Last Sunday’s NYT seems to have celebrated, belatedly, the anniversary of Marx’s death by posing the question “was Marx right?” to several economic thinkers (blogideologic asks himself the same question) Five contributors brought to bear on the answer—some better than others. The fact that no one seems to define the very notion undergirding the debate, “capitalism”, adds (and spreads) substantial confusion. That all see the world, as economists are prone to do, through a single lens (in this case “capitalism”), adds more. One certainly does not have to be a Marxist to see that most of the contributors wanted to state their prejudice as their answer that Marx was wrong about…something.
Henwood’s narrative is coherent and takes a class warfare approach, albeit muted and even verismilar, perhaps. The divergence he quotes from BLS between the rise in productivity and rise in pay since 1980 is a prima facie cause for social and economic concern when seen as a driver of consumer borrowing and its consequences. Henwood’s is a social piece and good polemic leaving out economic theory per se. That the consequent political theory and application of Marx’s conclusions and directions was a disaster spiritually, politically, socially and economically, however, can hardly be argued. That is not to say that he was “wrong” altogether; although, if his socialism was scientific, as the old joke goes, why did he not urge his devout that it be experimented on animals first…
An insightful contribution is Yves Smith’s although the title may be deceiving. Smith does seem to have drawn insights from Marx and Schumpeter and applies them to the current economic situation also noting a divergence: a “rise in inequality when the rate of return on capital…exceeded the economy’s overall growth rate” and giving a nod to class warfare. While metioning “large corporations” in the context of their impact on shrinking labor costs, Smith foregoes pursuing a very applicable track on a Marxist theme: “large industry.” Schumpeter acknowledged Marx as perhaps the first to recognize the emergence of large-scale business and its ability to drive out small or medium-sized firms (see, e.g., Capital, I, Part iv). This phenomenon is what supports the political case of class mobility erosion because, “under conditions of democratic politics, this process weakens the political position of industrial bourgeoisie” because this class is politically sturdier than “a small number of salaried executives and large shareholders quite irrespective of comparative economic performance or ‘service’”. In all this, however, Schumpeter saw the capitalist process itself at work and not an exogenous corruption of capitalism.
This theme is sophomorically taken up by M. Strain who finds Marx “devastatingly” wrong with regard to the labor theory, extrapolates that wrongness to “most of the important questions [Marx] tried to tackle” and then delights in truism: “the economy is not a holy, untouchable, object.” Strain also uses fuzzy terminology, preferring “free enterprise” to denote (some form of) capitalism. Even so, it is not immediately or theoretically clear that one can let free enterprise produce wealth while leaving distribution to “culture” (what is it?) and still be within the bounds of capitalism. The very idea of capitalism is that it does not have a separation of production and distribution! It should be intrinsic to its inner workings that distribution occurs “organically.” Much to Strain’s chagrin, to be sure, Schumpeter makes the case that production and distribution are separated under a socialist order so Strain himself may have skipped too quickly through “Union, Soviet.”
T. Cowen looks at both the political aspect and the large scale business aspect which he calls “special interests” and finds Marx “convoluted, replete with contradictions and in any case not ideally suited toward analyzing those problems” and “not always illuminating.” That may be so, but so what? How does that answer the question: was Marx right? Cowen’s answer comes through clearly as “no” but argues from irrelevant detail. He acknowledges that Marx did understand public choice and the imperfection of institutions—but then makes an argument that he was wrong because of…NIMBY? Really? Cowen could join Strain in looking up “Union, Soviet” or “China, Red;” and buy a mirror.
Finally, the coolness factor explodes with B. DeLong’s contribution: who else not named Georg Wilhelm Friedrich (or some “stranger” named Bob) could sneak “grok” into a critique on Marxist economics? He takes advantage of the fact that the question was so wide and selects a topic from which he deduces that Marx was wrong—the labor theory of value. Mind you, the setup of the festblog by the editors did give some guidelines–just as enforceable as the Code’s.
Regardless, that is then established—the labor theory is wrong—but what does that say about capitalism? What does that say about economic theory? If rising standards of living can occur with rising exploitation (which Marx sees as unpaid, surplus labor performed) and smaller labor share of (national?) income,” then the system is unstable, especially when things go South—somewhat of an “extraordinary misapprehension” in that static framework, no? This is a very optimistic view of the economic process (having nothing to do with DeLong’s optimistic/pessimistic conclusion”) in which (serendipitously aligned with Marx’s review of hiring practices in his time), “all women are strong, all men are good-looking and all the children are above average.”
