Marx- A Complete Introduction
Page 11
Centralization of the economy
Because Marx saw the competition between rival capitalists as one of the main economic problems, he believed that the economy should be managed centrally:
• Important industries should be centralized, only useful goods and services should be produced and over-production should stop.
• Banks should be centralized. It is only in this way that society can be sure there would be high levels of investment in the right kind of industries.
• There should be controls on imports to help combat unemployment.
Marx believed that these measures could only work in the communist society that would inevitably come about as a result of inconsistencies within the capitalist system. Marx’s view was in contrast to the views of Adam Smith who had a laissez-faire attitude to the economy. He believed that there was some ‘invisible hand’ that guided the markets and that pursuit of individual interests in the free market tends to regulate the economy for the greater social good. He thought it is better to leave the economy to its own devices than use any interventionist policies. Naturally, bourgeois society tended to agree with his views.
Was Marx right about the economy?
There is no doubt that capitalism has gone through repeated crises since it began. There was the ‘Long Depression’ in the 1870s and 1880s, and the Great Depression of the 1930s affected most of the capitalist world, increasing fears that a worldwide communist revolution was about to begin. After a relative boom period there was a series of crises beginning in the 1970s, largely as a result of fluctuations in the price of oil. At the beginning of the twenty-first century there was a world economic boom, followed by a global financial crisis beginning in 2007. More crises are being predicted, but how much all these crises are a result of the dialectic flaws inherent in capitalism is open to debate.
Modern neo-classical economists, such as those academics who follow the ideas of the Chicago School, would argue that boom and bust in the economy are just a part of the natural cycle of the economy. They reject the idea of dialectical instability and believe that market economies are inherently stable if left to their own devices. They believe that government intervention is the cause of depressions. They do not agree with Marx’s labour theory of value, believing that value is a subjective thing that varies for different people and even for the same person at different times. They also believe that Marx’s view of the economy was over-simplified and that no economic system is ever a purely capitalist one in which one group holds the means of production and one group provides the labour. They disagree with the assertion that labour is the only source of value in the economy and the only way of making a profit. They also assert that it was not market forces that caused the most recent world financial crisis but de-regulation of banking services and dishonest dealing in world financial markets, allied to a downturn in the US housing markets. Radical Marxists view these arguments with suspicion and say that as the present dominant view of the economic system in the West is a neo-classical one, stressing free enterprise, then it is in the interests of economists to support a system that benefits them. They also believe that although the cause of the 2008 global financial crisis was laid at the door of world banks and financiers it was only a short-term cause. The real cause is the inherent weakness of capitalism itself.
There is also much debate about whether profits and wages have fallen in the way that Marx predicted. In real terms, most people in the West are better off than they were in Marx’s time, and incomes are said to be evening out. Even in developing countries there seems to be evidence of improvements in infant mortality rates and production of food supplies, which are used as indicators of poverty. Rather than the majority of people being forced into the working classes in Western economies, the gap between rich and poor is being filled by a larger and wealthier middle class but rich and poor still exist, and since the financial crisis, the incomes of the middle class have become ‘squeezed’. Globally there is evidence of a greater inequality than ever between the rich and the poor.
‘In our own time, as Marx predicted, inequalities of wealth have dramatically deepened. The income of a single Mexican billionaire today is equivalent to the earnings of the poorest seventeen million of his compatriots.’
Terry Eagleton, Why Marx Was Right, Yale University Press 2011, p. 8
Case study: Capital in the Twenty-first Century
One of the surprise nonfiction bestsellers in 2014 was a book written by a French economist, Professor Thomas Piketty. In his book Capital in the Twenty-First Century he makes the claim that inequality in wealth is inherent in the capitalist system and unless there is some form of government intervention this inequality will grow and may lead to social unrest. For anyone who has read Marx this is not surprising news, although Professor Piketty claims not to have read Das Kapital.
The book has been popular because the professor attempts to show through hard evidence that a commonly held belief among economists, that capitalism becomes a more equal system as it develops, is mistaken. He states that wealth becomes concentrated if the rate of return on capital (r) is greater than the rate of economic growth (g). The evidence he shows in support of this means that he believes he has proved scientifically that inherited wealth will always grow faster than earned wealth in the modern economy, because the rate of return on capital vastly exceeds the rate of growth, especially since the last economic crisis. To combat this inequality he proposes what he believes to be the possibly Utopian solution of a global wealth tax that would reduce inequality.
Although there has been some controversy over his data, with some critics (notably from the Financial Times) believing it to be flawed, and some discussion over his definition of capital from Marxists (including David Harvey), the book has been applauded as a masterpiece by many reviewers. It has certainly got the media talking about inequality in society and about Marx and Das Kapital; it has also led more people to re-examine Marx in the context of today’s society.
Marx never finished his work on the economy. Volume 1 of Capital was the only volume he completed so he did not really have time to formulate his theories properly before his death. Because Marx’s views changed throughout his lifetime, there is a lot of discussion about which of his writings should be taken into account when stating his view of the economy. Marx’s theories can be used selectively to support different arguments. For example, a government that wished to intervene in the economy could select those parts of his work where intervention was stressed and other writings ignored. Some Marxists also believe that the dialectic view of the economy has been over-stressed by previous writers because it was over-emphasized by Engels and by communist leaders who wanted to gain control over the economy.
The predictions that Marx made about the economy have not all come about: profits do not tend to fall, workers’ wages have improved in real terms and the majority of people are much better off than they were in Marx’s day. For the majority of people in society class divisions have become less distinct, although we have seen from the latest evidence that inequality in society is probably growing. Where communists have come to power through revolutions their economies have suffered just as many economic crises as capitalist countries, although for different reasons. However, we have seen the takeover of smaller companies by large ones and several depressions in the economy with periods of high unemployment, so Marx wasn’t totally wrong; and although economists try to predict the future of the economy, they cannot really know what will happen next.
Key ideas
Abstract social labour An economic feature of capitalism that treats labour as a commodity and separates it from everyday life.
Accumulation of capital Where profit is not used to buy more products but is invested to future production.
Capital Money to which surplus value accrues.
Chicago School An economic school based around Chicago University in the 1950s that advocated a laissez-faire attitude to economic systems.
Concrete labour Labour that has to be applied to a product to give it value.
Generalized commodity production Type of production under capitalism and free market economy where there is no regulation of who makes what.
Labour power The strength and skill of the worker.
Social labour In feudal times this was labour done on behalf of society rather than for private enterprise.
Social production A way of organizing work in society so that it is divided out fairly.
Surplus products Products over and above those which satisfy the basic needs of the producers.
Theory of surplus value Marxist theory which explains how capitalists are able to profit from their workers’ labour power.
Things to remember
• Marx explained his economic theory in Capital. It is also explained in Wage-Labour and Capital and in Value, Price and Profit.
• The capitalist economy needs costly machinery to produce goods. Only those who can afford to invest capital in the economy can profit from it.
• All production under capitalism is the production of commodities.
• Human labour power becomes a commodity under capitalism.
• