Third Lecture on December 15, 1974

Ladies and Gentlemen, Dear Friends,

We began yesterday to work out some basic outlines from the course by Rudolf Steiner and I took the liberty of pointing out that the two main pillars that carry the whole course consist of the two ways of creating value, two ways that work can be done, namely the transubstantiating and the incarnating labor, and that by means of their cooperation and intersection prices arise and just price should be formed. For reasons of methodology, I have distinguished fairly sharply between these two branches of labor in order to define these two modes of determining the social organic process as distinctly as possible. Naturally, it is apparent that none of these two ways and means of labor output and surplus value creation exist in the economic reality purely by themselves, but that both of them are always interconnected, so that we can only speak of a predominance of the one or the other. We have already seen when looking at the means of production that these two streams intertwine in a special way in these means of production.

            

If we look at the origin of the means of production, there is a predominance of incarnating labor involved. But that is not the only thing to be considered, for also the nature products and the fabrication of semi-finished products must be taken into consideration; predominant, however, is the incarnating labor, because it takes a lot of spiritual, mental work to make a machine.

           

In the use of the means of production, transubstantiating labor prevails, because the latter goes into the making of consumer goods. But there the organizing labor [management] must also play a role. So, with regard to the means of production, we clearly see how both ways of creating surplus value and performing work are intertwined.

            

We finished yesterday by looking at the social organic trinity of the concepts: paying – lending – giving. We can begin by considering the concept of giving. The making of gifts is distinguished for their part again in the light of the immanent threefold components that form the basis of economic life: one can give to the sphere of purchase money by pressing a 10 dollar bill into the hand of a hungry person, but actually one gives in this case also to the free spiritual, cultural life. For when the hungry person can keep his physical organism in order, one offers him the possibility of also keeping his spirit, his mind in order. Donating is always a question of giving to the free spiritual life. But one can obviously give in a more direct way to the spiritual sphere, to especially productive individuals or centers of learning, not only to schools for children, but to free universities that constitute the centers of the free spiritual life – and everyone actually forms such a free university around himself.

            

When one makes a gift with a view to furthering the rights sphere so that associative or advisory bodies can be formed, it is also a donation to the free spiritual life, for it is a matter thereby of endowing the spiritual activity that formulates and constitutes rights.

            

A very special type of donation takes place when capital resources in the form of factories are not handed over by right of heredity, but on the basis of associatively formed judgments to the most capable persons. This is also a basic task of the associations: transferring the means of production, motivated by judgments formed out of a true community spirit, to the most capable people, whereby not the mechanism casts the deciding vote, but the creative potential that a person brings to the fore. Thereby it is not a question of handing over the ownership of the factories, for these belong in the sense of social organics to the general public. No, the firms and factories are put at the disposal of those individuals that, on the basis of decisions made by the associations, are deemed to be the best suited for managing the task at hand. But these decisions can naturally only come about in the right way and in the right spirit, if they are based on and carried by true knowledge of the human being and of the world.

            

In this context, I would like to quote yet another time from the course. With the gifts that we just spoke about, it is a matter of caring for the free spiritual life (culture), and when this declines - as is visible for example in our time – it must be clear that this is not due to a lack of human capabilities; these lie within the spiritual nature of the human being and are being taken care of by the spiritual world. But when these potentials are not being developed, it is because too little is being donated to the spiritual life and because too little knowledge concerning this exists; that is why the decisions to make gifts are not taken (p. 82): “These associations will find that when spiritual life declines, too little is being given freely; they will grasp the connection. They see the connection between too little giving and too little free spiritual work.” Their task is then to let more capital flow in the direction of gift possibilities.

            

When we look closer at this trinity of the concepts paying – lending – giving, we see immediately that nothing could be paid for or bought, if there was no transubstantiating creation of value: NLV. Lending is that process of directing personal credit on the basis of associative capital flow decisions and judgments to capable people, so that the other creation of surplus value, the incarnating one, can arise when the spirit or mind is applied to labor. These processes work into each other and with each other. Lending reduces the cost of purchasing, for transubstantiating labor becomes cheaper to the extent that more incarnating labor is applied to it. That causes an increase in the value of products. The more value a product has, the cheaper it is.

