A Marx revival? (1 of 5) The Marx bogeyman

"Grasping the ways in which Marx was right is the first step toward making sure that his predictions of capitalism's downfall remain wrong," writes Peter Coy in Marx to Market Bloomberg Business Week 11/14/2011.

But discussion of Karl Marx's thought is still heavily filtered through Cold War considerations. Coy in his first paragraph declares:

Marx’s most famous predictions failed; there has been no dictatorship of the proletariat, nor has the state withered away. His followers included some of the 20th century's worst mass murderers: Lenin, Stalin, Mao, Pol Pot. Yet the gloomy, combative philosopher seems to find adherents in each new generation of tyrants and dreamers.

To be fair, sifting through even the major variations of Marxism since the publication of The Communist Manifesto in 1848 in one brief column would surely tax the abilities of even the most brilliant summarizer.

Michael Sayeau reports a similar reticence at a conference of academic Marxists in The Fifth International: n+1 covers the London Conference, "On the Idea of Communism" n+1 04/22/2009:

Despite the billing of the conference, and despite the fact that the papers presented were almost to a one solid pieces of philosophical work, I think it’s safe to say that nothing groundbreaking, or even all that unexpected, happened. The speakers routinely erred on the side of contrition and caution. When Marx was cited, which was often, it was apologetically, rounded off with disavowals of dogmatism. When presenters engaged with the current economic situation, they were strident in proclaiming that change was necessary, but defensively so, as if they were still talking themselves into the idea — a holdover from the era of the bubble, when the "rising tide that lifts all boats" wrong-footed leftists for more than a decade. [my emphasis]

Peter Coy credits the real existing Marx of history with the following:

One of Marx’s most important contentions was that capitalism was inherently unstable. One only has to look at the headlines out of Europe—which is haunted by the specter of a possible Greek default, a banking disaster, and the collapse of the single-currency euro zone—to see that he was right. Marx diagnosed capitalism's instability at a time when his contemporaries and predecessors, such as Adam Smith and John Stuart Mill, were mostly enthralled by its ability to serve human wants. ...

Marx has gotten an attentive reading recently from the likes of New York University economist Nouriel Roubini and George Magnus, the London-based senior economic adviser to UBS Investment Bank. Magnus's employer, Switzerland-based UBS, is a pillar of the financial establishment, with offices in more than 50 countries and over $2 trillion in assets. Yet in an Aug. 28 essay for Bloomberg View, Magnus wrote that "today's global economy bears some uncanny resemblances" to what Marx foresaw. (Personal opinion only, he noted.)

Marx argued that overproduction was in fact endemic to capitalism because the proletariat isn't paid enough to buy the stuff that the capitalists produce. Again, that theory has lately been hard to dispute. The only way blue-collar Americans managed to maintain consumption in the last decade was by overborrowing. When the housing market collapsed, many were left with crippling debt. The resulting default nightmare is still playing itself out. ...

Now, once again, unbridled capitalism is threatening to undermine itself. The world's biggest banks, financially weak but politically powerful, are putting the screws on borrowers in an attempt to rescue their own balance sheets. Likewise, creditor nations such as China and Germany are attempting to shift the pain of rebalancing onto debtor nations, even though squeezing them too hard threatens to cause an economic and financial disaster.

It's understandable that at a time of serious and persistent depression, even business-magazine columnists would take a nervous look at Marx's work. Or at least third- and fourth-hand versions of it. My very first homework assignment in business graduate school was to read excerpts from Adam Smith and Karl Marx. (It was a Jesuit school!) The idea was that those two provided a classical philosophical justification for capitalism and a classical critique of capitalism's problems.

Marx and the Social Democratic parties that adopted his economic outlook were correct in their basic understanding of the longterm instability of capitalism. Or, to put it in more contemporary jargon, they were right in seeing that business cycles were an inherent part of the capitalist economic system. Coy's comments on the contradictions of the capitalist system ("unbridled capitalism is threatening to undermine itself") and the self-destructive foreign policies that it is producing are accurate enough. And such results were indeed referenced in Marx' classical criticism of capitalism.

