Marx Salon

By Art Carden

During this time of global economic crisis, the venerable Karl Marx is enjoying newfound popularity. He is undoubtedly the most influential social thinker of the last three hundred years if not the last thousand, but while his influence permeates the Great Conversation, his system has been crushed under the weight of contradictory theory and evidence. In light of global economic conditions, should we come to praise Marx, or to bury him? He is an important figure in the history of ideas, but we won't gain much insight into current economic conditions by reading Marx.

It is important not to mistake Marx's significance in the history of ideas for the veracity of Marx's economics. Paul Samuelson described Marx-the-economist as "a minor post-Ricardian," and the current global economy does nothing to suggest that we should revise Samuelson's assessment. Marx's theoretical system was destroyed by nineteenth century marginalism (as discovered and explained by noted economists William Stanley Jevons, Carl Menger, and Leon Walras), and the broader Marxian system has been thoroughly demolished in detailed critiques by the likes of Eugen von Bohm-Bawerk, Joseph Schumpeter, Ludwig von Mises, and Thomas Sowell. 

Even when setting his critics aside, history gives us plenty of reason to doubt Marx. He predicted growing misery for the working class and the creation of a large and growing reserve army of unemployed. Neither predication came to pass; indeed, precisely the opposite happened. Industrialization did not result in the increasing misery of the poor. Industrialization poured out blessings on unskilled laborers in the form of higher wages. Indeed, as Gregory Clark shows in A Farewell to Alms, real wages increased, interest rates stayed nearly constant, and rents on land also stayed almost unchanged. Contra Marx, the poor got richer in countries that adopted capitalist institutions.

Marx also claimed that capitalism alienates us from our essential nature and saps us of our creative juices. Deirdre McCloskey notes in The Bourgeois Virtues: Ethics for an Age of Commerce that the alleged social ills wrought by advancing capitalism were in fact mitigated rather than exacerbated by the spread of bourgeois society and bourgeois values. And, ironically, the intellectual and cultural freedom that Marx foresaw in his socialist paradise has flourished under capitalism. Commerce and culture are not substitutes. Commercial success is an input into flourishing culture.

In his monumental History of Economic Analysis, Joseph Schumpeter argues that one cannot fully understand and comprehend Marx if one has not read all three volumes of Capital and all of his Theories of Surplus Value. Further, he argues that one cannot have a full appreciation of Marx without an intimate familiarity with the continental intellectual tradition in which he wrote. Given the ways in which his qualifications trump mine, I defer to Schumpeter for an assessment. While acknowledging the importance and originality of some of Marx's analytical contributions, Schumpeter offers a threefold criticism of the Marxian system. Schumpeter points to Marx's important contribution about the relationship between ideology and ideas, but he points out that while Marx was keen to highlight the ideological underpinnings of capitalism he did not notice or discuss the ideological underpinnings of his own system. Second, writes Schumpeter, Marx "reduces [ideological systems of thought] to emulsions of class interests which are defined in exclusively economic terms." Finally, to borrow from Ludwig von Mises, Marx and his followers felt that identifying the interests behind an ideology was enough to dismiss it.

Marx's system is undermined by the bankruptcy of his theories of value and exploitation. Where classical and neoclassical economic analysis sees profit as an indispensable element of the market economy and as a return to capitalists and entrepreneurs for risk-taking, Marxian economics sees this line of thinking as mere apologetics for capitalist interests. According to Marx, any product of labor above and beyond what is needed to call labor into production that does not go into the pockets of the laborers is extracted and appropriated surplus value. In classical and neoclassical economics, this "exploiter" plays a crucial role by identifying prospective opportunities for moving factors of production from lower-yield to higher-yield employment. In his thorough critique and refutation of the Marxian system, Thomas Sowell (himself a former Marxist) points out that the entire Marxian system collapses on itself when one admits that factors other than labor have value.

