Cooperative Enterprise and Market Economy: Chapter 19

Introduction & Preface | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | Chapter 12 | Chapter 13 | Chapter 14 | Chapter 15 | Chapter 16 | Chapter 17 | Chapter 18

Translator’s note:

The previous chapter ended with an endorsement of State support combined with the autonomous self-organization and development of the subordinated economic categories and social groups as the path to democratization of the market. The author’s task here is to explain the functioning of a democratic market and how market democratization, actual perfect competition, might be achieved in the face of monopoly, oligopoly, centralization, and other anti-competitive phenomena.

One quibble: Luis Razeto uses the term “extraordinary profits” both for profits gained through temporary market advantages, such as exclusive use of new technology and for profits gained through capitalist exploitation of labor as such. “Subordinating labor power, [capital] obtains extraordinary profits by remunerating labor power only for one part of its marginal productivity and appropriating for itself the other part, which it accumulates precisely as capital.” But isn’t this just standard, ordinary, capitalist exploitation of labor power? The profit is only extraordinary if it is the product of some kind of special temporary advantage, as in the other examples he gives.

- Matt Noyes
 

Chapter 19

On the Functioning of a Democratic Market

1. - Economists use the term “perfect competition” to designate a hypothetical market situation in which different economic actors – farmers, business owners, shopkeepers, workers, consumers – are “price takers” with no ability to influence overall supply and demand. They are atomized, with no power over the existing conditions of the market and no influence on the combined functioning of the economy. Economists have insisted that such a situation of perfect competition has never existed and can never exist in practice; what we encounter in reality is a range of degrees of “imperfect competition.” Nonetheless, this does not invalidate the concept as a hypothetical model that we can use to evaluate the degree of competitivity or “perfection” of a determined market.

It is widely held that in the early days of market capitalism competition was widespread and that, as a result of capitalism’s tendency toward concentration, competition gradually gave way to monopoly. The reality of the historical process is different, as Paulo Sylvos-Labini has demonstrated. Using the information provided by economic historians as well as statistical studies, he concludes that the capitalist market has passed through different phases.1

The first stage was characterized by the existence of monopolies in new production and by capitalist domination over corporations through the putting-out system. The development of communications and transportation, along with the diffusion of the techniques of industrial production, later enabled a progressive growth of competition, which we can define as a second stage in which competitive capitalism prevailed. The unification of markets, the spread of protectionism, the search for greater technical efficiency on the basis of economies of scale, the concentration of financial and industrial capital, and the struggle to control demand, starting at the end of the 19^th century led to the formation of great monopolies and quasi monopolies which dominated the third phase in the evolution of the capitalist market.

The growing intervention of the State in the economy and in production, the development of financial capital held by highly concentrated economic groups, and other concrete phenomena led to what Sylvos-Labini calls an oligopolistic market. He distinguishes between two fundamental situations. First, differentiated oligopoly, in which there are a large number of enterprises, apparently in competition, but with very different degrees of power over the market because the producers are very much differentiated with respect to consumers and there is no substitutability of products. The second, concentrated oligopoly, is that in which large, highly concentrated industries produce goods that are homogeneous or hardly distinguishable, and a smaller number of enterprises control most of the market. In either case, he argues, “Oligopoly... is not a special and abstract case; it is, in one shape or another, the most frequent market form of modern economies.”2

It should nonetheless be recognized that the presence of monopolies and oligopolies that progressively concentrate market power does not eliminate competitive small and medium sized economic units from the economic scene. In a capitalist economy, the concentration of capital and industry can never be absolute; in every stage there will be a certain degree of imperfect competition. What we must understand is how to identify the existing relations between concentration and market forms. The process of concentration increases the market power on the part of large enterprises, be they monopolies or not. A large enterprise controls a relatively large part of the market, and if the number of capitalists is reduced, those remaining can come to agreement to regulate supply and prices. Again, Sylvos-Labini:

It has also been noted that, in many branches of industry, modern techniques gradually have caused an increase, in absolute and relative terms, of the minimum capital required to organize production at sufficiently low cost. This creates a “natural obstacle” to competition. ... It is common knowledge that very large and well-established firms find it much easier to obtain loans or otherwise to dispose of funds than do small, medium-sized, or new firms. It is precisely this which creates an obstacle to competition.3

Now, if on the one hand the free play of market forces in competitive capitalism leads to a gradual concentration of production, thus practically negating the very assumptions of perfect competition, on the other hand we see a parallel phenomenon when it comes to labor power.

