Johann Karl Rodbertus (Economic Ideas)

The following points highlight the five economic ideas of Johann Karl Rodbertus. The economic ideas are: 1. Exploitation of Labour 2. Commercial Crisis 3. Distributive Justice 4. Law of Decreasing Wage-Share 5. Suggestions for Improvement.

Economic Idea # 1. Exploitation of Labour:

Johann Karl Rodbertus believed that labour produces all economic goods either directly, or indirectly through tools and machinery. Only those goods are economic which are produced by labour, others being “natural”. The law of decreasing wage share was formulated by Rodbertus as early as 1837.

The total amount paid in wages may increase, but rent and interest take an increasing percentage of the aggregate income. To Rodbertus, national income is divided into two shares as wages and rent. Rent in its turn falls into 2 parts, i.e., land rent and capital rent.

The existence of rent is said to be due to two facts:

(1) The economic fact that there is a surplus produced by labourer over their subsistence and

(2) The juristic fact that private property in land and capital enables the owners to exploit labour and retain that surplus.

In this idea, Rodbertus is following the thought of Sismondi, Proudhon and St. Simon. Rodbertus theory of crises is also derived from his theory of a decreasing wage rate. He also stated that poverty and crisis are to be done away with and distributive justice to be attained by an ultimate socialisation of property.

To Rodbertus there are two aspects of distribution: first, distribution between those engaged in the production of wealth and land owners and capitalists, and secondly, between these persons and other members of the society.

Economic Idea # 2. Commercial Crisis:

His idea on commercial crisis explains that with the diminishing purchasing power of the working classes, the total consumption fail to keep pace with the total production leading to unemployment, further diminution of purchasing power and ultimately to an intensification of the crises. This is because the land lords and the capitalists instead of consuming, invest a considerable portion of their income in productive enterprises.

This leads to an increase in the volume of production of those commodities which the labourers are unable to purchase. As a result price falls, the size of production is reduced, factories are closed and unemployment is created leading to further crisis. In this respect also, his ideas have much similarity with the Sismondian theory of over production.

Economic Idea # 3. Distributive Justice:

Giving suggestion for the removal of the evils of improper distributive justice, he considered state intervention as a necessary one and ultimate socialisation of property. He regarded the latter aspect of distribution as the “secondary distribution”.

He remarks, “The judge who manipulates justice for society, the physician who heals the sick, the teacher who instructs the youth, receive incomes to the production of which they have contributed no work, incomes which are certainly the production of the labour of others.

He regarded rent, interest and profits as unearned incomes or exploited incomes and the existence of these as the chief characteristics of the present stage will soon be replaced by another which will all the more be close to the ideals of justice and in which the level of human welfare will be much higher. The stage which he visualised, would bring greater prosperity to the working classes.

He was of the opinion that the desire of the working class will enable to attain to enjoy the fruits of growing civilisation, culture and progress. He stressed that nobody can stop people from achieving this object, because the working class constitutes a vast majority of mankind. He did not agree with those who said that the realisation of this object will be the end of progress.

Economic Idea # 4. Law of Decreasing Wage-Share:

To Rodbertus, poverty and crisis were the two main evils of the modern economic system. “A man’s poverty”, he said, “does not depend so much upon what he has absolutely, as upon the relation in which his possessions stand to those of others about him and upon the extent to which they allow him to share in the progress of the age”.

Under the present situation, workers are paid only that much which is enough to maintain their living standard which does not keep pace with the increase in their productivity and consequently they are being left behind. Here he has enunciated the law of decreasing wage share. According to this law, the share of labourers in the national income goes on continually decreasing.

The total amount of wages paid to the workers may increase but the percentage of rent, and interest in the national income goes on increasing at a faster rate. He concluded that the great mass of mankind is deprived of the income which it creates.

In his respect, his ideas appear to be more akin to those of Sismondi, Proudhon and Saint Simonians. This essay on “The Normal Labour Day”, he proposed that “in each industry, there should be established a normal day’s work and that statistics should be collected indicating the number of such day’s work required in the production of each commodity and that exchange between these should be allowed in accordance with the ratio indicated by these figures.

He also suggested that after paying adequate remuneration to the capitalists and landlords, the remainder of the income should be distributed among the working classes according to the number of normal days of work of fraction thereof put in by them. He also suggested that the wages should be readjusted according to their productivity so that proportional share in the increase of the national product was guaranteed to them.

Economic Idea # 5. Suggestions for Improvement:

He suggested that the entire community should be the owner of the means of production. Property should be socialised by an evolutionary process. He further suggested that every individual should contribute something to the national income.

He mentioned three stages for nationalisation of property as:

(1) Antiquity in which human beings were enslaved; and their labour was appropriated by their masters

(2) Christian Germanic stage in which there was private ownership of property and capital, this was during his own days.

(3) Christian social stage which would develop within next five or six centuries and in which land and capital would be fully nationalized.

He suggested the fixation of prices according to the amount of labour Involved In the production of commodities; adoption of legal measures for fixing the hours of work; increase in labour’s share of the national dividend, protection of workers against the bad effects of trade cycles and reduction in taxes.

Under such a system of state regulation of production and consumption there would be as much personal freedom as in any other form in society. Rodbertus had full confidence in the authority of the state in its efficiency and power to bend the individual will to the general will.