J. S. Mill's Liberal Utilitarian Assessment of Capitalism Versus Socialism

John Stuart Mill argued, in his Principles of Political Economy (1848, 7th edn., 1871), that existing laws and customs of private property ought to be reformed to promote a far more egalitarian form of capitalism than hitherto observed anywhere. He went on to suggest that such an ideal capitalism might evolve spontaneously into a decentralized socialism involving a market system of competing worker co-operatives. That possibility of market socialism emerged only as the working classes gradually developed the intellectual and moral qualities required for worker co-operatives to succeed against private firms. Workers would tend to reject the hierarchical wage relation as they developed the requisite personal qualities, he believed, and capitalists, facing escalating wages for skilled labour as a result of the diminishing supply of high-quality workers for hire, would tend to lend their capital to the worker co-operatives ‘at a diminishing rate of interest, and at last, perhaps, even to exchange their capital for terminable annuities. In this or some such mode’, he speculated, ‘the existing accumulations of capital might honestly, and by a kind of spontaneous process, become in the end the joint property of all who participate in their productive employment: a transformation which, thus effected, (and assuming of course that both sexes participate equally in the rights and in the government of the association) would be the nearest approach to social justice, and the most beneficial ordering of industrial affairs for the universal good, which it is possible at present to foresee.’