Confronted by the dominance of capital, workers organize in unions that, in order to be effective and match the dimension of their capitalist opponents, must become large, with regional, industrial, national and international structures.

Some have denied that this process is the formation of a labor monopoly. The concentration of labor is effective if it is considered as a tendency and not as an established fact, given that the power of organized labor has never been quantitatively majoritarian in any capitalist economy. But the process of monopolization of labor power does not have the same implications when it comes to market concentration as does that of monopolization of capital. In effect, a strong national labor union is a distinct economic subject from other economic groups and constitutes a force whose power is opposed to theirs, such that an economy without strong unions can be more highly concentrated than one that has them. Still, from the point of view of the hypothetical perfectly competitive market, the existence of large labor unions that monopolize – in a position subordinated to capital – labor power is itself an obstacle: by concentrating bargaining power and market power these unions reduce the mobility of Labor as a factor of production and limit, de facto, the power of unorganized workers and of the informal labor force. In any case, attributing the cause of this market imperfection to unionism is absurd, since it it nothing but a defensive response on the part of a subordinated and subjugated economic category in a market dominated by capital.

2. – We present all of these historical and theoretical considerations – as excessively simple and schematic as they are – for the sole objective of showing that the market can be organized in very different forms, that there is no single market logic. Returning to our concept of the determined market we can say that the distinct market situations, from perfect competition to oligopoly, are distinguished by various correlations of social forces. A more concentrated market is more oligopolistic, a market that approximates perfect competition is more democratic.

We should take a moment to consider this last point. We took as our starting point the notion, widely held in economic theory, that perfect competition is a situation in which the economic actors are price takers and do not have any influence over the market. We indicated that such a definition lacks real theoretical meaning: the market is, essentially, a relation of power, a correlation of forces. Prices are never “given” but result from decisions made by economic agents, and each of them has a certain power to set prices. In a concentrated market, the influence of monopolies and oligopolies over prices is visible, since they concentrate a great deal of power. In a highly competitive market, prices are the result of multiple decisions with various intentions that together produce a general result. As the system of prices is the product of all the forces at play, it appears that it does not reflect the will of any single agent, but the decision of each agent always has an effect that is greater than zero.

It is precisely for this reason that the hypothetical situation expressed in the term “perfect competition,” which economists have imagined as the absence of influences on the market, corresponds in reality to a situation in which the market is democratic, dispersed, in which power is highly distributed among all the economic subjects, shared among an infinity of social actors.

This reformulation of the concept of perfect competition does not invalidate the economic theory that the free play of the market in conditions of perfect competition leads to the optimal allocation of resources and the equitable distribution of revenue. This argument has not been refuted by critics of the market economy. What they have done is demonstrate that perfect competition has never existed in practice and that, as such, the theory is not applicable to reality and does not serve to justify capitalism.

We have also demonstrated that capitalist competition leads to the concentration of capital and that as a result it destroys in practice the very assumptions on which the theory is founded. Still, the theoretical model of perfect competition, if we accept the assumptions, remains valid.

The problem, then, is how to create these assumptions in practice? In effect, competition is never perfect – the market is never democratic – where one category dominates and subjugates the others, e.g., where capital organizes and subordinates the other economic categories: labor, technology, community, etc.

Perfect competition assumes the autonomization of the other economic categories and a situation in which they are equal to capital, that is, a new, democratic, relation of social forces guaranteed by “a new ideological, juridical, and political superstructure.”

In sum, the mode of functioning of a democratic market corresponds to that which theory has described as perfect competition. It is in such a market that we can realize the conditions of pure competition, necessary for the optimal allocation of resources, equitable distribution of revenue, and maximization of the social product. That is, maximization of the full potential of the determined economy.

A first condition of perfect competition is the atomization of the market, in the sense that the distinct economic factors (capital, labor, technology, community, etc.) are not monopolized or concentrated in a small number of economic subjects but distributed in a large and growing quantity of independent operators who, precisely for that reason, compete amongst themselves, each seeking to maximize their gains, but with none being able to obtain extraordinary profits.

In a capitalist economy, that is, in a market in which capital presents itself as the organizing economic factor for the large part of economic activities, subordinating all the other factors and instrumentalizing them for its own growth, the market inevitably tends toward concentration, becoming less and less atomized. Subordinating labor power, it obtains extraordinary profits by remunerating labor power only for one part of its marginal productivity and appropriating for itself the other part, which it accumulates precisely as capital. Subordinating technology and remunerating the contributions of technological development at a rate inferior to the marginal productivity of the technological innovations introduced, it once again obtains extraordinary profits until the new technology is not widely adopted. Subordinating consumption, through control over supply and manipulation of demand, capital obtains extraordinary profits by demanding that consumers pay higher prices. Subordinating even the State, capital obtains extraordinary profits by demanding special guarantees, concessions, and privileges that are not provided to everyone.

From the moment this process of concentration of capital appears, the other, subordinated, economic factors naturally tend to defend themselves by means of organization and concentration. Remaining atomized in the face of a factor that is concentrating and accumulating power would put them in an even more disadvantaged position.

Labor power is concentrated in unions, guilds and corporations that manage to impose better conditions by bargaining collectively over the value of their contributions in the factor market.

Technological development defends itself by creating barriers to the diffusion of technological innovation through patents and scientific and technological secrets, establishing unjustified limits on those seeking to participate in specialized professions, and creating hermetic languages that make theoretical apprenticeship and innovation on the basis of practice more difficult.

These are practical forms and mechanisms of concentration and monopolization that the technological factor deploys defensively to protect its own value, different from the ways capital concentrates technology in order to appropriate that factor’s economic contributions.

The difference between the two forms of concentration of the technological factor is theoretically decisive, since the first is effectuated by the factor itself before entering into relation with the capital that acquires it, organizes it productively, and utilizes it for its own benefit.

The defense of consumption – of individuals as consumers of good and services – is seen where capital is concentrated and the “sovereignty of the consumer” is limited. This defense assumes the same form as the concentration that we see in other factors; in the presence of goods and services that are offered by a monopoly and at excessive prices, a strong tendency develops to prefer collective consumption to individual consumption, that is to demand that the goods and services in question be supplied to the community in general or to specific social groups at public expense. However much higher the price of a good or service is compared to other prices, in a concentrated market it is distributed in a progressively less equal way, such that the “...the rise in the price of a good should increase the inequality of its distribution beyond the point tolerated by public opinion, which will then demand either its subsidization and sale below cost or its free provision out of public funds.”4

The State, too, as an economic factor, tends to behave in ways that contradict the demands of perfect competition, when capital dominates the other factors and becomes increasingly concentrated.

That which the mode of perfect competition demands of the State is basically that it guarantee the free operation of the market, that it establish “rules of the game” applied equally to all, and that it prevent the formation of monopolies. But the dominance of capital over the market, translating into functionalization of the State for its own interests, in fact generates tendencies to intervention and non-neutrality of the State, which take various forms. On the one hand, the State defends itself from capital by creating growing instances of control over private economic activities and generating a broad bureaucracy that tends to have its own economic interests and thus acts like a separate “caste” or body. On the other hand, the social groups that represent economic factors other than capital increasingly pressure the State take measures for redistribution in their favor, creating employment, fixing wage levels and securing employment, broadening the spectrum of collective consumption, fixing different tax rates, redistributing income, etc. Instead of being neutral, the State converts itself into an instance of mediation between different interests in a framework of struggle for market control.

All these forms of concentration and monopolization of subordinated economic factors in a market dominated by capital constitute effective limitations on perfect competition, that is, they block the functioning of a hypothetical democratic market. Nonetheless, as we have had occasion to say, in the context of a market which is in practice oligopolistic they often constitute forms of correction in the direction of democracy, as they reduce the power of capital and permit the subordinated factors to recuperate a part of the market power that would correspond to them in a balanced economy. When neo-liberal economic and political thought centers its analysis of the obstacles to the functioning of the free market on these forms of concentration and not on the root of the problem which is the concentration of capital, what they are in fact doing is opting for a market that is more concentrated and oligarchic than that which exists.