            

Loan money makes purchase money valuable, because it reduces the costs of commodities. Through purchasing, on the other hand, more capital arises, that can be used for personal credit. But now it must be taken care of that the overflowing capital does not accumulate and pile up on the (unimproved) land in collateral credit. Therefore, the profit made from the sale must be transferred into the gift sphere, fructifying the free spiritual life and offering new possibilities for making personal credit available to capable personalities. Lending, on the other hand, i.e. giving personal credit to set up means of production, generates surplus capital again, that also needs to be transferred to the gift sphere. But making gifts, for its part, reacts again on the sphere of purchase money, because it has the indirect effect via personal credit of making commodities cheaper and increasing the value of purchase money. In that way, the three spheres are intertwined; that is how they function together. It is important to always ask oneself: how does the trinity of concepts work together and into one another, and how is this then expressed in the forming of price?

            

The forming of the just price has been occupying us, and what actually underlies and must underlie every view on social organics. Now there are in the economic life of today a number of price-falsifying influences. We cannot take the time to make a list of all these factors; we can only deal with the most important ones. Wages are considered to be the price for the work that is done. Today practically everyone is still convinced that the worker sells his work to the entrepreneur and that the entrepreneur pays the worker for his work. The economic confusion and the social struggles of our time actually all revolve around this question of wages, even when it is masked by saying that it revolves around the human dignity of the work.

            

As soon as somebody demands something in exchange for his work output, he demands a wage, and if he is willing and able to accept something in return for his labor as demanded, he is practicing self-sufficiency. Yet, it is an illusion to believe that the work in the factories is paid for and, as a matter of fact, could even be paid for. To be sure, in the present social conflicts of the working world this illusion has been turned into a reality, but it is in reality an illusion. For work cannot be bought, it is not an object, a commodity that can be consumed; work is rather something that is connected with the spiritual nature of the human being. We cannot move a finger without a spiritual impulse. The transubstantiating labor also has its origins in an incarnation process, in bringing spiritual forces in and out. Work cannot be bought. The entrepreneur does not buy the work from the worker, but the product that the worker makes.

            

Here we are faced again with the central price problem: What is the right relation between V1 and V2, of transubstantiation value and incarnation value? The worker works primarily on the transubstantiating side, while the entrepreneur – and especially so as trader, which he also is – stands on the incarnating side. In the sale of transubstantiation products in compensation for incarnation products, we have again a meeting of V1 and V2, and the right balance between the two values must be expressed in a right primary price for the transubstantiation product. Wages do not exist; there is only a primary price for the transubstantiation product. This is a just price when it is properly weighed in relation to incarnating labor that causes an increase in the value of the transubstantiation product by reducing its cost. Hence the question is: how can the increase of value of the transubstantiation product be expressed in its primary price, an increase in value that occurs by its being put on the market by the entrepreneur and thereby reduced in cost.

            

V1 and V2 meet again at the point where the entrepreneur as trader buys the primary products. This draws our attention again to that most important question of price formation. Another quote (p. 90): “This therefore is the most important question in relation to price formation: How can we harmonize the tension that exists in the creation of prices between the evaluation of goods arising from the free will of human beings and that of goods in the production of which nature has a hand?” Again, V1 and V2 are meeting head on.

In trying to understand the problem of price formation, it can be helpful to bring to mind that we have so far looked at two processes in the social organism flowing in opposite directions. The first one was called the transubstantiating current flowing in the direction of V1 with nature as its source. The second one flows in the opposite direction, because it does not reside in nature; it has its source in the spiritual life and goes in the direction of the value creation V2. The V1 current begins in nature that is transformed by human labor, and then the process of creating value already moves into the forming of V2 by virtue of the fact that the human mind is applied to labor. At this moment, the current passes over into the counter-current, which is mainly expressed by the transubstantiation products being only enhanced to the degree that they become means of production. When these means of production are again put to work as such, they are called industrial capital.

                    V1                                                       Spirit (Mind)

                     ­                    Labor (Work)                        ¯

               Nature                                                            V2

         Transubstantiation                                             Incarnation       

This is the capital, the value creating potential that the entrepreneur puts at the disposal of the workers occupied in the transubstantiation current. This incarnation stream thereby passes over into the transubstantiation stream; consumer products are made that are directly put on the market and consumed in a natural process. This constant counter-current of two streams that are transformed into each other, their opposition, constitutes the whole social organic process; and the equalization of the two streams that arises from the cooperation and collusion of the polarities is one of the most important social organic tasks.