It is a static vision–Keynes’ quip about death in the long run notwithstanding; therefore, thou shalt make dt as infinitesimally small as possible, but no smaller, especially when the approximation therein becomes the rock-solid hypothesis instead. Further, then, Marx was right about the growth of the gap in society—while working class’ living standards may increase and if they do so at a lower rate than the growth of exploitation, then Henwood’s narrative is strengthened, and Marx was right about something, at least.
If the outcome of the economic process is a flow, a joy of life, then an analysis of income that facilitates that joy may be possible, qualitatively, as breaking down into, say, enjoyment of consumption, of leisure all this while doing less work (disutilty of labor). Georgescu-Roegen examined this type of derivation for Ricardo, Marx and the Neo-classics. To recall, Ricardo assigned value independent of labor to land and to the services of capital and subtracted the disutility of labor (but did not consider explicitly the value of leisure) in his vision. Marx, although otherwise insightful into the important role of the length of the work-day, a topic which may hold a key for “development” if balanced appropriately between village and town—he was then right about something else), did none of that. Nature’s gratis supplies and the services (as opposed to funds) of capital, not depending on labor, have zero value, in his perspective. Consequently, this pseudo measure in the Marxist view evaluates to zero overall—and that does seem to put the “dismal” in the “science” and the “materialism” in “historical.” Got it—he was wrong about that: only on the margin (of history) is a labor theory like that applicable: as Georgescu-Roegen quipped, only the first hammer “incorporated” only labor–the next hammer was build with labor and a hammer!
(BTW, the Neo-classic view identifies income with the value of the product, so is “paying attention to that part of a worker’s time sold for wages” while completely ignoring the value of leisure time. This is the view of the “businessman: wages are a part of his cost but do not represente a cost counterpart in the life enjoyment of the worker.” It therefore has no obvious instrument to manage leisure and disutility of labor so it is, by design, ill-equipped to deal/issue recommendations for economic development of “emerging nations” as it cannot even begin to fathom wanted vs. unwanted leisure, for instance, a topic that should be at the heart of any conversation on development. But, due to the lens mentioned above, Neo-classic economics cannot see that.)
More importantly though, Marx was right about the plain fact that the economic process is not an isolated system—“heroic assumptions” are absolutely necessary in order to even define where the cuts in seamless reality should take place in order to delimit an economic process! These cuts are also necessarily “rough,” thus leaving “dialectical penumbras” around the economic process. The human aspect of the economic process erupts through because it must admit an irreducible qualitative rest—something Neo-classic theory cannot seem to fathom and “too often take for granted that the quantification of quality leaves no qualitative residual.” He was also right to notice therefore the limitations of static economic analysis (Ricardo’s) and look for a cycle of [re]production.
To conclude, Marx is shown to be right about a few very important things in economics. Apropos of these articles, however, they arguably suggest that “[current economic] reason is not the normal human reason.” As about revolutions, (spread of) communism, etc., one can always look up…”Secrets, Venona” or “Conference, Yalta.”
- J. Schumpeter, “Capitalism in the Postwar World”, Postwar Economic Problems, 1943, reprinted in Swedberg, Essays, Transaction Publishers, 1997
- J. Schumpeter, Theorie de la monnaie et de la banque, Harmattan, 2005: “dans l’economie de propriete privee, il n’existe pas de mecanisme de repartition separe”
- N. Georgescu-Roegen, The Entropy Law and the Economic Process, Harvard, 1971
- N. Georgescu-Roegen, “The Institutional Aspects of Peasant Communities: An analytical view”, in C. R. Wharton, Subsistence Agriculture and Economic Dev., 1965
- N. Georgescu-Roegen, Analytical Economics, (AE) Ch. V and passim
- N. Georgescu-Roegen, “Measure, Quality and Optimum Scale,” Indian J. of Statistics, 1965
- K. Marx, A Contribution to the Critique of Political Economy, Ch. 2, Note B, qtd. in Georgescu-Roegen, AE, ibid.