Still, it is necessary to note that none of these forms of response by the subordinated categories to the dominance of capital – unionism, collective consumption, the controlling and redistributive intervention of the State, etc. – have in themselves the radical potential to transform and lead the market to a situation that is truly democratic, since it is a question of actions that maintain the economic categories in their subordinated position.

Following this path, labor power, technological creation, consumption, etc., can not become autonomous from the power of capital against which they react. What is more, the concentration of these subordinated categories, if it manages to increase their power vis-a-vis capital, gives rise to limitations of another type with respect to their development. Union organizations defend the interests of employed workers, which are difficult to conciliate with the interests of the unemployed precisely because of the type of demands they place on capital. Moreover, it is common for organizations to develop their own institutional interests and become bureaucratized, leading the workers to bear the weight of the very structures that represent them and to which they delegate their decision-making power. The mechanisms of defense of technological creation often block the contribution of independent creators and, multiplying the instances of control, reduce the real potential for innovation and development. Collective consumption is often inefficient considering the amount of social spending destined to support it, and in the same way the multiplication of the redistributive and control functions of the State and of the bureaucratic apparatuses tasked with carrying it out end up creating operational inefficiencies in public services.

In contrast, the development of self-managed and cooperative economic units organized by currently subordinated categories (labor, consumption, technology, etc.) operates directly in favor of an effective democratization of the market, as much because it makes them autonomous from the power of capital as because the units of economic activity and management present in the market multiply and grow.

The development of a broad cooperative sector has, from the standpoint of the dispersal necessary for the “perfecting” and democratization of the market, a double effect: by autonomizing the subordinated categories it reduces the capital’s extraordinary profit margins, counteracting the process of capitalist accumulation and concentration. At the same time, by creating new possibilities of development of cooperatively organized categories, it leads to their growing dispersal, thus rendering unnecessary their defensive subordinated organization.

A second condition of perfect competition is free access to the market by new economic units that enter into competition with existing units. In a capitalist economy, access to the market is strongly limited. In the first place, this is due to the processes of communication we already examined. Monopolistic and oligopolistic enterprises create barriers to entry for new enterprises that would compete with them, through a series of well known practices (dumping, control over access to credit, etc.). The concentration of other subordinated economic factors also presents barriers to access for those parts of the same factors that remain on the margins of the concentrating organizations and mechanisms.

In the second place, access to the market, while remaining partially open to new economic units organized by capital, is still largely inaccessible to enterprises that might be organized by the other factors, given their subordination. While the possessors of capital develop and concentrate entrepreneurial capacity, the organizing capacity and entrepreneurial spirit of workers, communities, and creators of technology, who remain subordinated and lacking in indispensable information, is underdeveloped. Capitalist control of credit is another limit; capital is not interested in opening lines of financing to alternative economic activities.

A capitalist economy, then, places multiple powerful obstacles in the way of the creation of new cooperative economic activity. The development of existing cooperatives, in the direction of greater efficiency, the formation of new cooperative enterprises that manage to overcome the obstacles, and the expansion of an integrated cooperative movement with both representational and operational goals, can create spaces of access to the market for those categories as autonomous organizers of economic activities.

From the theoretical point of view, in a market democratized by the presence of a broad sector of enterprises organized by labor power, communities, technological creation, savings and credit, etc., access to the market becomes effectively easier and more free. The economic categories, other than capital, are not only able to access the market in order to sell themselves to or be hired by capital but also by organizing and hiring the other factors themselves. Capitalist enterprises have to compete with them not only on the market for products but also, and especially, in the factor market. The factors, having other alternatives for autonomous employment, will see their value recognized globally and gain bargaining power.