            

This will be the task of the associations, which they can fulfill by harmonizing the creation of values, by balancing the parts that both streams play in the social organic process through the corresponding control of capital, but also by guiding and managing the workers. Just or true prices arise by controlling the flow of capital in this whole stream in the right way.

Now the social-economic thinking of today is to a large extent dominated by the old prejudice that true prices will come about by themselves on the market and that nothing more needs to be done than to see to it that there is a free play of supply and demand on the market. Within this free play prices can and must be formed; this is the old view of Adam Smith, which is still dominant in today’s social economic thinking.

           

Now according to Rudolf Steiner, this generalization of Smith’s formula – price formation through the interaction of supply and demand – is justified to a certain, limited degree; it must however not be generalized, for it must be understood that supply and demand exist everywhere in the social organic process, and that one party is not only supplying and the other merely demanding. When the producer brings his goods to the market, he is not only a supplier; putting goods on the market is a demand for money, while the consumer on the other hand makes a demand in buying goods, a demand for goods. Putting goods on the market is demand for money, and buying goods is based on a supply of money. This gives rise to the three famous formula’s which Rudolf Steiner put forward in the World Economy Course (p. 100) and which, as you know, caused a great deal of discussion.

            

One of the reasons for the misunderstanding which, in my opinion, entered into those discussions, is that the corresponding text by Rudolf Steiner on this point is obviously partly wrong. But let us look at these equations and try to understand them.

            

Rudolf Steiner says namely: X – that is value formation and price formation – is a function of three factors that are all equally justified, a function of supply, demand and price: X = ƒ (s,d,p). But, says Rudolf Steiner, this function for X is only the case in the sphere of the trader, where it can thus be said: p = ƒ (s,d). The trader equation is therefore essentially accurate, because in trade it is actually neither a question of money or goods, but something midway in between money and goods. Then consider: for the trader the goods that he offers are money, and the money that he takes in, he transforms immediately into goods. He offers money-goods mg and takes in goods-money gm, so that we must change the price X to money-goods. It comes about in the evaluation of a supply of money-goods or goods-money meeting a demand for goods-money or money-goods.

            

Now there is furthermore a producer and a consumer equation. We have already seen: When the producer puts his goods on the market, it is a demand for something. For what? Money; I must there write index m; this demand is a function of supply and price: dm = ƒ (s,p). With consumers it is not a matter of demand for money, but supply of money. And that is again a function of two factors, namely of price and demand: sm = ƒ (p,d).

            

The question is: What is meant by supply and demand? With the producers equation it is quite clear that the producer expresses a demand for money and that his supply is one of goods. But what is this price p? Is that the goods price? Do we write down pg? Does a supply of goods not become a demand for money, in the background of which stands a demand for goods? In that case, we would have the trader’s equation again. If you write pg for that, you flatten it out, and that cannot be right. And if you read the World Economy Course concerning this point carefully, you will notice that also Rudolf Steiner indirectly said that it cannot be a matter of the price of the goods, but a matter of the prices that the producer sets for his products. These prices he sets and can set according to what can be obtained within the social organic process.

            

Now what is the possibility of determining and fetching this price dependent on? On the value and price of money. It is obviously a question of the price of money, for otherwise it reverts back to Smith’s formula. When the producer demands money by offering his wares, he can only do this within the realm of the obtainable prices. And these obtainable prices, which are expressed in money, arise from the general possibilities within the social organic process and these are precipitated in the price and value of money. It cannot be otherwise in my opinion.