The current crisis is not a crisis of capitalism. It is a crisis of interventionism spawned by the hubris of political leaders who, to borrow from F.A. Hayek, were arrogant enough to think that they could design what they could not possibly understand. Governments regulate, which means two things.  First, the regulators are insulated from competition. Removing the determination of standards from the cash nexus of the market process means that they are circumventing the information-generating process that would tell providers of rules and regulations whether they are choosing wisely or choosing poorly. Second, turning market decisions into political decisions means creating political incentives. We should not be surprised that financial market regulations are being bent to the benefit of those who are in the best position to influence policy and to the detriment of everyone else.

Marx's status as an important figure in the history of ideas is unassailable, but the decisive and multi-faceted refutations of his system suggests that we won't learn much by perusing his work for insight into the roots of the global economic crisis. For real insight we have to look elsewhere. I'm starting with Ludwig von Mises and Friedrich Hayek. Like Marx, both offered complete social systems, internally consistent monetary theories, and explanations of economic crises. The difference is that Mises and Hayek got the economics right.

Art Carden is Assistant Professor of Economics and Business at Rhodes College in Memphis, Tennessee and an Adjunct Fellow with the Oakland, California-based Independent Institute.

fhwrdh/flickr

By James K. Glassman

A quarter-century ago, Marxism provided the ruling ideology for roughly half the world's population and threatened to spread to at least half of the other half. But a year ago, outside of Pyongyang, Havana, and isolated pockets of academe, the conventional wisdom was that Marxism was stone dead.

"I shouldn't even mention Marxism," wrote Charles Murray, the conservative scholar. "For decades, it was the leading intellectual paradigm on the continent and had a huge influence among broad elements of the American intelligentsia. What is left of Marx?...Virtually nothing."

Today, however, there's a chill running up the legs of leftists everywhere as they survey the wreckage of the current economic crisis and point to Marx's warnings about how such debacles are, as Matthew Yglesias paraphrases, "endemic to the capitalist system."

Not so fast! As terrible as it has been, the recession in the United States appears to be bottoming out, as Fed Chairman Ben Bernanke said yesterday. A good guess is that the U.S. economy will show positive growth in this quarter, or next at the latest. Also, some perspective is in order. GDP this year, despite the recession, will exceed $14 trillion, or $45,000 per capita. This crisis of capitalism has meant that, for the United States and other developed nations, output for the first quarter of 2009 will be the same, in real terms, as output for 2007. And, by the way, capitalism is not the only system that moves in fits and starts. Feudalism and communism have their own economic crises; communism's (if we may judge from North Korea and Cuba) is perpetual.

Berkeley's Brad DeLong, of all people, puts it well:

Marx thought that business cycles and financial crises were evidence of the long-term unsustainability of the system. We modern neoliberal economists view it not as a fatal lymphoma but rather like malaria: Keynesianism -- or monetarism, if you prefer -- gives us the tools to transform the business cycle from a life- threatening economic yellow fever of the society into the occasional night sweats and fevers: that with economic policy quinine we can manage if not banish the disease."

My own interest in Marx is rooted in Keynes's famous statement in his General Theory of 1936: "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." Keynes himself is such an economist, as I wrote in Commentary in March. And, in this department, Marx is at least Keynes's equal (Keynes, in the quotation, was referring to "political philosophers" as well as economists).

Marx posited a world of contending, class-driven materialist forces. "Does it require deep intuition," he wrote, "to comprehend that man's ideas, views, and conception -- in one word, man's consciousness -- changes with every change in the conditions of his material existence?"

We have bought into this notion almost completely. Look at the 2008 election campaign, where the candidates fully accepted the construct that policy is determined by powerful, moneyed corporate "special interests." The healthcare system we have today, we are continually told by politicians (and accept as truth), is the result of the clout of lobbyists working for drug and health insurance companies. And anyone who thinks ideas can be generated or advocated outside the context of wealth is naïve.

It's not that such a notion has no validity. Of course it does. The problem is that we've bought into the whole dreary story completely. Christopher Hitchens in his Atlantic piece quotes James Buchan: "Marx is so embedded in our Western cast of thought that few people are even aware of their debt to him." That, alas, is true. The average TV talking head, as a framework of analysis, embraces the Marxist concept that the only reason people do things is for material interest: All relations are driven by power, and all motivations by money.