A third condition of perfect competition is full employment and mobility of productive factors. Where capital dominates and takes the position of sole organizing factor of economic activity this condition can not be seen in practice. The reason for this is that capital has limited organizing capacity, it is not interested in organizing factors that do not offer it high returns, and it requires a certain degree of unemployment of the factors it hires to keep the market costs of those factors low, permitting capital to obtain extraordinary profits from its exploitation in production.

This reality has been specially analyzed with respect to the factor labor power, it having been demonstrated that the existence of a certain level of unemployment and a reserve army of labor is necessary to contain labor costs. A similar analysis can be made for the other factors.

The introduction of technological innovation in the process of production is limited in various ways: enterprises that have advanced technology that enables them to obtain extraordinary profits are naturally interested in maintaining their sole control over the technology for as long as possible, and place various obstacles in the way of its diffusion. In other cases, large enterprises that control important portions of the market share for a product, and that base their production on one type of technology, make every effort to impede the productive utilization of more efficient technologies, which they accomplish by buying exclusive ownership or access to technologies that they never use. Finally, the domination of capital, which promotes technology that tends to increase the productivity of the factors it hires, reducing in this way the quantity of those factors needed, does not incentivize – or directly disincentivizes – the development of alternative technologies founded on a greater utilization of those factors and lesser use of capital, technologies that, when combined with those already in use could contribute to something like the full employment of economic factors.

With respect to consumption, too, the dominance of capital imposes limits: the possibility that consumers might choose freely from a wide range of alternatives, different in price and quality, is strongly restricted by monopoly and oligopoly which tend to mass production of standardized products.

Economies of scale not only cheapen large-scale production but… also raise the cost and diminish the profitability of small-scale production. This in turn raises the minimum volume of sales necessary to render production profitable and thus leads to an ever increasing narrowing of the range of variants of products offered and neglect of minority needs and tastes in the nature and design of good produced and marketed.

The increasing neglect of minority preferences is a bad thing because it is illiberal, makes for uniformity, and destroys to some degree the principal merit of the market economy: its ability to cater separately and simultaneously to different people’s differing needs and tastes.5

This is only one aspect of the problem. From the moment that the decision about what to produce is made in enterprises organized by capital, the spontaneous tendency will be to produce preferentially for those social sectors with the highest incomes who are able and inclined to pay every growing prices for products that offer few additional qualities with respect to similar products of simpler design. In this way the capitalist market tends to meet sophisticated consumer needs, leaving unmet the needs and demands of broad social sectors. To which we can add that in high income sectors there is often a tendency to select more expensive goods for the social prestige associated with the excessive spending and consumption.

In sum, the capitalist structure of production tends to configure an oligarchic and undemocratic structure for consumption, characterized by the existence of superfluous consumption alongside underconsumption and unmet basic needs.

The under-use of productive factors would be greatly reduced if those factors were to develop their own autonomous capacities to organize economic activities and to participate in the market not only in a subordinated position but also as organizers.

Labor power can be hired by capital, but it can also take on the risk to organize its own economic activities; consumers can find satisfaction in the products that the market offers but they can also demand, through association, goods and services of particular types and prices. Technical innovations can be offered in the market for utilization in enterprises organized by other factors and also be the base for the formation of new productive units. The result is a not just the broadening of the use of factors and resources but also their mobility, in the presence of multiple alternatives.

The fourth condition of perfect competition is the transparency of the market and perfect knowledge with respect to the alternatives present in every economic operation. As with all the previous conditions, this can never be completely realized; but it is possible to approach this condition, or stray further from it, and it offers a standard of measure of the degree of democratization of the market: ignorance and lack of transparency in the market are sources of oligarchic power, while greater access to information is democratizing.

The transparency assumed by perfect competition refers as much to information held by consumers with respect to alternatives offered on the market as to information held by producers with respect to technologies and sources of existing financing, and also to the information held by the subjects of economic activity in general with respect to the conditions and tendencies of the economy as a whole. With respect to all of these levels of information, the dominance of capital in the market implies a tidal wave of obfuscations and obstacles, intended to hide information or to distort it propagandistically. To this should be added the fact that the structural subordination of workers and, more generally, sectors characterized by non-possession of capital limits their opportunities for education and technical training, resulting in ignorance and disinformation with regard to a reality that is increasingly technical and complex.