            

Now we come to the consumer equation. The consumer has money and offers it. This money supply is connected with the interaction of two factors, namely price and supply. Price here obviously means the price of the goods pg, and this is set by the seller on the basis of demand. But demand for what? For money dm. The less he demands money or the less the value of the money, the higher he sets the price for his goods. And conversely, the higher the value of the money, the lower he sets the price of his goods. Here we have to do with the interplay of the price of goods and the demand for money. This is the answer to the supply of money by the consumer. Only in this way, I believe, can these equations be interpreted.

pmg =    ƒ(smg, dgm)                 Traders equation

dm   =    ƒ(sg, pm)                      Producers equation

sm   =    ƒ(pg, dm)                      Consumers equation

If you examine this closely, you will recognize that a different indexing of the factors always reverts back to Smith’s one-sided formula, which is only valid for traders. I have advocated this view now and then before to the amazement of my audience, which is perhaps also the case here among some you, because I spoke of the price of money.  But today in these times of inflation we live daily with “the price of money”. And moreover, the concept “price of money” appears in Rudolf Steiner’s course itself. I could quote you a whole list, but I will give you only a few examples (p. 150):

“How does  money itself influence the forming of price? For money itself plays the chief part nowadays both in the ordinary purchase and sale, and in the payment of wages, and in all the rest of economic life as well. We must distinguish between that which eventually emerges as price in terms of money, and that which constitutes the essential value of money in the hand of one man or another.”

Or a little later that (p. 151):

“Money as such receives its value by the free process of circulation.”

 This is expressed in the price of money, in the currency. Then (p. 153):

“Economically the situation is that money itself, simply through the economic process, undergoes change.”

Or once again (p. 158):

“In that case I would be a bad economist if I used very young money. For young money, by virtue of its youth, is the most valuable and accordingly the most expensive. Thus, if I need the money for a shorter period, I shall provide myself with cheaper money.”

This we must speak about later.

            The concept price of money is no doubt mentioned here by Rudolf Steiner, as is evidenced by the text; this is a philological issue, not a cognitive one. But we can also understand it, for money becomes valuable and its price as well, in the social organic process by virtue of its aging. We have reached the question of the aging of money.

(Pause)

1.      Short answer to a question:

Social organic control of capital is only sensible against the background of a viable worldview of the nature of the human being and the world. All social organic processes only serve to give human beings the chance to experience themselves as spiritual beings living productively in a spiritual world.

2.      Short answer to a question:

Economic rationalization gives rise to leisure time, which can enable individuals to partake in the social and cultural activities of a free spiritual life. This spiritual life must be present within society with initiative and productivity. But there is something else. If the incarnating value only takes place towards a maximization of profits, we are moving in a direction without social organic style. It is namely not only a matter of maximization and so-called price reduction of products, if with that is meant their human, spiritual value. Incarnating labor should not only be looked at from the viewpoint of rationalization (efficiency), but from the viewpoint of the enhancement of products in connection with the enhancement of human needs. The rationalization of labor must be properly weighed against the labor of enhancement.  Thus, no rationalization without human enhancement!

            

It is very true that we require a stable value of money, but a balanced, not a static one. So that one can say: currency devaluation only in connection with synchronous currency revaluation. Money value may also decrease to the degree that new money arises. This brings us to a very important concept of the social economic course, the concept of old and young money. Rudolf Steiner speaks about old and young money, because money in the sense of social organics can be nothing else than an order for (obtaining) values. Economic values are expressed for the most part in the means of production in which the two values, the transubstantiating and the incarnating ones, flow together. That is how money is covered – real financial collateral can consist only of the useful means of production, useful in the sense of true social organics, for those means of productions used for making weapons of mass destruction are in this sense not useful and cannot create financial security. Money can only be covered by useful means of production. That is its real value. Not real, for example, is the value that is deposited on fallow land in the form of collateral credit. Once it is understood that money can only be covered by the useful means of productions, then it can also be understood that money must age and die as well as be born. It must age to the degree that the means of production are worn out. They can under certain circumstances be devalued completely by one industrial process being replaced by another that is not only more rational, but that has a greater value in enhancing human needs. To that degree money ages, it becomes old; as the means of production become old, money must get old and diminish in value. But when it only ages, the social organic process cannot go on. The aging must go hand in hand with money creation. There must be young money to the degree that there is old money. That is how stability in the process can be achieved.