Marx saw history as a succession of class struggles, with the current and final one between "two great hostile camps...bourgeoisie and proletariat." Social and economic mobility, not to mention the ownership of assets like stocks and real estate, is so pervasive in the United States that it is absurd to believe that we have a "working class," or proletariat, as Marx conceived.

Yet surveys show that Americans describe themselves in just these Marxist terms. They eagerly respond to Gallup polls asking them which candidate "respects working-class Americans" more. The first step toward purging Marx from American life, in fact, is to stop using the term "class" to describe anything other than a sense of style or a course in school. Americans need to get back to their pre-Marxist roots, when we viewed individuals as conscious, autonomous actors. That was the basis of Enlightenment thinking that Marx supplanted.

He wrote in 1857: "The single, isolated hunter and fisherman, with whom [Adam] Smith and [David] Ricardo begin, belongs to the unimaginative fancies of eighteenth-century Robinsonades," a reference to utopias on the lines of Daniel Defoe's Robinson Crusoe. Marx ridiculed this concept of "Natural Man" -- the man of the Declaration of Independence, with its strong admonition that governments are formed to protect the natural, God-given rights of the individual, rather than governments beneficently bestowing those rights.

Even if Marx had gotten the part about capitalist economic crises right, he got the part about human beings wrong. At least, I sure hope so.

James K. Glassman is the former Under Secretary of State for Public Diplomacy and Public Affairs. He is president of the World Growth Institute, which promotes global economic development.

By Leo Panitch

I appreciate Matthew Yglesias's recognition of the need to take Marx seriously, although the reasons for this go well beyond Marx's foresight regarding how endemic financial crisis would be in capitalism. In fact, Yglesias is right that Marx is not unique in this respect. I chose my words very carefully when I praised Marx for the tools he gave us to understand the "contradictions" inherent in a world comprised of "competitive markets, commodity production, and financial speculation."

For Marx, the exploitative social relations of commodity production and the anarchy of competitive markets were more fundamental characteristics of capitalism than financial speculation. For Marxists, the significance of finance lies in terms of its connection to production and competition. Moreover, the tools Marx gives us are necessary not only to understand moments of crisis. They are needed to properly understand how it is that capitalism's fundamental characteristics of exploitation and alienation, class inequality and social isolation are reproduced in commodity production and market competition even in periods of capitalist dynamism, and how this too plays a role in generating both financial speculation and future crises.

This brings me to Yglesias's misleading notion that just because many Western European parties originally influenced by Marxism still go by "socialist" or "social democratic" names, this means they are receptive to Marxist ideas today. Far from it. Indeed, the evolution of these parties has been one long history of distancing themselves from Marx. Anthony Crosland's The Future of Socialism, first published in 1956, famously encapsulated the thinking of a whole generation of socialist and labour party leaders and intellectuals in Western Europe countries with the argument that the post-war "transformation of capitalism" had, once and for all, proved the Marxist analysis of capitalism wrong.

According to Crosland the post-war world had witnessed three "fundamental" changes: 1) the capitalist class has lost its "commanding position" vis-à-vis governments; 2) there had been a "decisive shift" of class power towards the working class at the expense of business; and 3) the very nature of the business class had changed in terms of the diminished power of banks and financial markets.

Notably, Crosland refused to adopt what he called "the current fashion" of sneering at Marx, who was, in his view, was "a towering giant among socialist thinkers" whose work made the classical economists "look flat, pedestrian and circumscribed by comparison...only moral dwarfs, or people devoid of imagination, sneer at men like that." But whereas Marx had been relevant until the Second World War, Crosland insisted that after it he was not. With the assumptions that the New Deal and post-war reforms and regulations were permanent and irreversible and that they had contained capitalism's crisis tendencies as well fundamental class inequalities, not only the British Labour Party but also such original proponents of Marxian class struggle as the German and Swedish Social Democratic parties had ostentatiously renounced any association with Marxism by the 1960s.