The sharing of information and the transparency of the market have as a condition economic dispersal, the reduction of the dominance of capital, and the autonomization of currently subordinated economic factors. In this sense the development of a broad cooperative sector is clearly necessary. Autonomous organizations of consumers tending to value and increase the power of that category in the market, are naturally inclined to seek the most accurate and complete information with respect to the characteristics of goods and services offered. Members of productive units organized by workers certainly gain knowledge of general market and economic conditions, knowledge that is spontaneously transmitted and disseminated to the labor force as a whole. The existence of new possibilities of economic activity based on technological creation and innovation no doubt broadens the information available with respect to technologies and methods of production and organization.

As ignorance is the source of power for oligopolies, the opposite is certainly true: oligarchy of wealth produces and reproduces ignorance in the subordinated sectors, such that transparency of the market and the democratization of the sources and contents of information can only come as the result of a process of democratization of the market and the economy.6

We have reconsidered the four principle conditions of perfect competition identified in economic theory, making use of the concept of a determined market. Their practical establishment as conditions of a democratic market, implies the development of a multifaceted process of transformation centered on the creation and development of activities and economic units organized independently by the categories and factors currently subordinated.

The democratization of the market presents itself, then, as a process with two interlacing lines of action: overcoming the subordination of the non-capital economic factors and categories through the development of alternative and autonomous organizations and economic activities, and reducing the power of capital through a process that is anti-oligopolistic and decentralizing. By reducing capital’s economic power and augmenting the power and autonomy of the other factors currently subordinated, a new relation of social forces is created in a process of radical distribution and decentralization of power, a process of democratization of the market.

Now, this democratic market is not a capitalist market. Perfect competition defines a situation in which lucre does not exist: every factor and every subject of economic activity is remunerated in proportion to its productivity, without any margin for the acquisition of extraordinary gains, that is revenues resulting from the exploitation of those factors and from speculation.

On the other hand, in a democratic market the commodity ceases to be the general form under which all other factors are presented and related, including people and their creative potential. Labor power and intellectual, artistic and technological creation are commodities to the degree that they are exchanged in the market at definite prices. But it is only the object of organization that is transferred in the market, not the organizer. The entrepreneur who organizes capital is not exchanged, not converted into a commodity, but remains in their own position, that of an organizer. The capital involved does not have a predefined market value but is compensated in proportion to its operational efficiency.

The same thing happens when labor power becomes an organizer: it is not exchanged, not hired, it ceases to be a commodity, its remuneration depends on the outcomes of its management. As organizers, capital, labor, or any other factor have no “exchange value,” such that only directly and as a criterion of measurement of management efficiency can they be attributed an “exchange value,” that is, the value they would have if instead of organizers they played the role of transferable commodities.

Finally, a democratic market is one in which social inequality founded on exploitation and speculation is not tolerated. It is a fair market, because each person is compensated in proportion to their contribution to the global social product. Nonetheless it is not an egalitarian market in the sense that all people receive equal incomes. That would be unjust since those who work more and those who take on more organizational responsibility would be expropriated of one part of the the results of their efforts by those who work less and take on less responsibility and risk, which would be to reward laziness and irresponsibility. The democratization of the market is a process tending toward equality, eliminating current unjust inequalities and creating and effective and not purely formal equality of opportunities.

3. – This observation on equality is linked to the specific problem of the economic function of the State. The classical and neo-classical theory of perfect competition requires the neutrality of the State with respect to the different subjects in private economic activity and no direct intervention in production and distribution. In the light of historical experience and our theoretical analysis, should we still claim that neutrality and non-intervention are requisites for the functioning of a democratic market?

To respond to this question it is necessary to distinguish two aspects implied in the formulation of the problem: neutrality with respect to the economic subjects and non-intervention in economic activities are two different things. Neutrality means that particular groups or individuals are not favored when they act; non-intervention signifies a refusal to act. This last aspect of the problem poses the question, should the State organize certain productive activities and develop certain instances of regulation and control of the economy and the market? The first aspect of the problem, on the contrary, asks how and in what mode should the State accomplish its economic functions and more specifically if it should take on redistributive functions.