            

We see that the value of money is on the one hand dependent on human capabilities. By making new means of production, organizing takes place, spirit is applied and products arise. (Process: money creation, money regeneration, renewal.) By using these means of production, money too is worn out; it gets old, depreciates and expires. Now a very interesting question comes up here. The old money must be taken out of circulation by the associations. New money can only be brought into circulation to the extent that goods are produced. If aging money predominates, and therefore an inflationary tendency arises, the circulation of money must be decreased, because an increase in the money circulation decreased its value.

            

Naturally, the more means of production are made, the more money can be brought into circulation. In the light of the social organic process, currency depreciation must be met with a decrease in the money circulation, the opposite of what happens today.[1] Through increasing and decreasing the value of money (regeneration and devaluation) the associations can control the money flow by, for example, directing young money to the loan sphere. Young money increases in value. It is spent on newly made means of productions. It increases in value, if these means of production are used in the sense of social organics, from a minimal value to the highest maximum value possible. At that point, it should enter into the purchasing sphere. It diminishes in value when the means of production become old and worn out and need to be replaced. The money that has become old can under certain circumstances be steered directly into the gift sphere, where it is only a question of taking care of the daily needs of those spiritually productive; they for their part contribute to the creation of young money in the future.[2] Not a statistical stability of the money value is obtained in this way, but a stabilization by balancing the aging process and regeneration of money, whereby the aging corresponds to a decrease in the money circulation and the regeneration to an increase.

            

There is another formula given by Rudolf Steiner that is worthwhile considering. The forming of the just price by balancing both value streams in the right way: V1, on the one hand can also be expressed by N (Nature) times L (Labor) = V1. On the other hand, we have seen that through the incarnating value V2, labor is saved, i.e. negative labor.  Now the Course gives for the V2 formula: Spirit minus Labor. In my opinion, however, it should be: Spirit times minus Labor V2 =  S ´ (- L). In the Course it is not printed in that way, but this is obviously an error. Labor is not subtracted from the spirit, labor is saved and therefore it must read:

                                    V2 = S  ´ (- L) Spirit times minus Labor

                                    V1 = N  ´  L    Nature times plus Labor

My reflections have led to this interpretation. In this proper balancing act just price originates. It is based on the to and fro of the process of steering transubstantiating and incarnating labor. The two value currents intermingle; neither appears purely by itself.

            

I would still like to point out a few other problems that seem especially topical to me. One of them is the currency problem. If it is understood that just price originates by balancing “Nature times plus Labor” against “Spirit times minus Labor” in the right way, if it is understood that the labor that would have to be expended for the forming of V1 is saved by the forming of V2, then it must be said that this conservation of labor expresses the value of this incarnating labor. The incarnation worker would therefore have to get from the transubstantiation side so much as a counter value as is saved by his output, and this would have to correspond, if things go right, to what he needs to cover his necessities in life in order to again produce the same output or an equivalent.

             

We have heard, on the one hand, the formula that the value of the transubstantiation labor saved is determined by the incarnation worker having to receive for his costs of living that which is necessary to produce the same output or an equivalent. If everything runs as it should, then the necessities in life for the time that he requires in order to produce his spiritual output corresponds with the amount of transubstantiation labor saved by the incarnating labor. With that the following objection can be met: A toddler making only a few strokes gets more than a hard-working painter.

            

We come to a third, important point of view: All transubstantiating labor is made possible by the available land, not only farmland, but also the natural resources underground.  What is available for the individual within the transubstantiation sphere can be expressed by the ratio of land area to population. Every single member of the earth’s population would have in principle that much land area available as results from this ratio. The increase in value of the earthly usability of the land is proportional to the means of productions that are applied to this land area, for the land itself has no value; otherwise we would get into the sphere of collateral credit. The value of the land area is expressed by the totality of the means of production capable of being put to use on it. Accordingly, the currency factor is the ratio land to population, i.e. La : Po. That is the real currency coefficient. We must thereby proceed from an average land area, not from a desert, and must bring this average land area in relation to the population and the means of production applied to, or used on this land. That is the currency coefficient according to the facts of reality and that is what matters here. Each member of the population would therefore have to receive so much for his basic necessities for living as corresponds to the value of the average land area allotted to him. The prices for calculating his basic needs must be included in this factor. The prices may therefore not go beyond the margin in value (German: Wertspanne) that is thereby expressed. In this respect, we have a currency regulator. The time factor is expressed by the working factor (German: Bearbeitungsfaktor). The value that arises in a certain work time is available for the individual in his leisure time.