From today's perspective, it is obvious how mistaken it was to think that capitalism had changed its spots. Indeed, the very notion that reforms were irreversible was already disproved by the 1970s when not only politicians like Thatcher and Regan but also European social democratic politicians concluded that the full employment and welfare state reforms had made workers too "militant" or too "lazy" and that this was causing inflation, fiscal deficits and lower productivity. When their attempts to deal with this through corporatist 'social contract' treaties between capital and labour (that Marx would have especially derided) failed, it didn't take too long before they embraced the free market solutions of the neoliberals, including especially the opening up of capital markets -- with Sweden leading the way in the 1980s (culminating in Sweden's massive financial crisis in the early 1990s) and Germany and rest of Europe going even further in this direction right up to the moment when the current crisis struck in 2007.

Yglesias doesn't get it. It is those who look back to the old regulations and reforms that are the real conservatives in terms of what is necessary, and the real cynics in terms of what is possible. While it is true that some countries' regulations and reforms were more extensive and long-lasting than others, this mainly had to do with the strength of their trade unions and socialist political culture at the time when these reforms were introduced, and as these strengths diminished -- very much encouraged by the socialist party leaders and their house intellectuals and media -- the trajectory of these societies moved more and more in a neoliberal direction. As my article emphasized, Marx would not tell us to search for this or that policy fix in the face of this crisis. He would tell us to try to develop the popular revolutionary aspirations, consciousness and capacity to build the kinds of movements and parties oriented to getting rid of capitalism, and (unlike the old European social democratic parties) having the nerve to go through with it.

This would have to involve not only democratizing the state and the economy but also the media -- which has played a massive role in encouraging all the fashionable sneering at Marx and that went on recent decades no less than in the 1950s. Yglesias is perceptive to note that FP's cover - imaginative and arresting as it certainly is -- may have the effect of encouraging readers not to take Marx too seriously. It is notable that the editors' notes to the current issue admit that the consensus among the people invited to write about "what is to be done" is more Schumpeterian than Marxian. Sad to say, this was precisely the case with the New Dealers and post-war reformers. But Yglesias seems to be very much in this camp himself, incapable of looking beyond reforms that would give us "a bit less equality" while patching up capitalism once again.

One can't really take Marx seriously while ignoring his main message, i.e. the need for movements from below to renew "the spirit of revolution."

Leo Panitch is Canada research chair in comparative political economy and distinguished research professor of political science at York University in Toronto, and coeditor of the annual Socialist Register.

Tavallai/Flickr

By Matt Yglesias

With the world facing the most serious economic crisis in many decades, the free-market orthodoxies that have governed the United States for the past 30 years -- and proven increasingly influential abroad -- are increasingly coming under question. Under the circumstances, it's perhaps natural that we're seeing something of a resurgence of interest in the work of Karl Marx, both in the form of a recent Atlantic article by Christopher Hitchens written mostly to amuse, and in Leo Panitch's more serious take in Foreign Policy.

It should be noted that there's something a bit parochial about this. In the English-speaking world in general, and in the United States in particular, there's thought to be something a bit naughty about mentioning Marx or letting slip the "s-word." But in the rest of the world, it's extremely common for the main left-of-center political party to have "socialist" or "social democratic" in its name. And while Americans mostly think of Marx's practical political influence in terms of the Soviet Union and its satellites, many democratic political parties in Western Europe can trace their origins in part back to Marxist influence.

Meanwhile, the pop art depictions of Marx that accompany both articles suggest to me an intention to undermine the nominal commitment to the idea that we ought to take Marx more seriously. They suggest that to raise fundamental doubts about the capitalist enterprise is actually quite silly.