In general, State organized production and economic activity does not contradict the functioning of a democratic market, in fact it is necessary for the existence of such a market. This is entailed by our reformulation of the concept of perfect competition, in that we postulated as a prerequisite for its functioning that every factor can, and in fact does, autonomously organize economic activities. The State is an economic factor, a component of the system of relations of forces that make up a determined market.7

The specific role of the State is to represent the general interests of a nation, its ambit is the common good of society. The general interest and the collective good have a specific dimension and economic reality and their realization assumes the development of specific economic activities.

It is a question of economic activities that involve a common interest and whose realization implies the use of community resources: national defense, individual security, the administration of justice, control of currency as the general and common medium of exchange, the development of basic education of the population, and public health, protection and improvement of environmental conditions, the use and development of a nation’s strategic resources, the production of goods and the provision of supplies that being required by all of the population can be produced with efficiency only through a single provider (technical monopoly), the activities that in their private form could have positive or negative effects on the community in general or on third parties, and for which it is not possible to measure or set payments or indemnities (as is the case with streets and highways, bridges, parks, water treatment and drainage, etc.). In all these cases, and in still others, if the activities were developed by private organizations, monopolistic situations would arise. One would witness an unjustified private appropriation of community resources, the creation of relations of subordination, and concentration of power in a particular group and population, all of which contradicts the very concept of a democratic market and impedes free competition. All of these activities constitute as such an economic sphere of public responsibility, and it is only if the State, through its institutions, constitutes itself as the organizing actor that the market can be democratically configured.

As for the neutrality of the public authority in the exercise of its own economic functions, we need to clearly distinguish between two situations. According to the pure theory of perfect competition, the neutrality of the State in relation to the different private economic subjects is obviously indispensable; but this means that in an effectively democratic market, any redistributive function that disadvantaged or favored particular groups or individuals would generate inequalities and and concentration of power that would distort economic democracy.

However, we well know that the perfect democratic market never exists as such, that it does not arise in reality, and that the problem is precisely how to enact a process of economic democratization. In such conditions, the absolute neutrality of the public administration is impossible, and even if it were possible it would lead to reproducing the existing inequalities and relations of subordination.

The creation of conditions of perfect competition and the enactment of a process of economic democratization demand, on the contrary, the non-neutrality of the State, concretely speaking, the privileging of subordinated social sectors, principally through development of the economic categories and factors that currently find themselves suppressed and of an effective control and containment of the power of capital, which is now dominant.

But this supposes a truly democratic configuration of the State itself. The democratization of the market presents itself, then, as a process that is not solely economic but a complex combination of social, political, and cultural processes. This leads us to the problematic we will examine in the final chapter.8

• 1

  Paulo Sylos-Labini, Oligopoly and Technical Progress. Harvard University Press, 1962.

• 2

  Sylos-Labini, Op. Cit., P 14

• 3

  Sylos-Labini, Op. Cit., P 9

• 4

  Tibor Scitovsky, Papers on Welfare and Growth. Stanford University Press, 1964. P 243

• 5

  Scitovsky, Op. Cit., P. 245.

• 6

  This is reminiscent of Mondragon founder Arizmendiarrieta’s call to “socialize knowledge in order to democratize power.” Reflections of José Maria Arizmendiarrieta. Solidarity Hall. 2022. – MN

• 7

  In Chapter 1, Razeto defines the factors of production as: labor power, technology, materials means of production, finance, management or administration, and community, each being linked to social groups or forces – most notably labor power to workers. He also identifies several economic categories, in which a factor and a social force are combined. Labor and Capital are two such categories, as is the State. Where it plays the leading role, as in a centrally planned economy with State enterprises as the dominant form of production, the State becomes the organizing category and administration is the organizing factor. – MN

• 8

  We have more fully developed and enriched the concept of the market, the model of a democratic market, the conditions for its perfect operation, and the processes implied by the democratization of the market in other works. See, in particular, Economía de Solidaridad y Mercado Democrático, Libro Dos, VIII - XII. Programa de Economía del Trabajo, Academia de Humanismo Cristiano, 1984.