In terms of the field of economics as we know it today, both classical capitalist economics and Marxism shared a different focus than today's economics. Classical econ and Marxism focused on labor relationships, particularly the labor theory of value. Starting with neo-classical economics of which Alfred Marshall (1842-1924) was the most famous exponent, economics shifted its focus to markets. Marx's theory of surplus value was derived from the work of classical economist David Ricardo, though Marx made his own version of it having to do with "surplus value," which is basically the monetary value that workers add to materials in the production process.

I won't try to hash through it here. But Marx saw an inherent problem on the economic side that derives from his concept of surplus value. In his view, increased industrialization (and by extension automation today) would would create a secular (long-term) decline in surplus value and therefore of profits, or, more specifically profit rates. If such a tendency has been at work in capitalist economies since the 19th century, it is very much a long-term trend, because there is no clear evidence of such a process at work.

(Two recent examinations of that aspect of Marx' theory are Michael Heinrich, "Begründungsprobleme.Zur Debatte über des Marxsche 'Gesetz vom tendenziellen Fall der Profitrate" Marx-Engels Jahrbuch 2006 and Klaus Müller, "Tendenzieller Fall oder Anstieg? Zur Komplexität okonomischer Erscheinungen und Beispiel der allgemeinen Durchscnittsprofitrate" Marx-Engels Jahrbuch 2009)

As Coy points out, Keynes and the Keynesians recognized some of the same realities that Marx did about what Marxists would call the inherent contradictions of capitalism. Marx himself drew much of his imperical data for his economic theories from the business press of his day. To the extent he and his contemporary collaborators were careful in their observations and analysis, it is not surprising that some of their observations about the fundamental dynamics of the capitalist system still hold.

During Marx' time, no party that shared his philosophy took governmental power, so we can only guess what Marx' more short-term prescriptions for what we now call macroeconomic policies would have been. (Marx did write approvingly of the short-lived Paris Commune of 1871, but they never had a chance to set up long-term economic policies and they never actually governed France.)

And Marx' influence may have been greater in the long run outside of the field of economics proper as we know it today: in political science, in politics, in sociology and in philosophy. Whether what Marx called surplus value can be measured empirically or not, it could still have meaningful applications as a moral, historical and polemical concept. We're unlikely to see those thoughtfully analyzed in Bloomberg Business Week anytime soon.

In the end, business publications are not likely to spend much time or energy attempting to use Marxist theory to derive useful insights on economics and business news of the day. But Peter Coy's article gives a real clue to why the specter of Marx is haunting the pages of business publications (corny reference, I know!): the real contradictions of capitalist economies - the business cycle, the tendency toward maldistribution of wealth and income, overproduction, self-destructive tendencies for the whole system from warring business interests pursuing their own individual goals - are things that Marx' classical criticism of capitalism recognized. Hauling out the image of Karl Marx represents both a way of invoking those classical criticisms and an attempt to inoculate the audience against them. (Stalin! Mao Zedong! Pol Pot!)

Non-Marxist thinkers like Thorstein Veblen and John Maynard Keynes recognized the same things. But one of the effects of capitalism is to make very practical businesspeople forget that such longer-term problems are there and to actually start believing the feel-good propaganda that makes contemporary corporate capitalism sound like the best of all imaginable worlds. Instead of what it really is.

Posts in this series:

A Marx revival? (1 of 5) The Marx bogeyman 12/28/2011
A Marx revival? (2 of 5) Some intellectual luminaries of the European left 12/29/2011
A Marx revival? (3 of 5): the former Communist states as real-time challenge 12/30/2011
A Marx revival? (4 of 5) Is there actual evidence of such a thing in US and European politics? 01/01/2011
A Marx revival? (5 of 5) The archetypal left challenge to Marxism 01/02/2011

Tags: communism, second subject