Further re-enforcing this sense is the heavy emphasis currently being placed on Marx's argument that periodic financial crises were endemic to the capitalist system. At the time Marx was writing, the modern era of financial crises was quite new, and so this point was both original and by no means obvious. Subsequently, we've had more than 100 years to study the operations of capitalist financial systems and that time has proven Marx so overwhelmingly correct that the observation no longer counts as distinctively Marxian. Everyone, from followers of John Maynard Keynes to Milton Friedman's monetarists to the "Austrian School" of extreme libertarians agrees that periodic episodes of crisis are endemic to the system. This is not to take anything away from Marx, who got to the point quickly. But bringing him up only to cite him making a now-banal point seems almost as if we're exhuming the corpse in order to demonstrate to the village that it's still dead. Not to explore our doubts about capitalism, in other words, but to quiet them by making it seem as if Marx doesn't have anything to say that we don't already know.

I would suggest on the contrary that there's no time like the present to learn from Marx's theory of ideology -- the idea that wealth and power have a tremendous ability to gin up self-justifying narratives. Global elites' curious passivity in the face of the growing housing bubble was an excellent example. That prices were out of line with historical trends was easy enough to see, and the fact that asset bubbles recur periodically and lead to financial crises was once well-known and then swiftly rediscovered after the bubble popped. But during the bubble years, prominent policymakers on both sides of the aisle found themselves in the grips of an extremely naive rationalism that held that there couldn't possibly be a bubble, since the market should be magically self-correcting.

Naturally, nobody believes that now. And, indeed, it seems like a slightly ridiculous thing to have ever believed. Marx can be helpful in letting us understand how it ever came to be so widely believed and how it is that, to this day, the voices of a small clique of extremely wealthy financiers continue to speak so loudly in Washington. Understanding the process of ideology and self-justification can help us to dispel its power and see our way through to a better resolution of the crisis and a more just society.

Unfortunately, attention to the specific issue of Marx's account of financial crises seems mostly to inspire a curious kind of passivity. "Reformist politicians who think they can do away with the inherent class inequalities and recurrent crises of capitalist society are the real romantics of our day," writes Panitch, "themselves clinging to a naive utopian vision of what the world might be." This is radicalism as conservative -- even in the midst of a great economic crisis, there's nothing we can or should do to reform the system and no concrete lessons we should learn. But of course some countries' regulatory systems are better than others at avoiding banking panics -- Canada and Spain, for example. Some countries, Sweden for example, appear to have found workable methods of resolving insolvent banks. And while no country is without some economic inequality, many countries get by with quite a bit less than we have in the United States. Re-reading Marx ought to be a spur to reform -- to cast off the illusion that policy decisions made in the interests of the few represent nothing more than neutral technical expertise -- rather than a further source of complacency.

Matt Yglesias is a fellow at the Center for American Progress Action Fund. You can read his blog here.

DREASAN/flickr

In FP's latest issue, Leo Panitch writes:

The economic crisis has spawned a resurgence of interest in Karl Marx. Worldwide sales of Das Kapital have shot up (one lone German publisher sold thousands of copies in 2008, compared with 100 the year before), a measure of a crisis so broad in scope and devastation that it has global capitalism -- and its high priests -- in an ideological tailspin.

Yet even as faith in neoliberal orthodoxies has imploded, why resurrect Marx?" 

Panitch goes on to make a case for doing just that (an excerpt of which is below), but his article has sparked much debate on the merits of Marx, Das Kapital, and just how much his critique of capitalism applies to today's economic upheaval. 

All this week, FP will bring you a debate with new posts each day on Marx and whether or not his writings offer insight worthy of resurrection. 

Enjoy, and do weigh in!

An excerpt from "Thoroughly Modern Marx"

By Leo Panitch

To start, Marx was far ahead of his time in predicting the successful capitalist globalization of recent decades. He accurately foresaw many of the fateful factors that would give rise to today's global economic crisis: what he called the "contradictions" inherent in a world comprised of competitive markets, commodity production, and financial speculation.

Penning his most famous works in an era when the French and American revolutions were less than a hundred years old, Marx had premonitions of AIG and Bear Stearns trembling a century and a half later. He was singularly cognizant of what he called the "most revolutionary part" played in human history by the bourgeoisie-those forerunners of today's Wall Street bankers and corporate executives. As Marx put it in The Communist Manifesto, "The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby relations of production, and with them the whole relations of society. . . . In one word, it creates a world after its own image."