism was associated with periodic slumps and recesses. But because of these slumps capitalism could not be overthrown. It would meet a natural death or be cut to size if socialist programmes were implemented successfully.
Both Shaw and Webb conceived that socialism would be achieved through nationalisation, municipalisation and expanding governmental control over the economic affairs. These three methods were designed to signal the end of laissez- faire.
Democracy to the Fabians was not simply political—it was both social and economic. Particularly, they emphasized the economic aspect of democracy.
A society characterized by exploitation cannot be called truly democratic. Shaw described the aim of social democracy in these words “to gather the whole people into the state, so that the state may be trusted with the rent of the country, and finally with the land, the capital and organisation of the national industry—with all the sources of production, in short, which are abandoned to the cupidity of irresponsible private industrialists.”
Summarizing Fabians’ approach to neoclassical economics Elizabeth Durbin contends “Neoclassical analysis was central to the Fabian case against Marx and for collective ownership. However, there were problems with this approach which a more sophisticated understanding would later reveal. For it is impossible to measure rent, and the early Fabians were confused between the payments due to the factors of production and the income going to families”.
The Great Depression of the thirties of the 20th century threatened the economic arid political stability of capitalist countries. At the same time, the then Soviet economy, through state control and planning, achieved miraculous success and that impressed a number of Fabians.
The Webbs were so much impressed with Soviet success in the economic field that they wrote a book Soviet Communism – a New Civilization? In this book they advocated state controlled economy and adoption of planning as potent methods of attaining socialism.
In the thirties of the twentieth century the Fabians were influenced by another thought. In 1936, J. M. Keynes published his epoch-making work General Theory of Employment, Interest and Money.
As a result of depression the expansion of economy shrank to a considerable extent. People’s purchasing power fell remarkably. The unemployment reached a stage that was unprecedented.
The growth of economy was so discouraging that common people and even the big policymakers and administrators could not find a single ray of hope. At this juncture of time the Fabians thought that J. M. Keynes’s suggestion could provide solution and they forthwith accepted his proposals. The Fabians accepted the Keynesian theory of full employment. To arrest growing unemployment Keynes urged upon the government to expand spending.
The Fabians saw in this Keynesian proposal the intervention of government and also the cornering of capitalism. The Fabians further thought that the government spending would offset the insufficient private spending.
However, Fabians did not share Keynes views on capitalism. There were many Fabians who opposed Keynes’s individualism. After the Second World War (1939-1945) the economic condition of Britain underwent drastic changes. The unemployment and inflation were mounting day by day.
The Labour Party came to power in 1945 after the war and it showed no resistance to Fabian philosophy. The socialist principles of Society were incorporated by the Labour Government into its future programme. Side by side the postwar economic situation created an atmosphere for free discussion.
The Fabian Society commissioned Arthur Lewis to write a book on the economic perplexities of the moment. Lewis performed the duty by writing The Principles of Economic Planning. Lewis argued that the crucial issue was whether the state should operate through the price mechanism or in supersession of it.
The real choice was between “planning by inducement” and “planning by direction”. The Labour Government, guided by Fabian philosophy, ultimately decided to make enough room for the private enterprise and this signaled the advent of mixed economy in fact the Fabian Society was the creator of mixed economy which was later on accepted by India’s Planning Commission and politicians. The central idea of such a system is both the state and private enterprises will be allowed to play important role.