            

Now among the many questions that all this raises there is an important one with respect to the fundamental social law that contains the social organic altruism, the social organic reciprocity. With a certain justification, but only based on a misunderstanding, it could be objected here that one of the most important, powerful incentives to work, namely working for profit, would disappear if this law became valid. It is said today and rightly so: People will no longer work, if there are no more incentives. But then it is interpreted falsely in the way that only the prospect of gain expressed in possessions, property etc. provide an incentive for the human being and that this is simply human nature. I say that in a modern, structured social organism profit remains as before the decisive incentive, but in a modern metamorphosis. Then it will also be a matter of profit, but profit as gain in productivity. There must be as much productivity flowing in as possible, and the desire for increasing productivity will continue to be the incentive.

Let me close with a final observation.  The social organic process came to the fore as the interpenetration of V1 and V2, the transubstantiating and incarnation values. This interpenetration leads always to a work of art, to the highest art that there is, the social work of art, and the health and beauty of this social work of art is expressed in the just price, in the right money value. I would like to add two short points of views to that.

            

Social organic transubstantiation requires a common conscious awareness that comes to life in mutual acts of giving in the sense of the fundamental social law. This law says: The gain in productivity is greater, the less I keep my productivity for myself, and the more unrestrictedly I donate my productivity to the social organism. Then, depending on its contents, something out of this great collecting pot can be given back, always with respect to the La : Pop, the currency coefficient. This requires a common consciousness, a consciousness of mutual giving. In this realm there is a consciousness over and beyond what the individual human being can encompass with his personal consciousness.  Transubstantiating labor leads within the consciousness of mutual giving to the forming of a common consciousness in the sense of the Christmas Conference [3], which points to the fundamental social factor of the future, to the forming of a common consciousness that can absorb more than the sum total of the individual conscious minds. An enhanced, higher consciousness content can become present within the common consciousness of the transubstantiating labor; there a super-terrestrial community life can be experienced. That is why the fundamental social law is designated as the law of occultism: A higher potential in super-terrestrial consciousness becomes present in the mutual acts of giving. Every active in the field of transubstantiating labor experiences himself within and through this common consciousness as its representative. This is one of the great sources of labor and labor output that at the same time expresses the human dignity of labor by virtue of living, being active and working in the sphere of a common super-terrestrial consciousness. That makes their work sensible and worthy of a human being.

            

The other great working impulse is not connected with community consciousness, but with the consciousness of freedom, the basis of which - as is shown by soul observation - is the realization faculty of the human being.

The human being realizes reality by constantly letting living concepts flow into his percepts, which are individualized in this process. He does not receive a ready-made reality; he has to first create it, he is a constant ‘realizer’. Since he is not dependent on a finished reality, he is a free human being. This realizing-consciousness is the source of all creativity, out of which all creative activity flows forth. This experiencing of oneself in freedom and realizing-consciousness is the other great working impulse. The community consciousness in the sense of the fundamental social law through the reciprocity of the acts of giving that lead to the representative consciousness is a future consciousness, while the consciousness of freedom draws on the past of the spiritual world, from which human beings bring forth their free creative impulses and ever new driving forces. V1 and V2 unite, as you see, in the streaming together of these two fundamental working impulses and incentives; they must stream together in associative or advisory bodies, in which then a constantly renewing and continuing formation of the rights sphere takes place, in which true justice in the balancing of the two value poles, leads to Just Price.

            

The working world economy and the social community will not be rescued by a world computer [internet], but by a network of associations spread out over the whole earth, a network in which community consciousness and consciousness of productive and creative freedom can meet and confer in human beings, because they have become capable of speech.

These then were some small samples from the social organic Course.

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[1] During inflation the rate of the circulation of money increases. (Note by the publisher of the German original edition).

[2] The words in the future were added to this sentence by the German publisher.

[3] On the occasion of the so-called Christmas Conference during the turn of the year 1923/24, the Anthroposophical Society was founded anew in Dornach (Switzerland). See Herbert Witzenmann, The Principles of the Anthroposophical Society, working translation, Willehalm Institute, 6^th ed. Amsterdam, 2001.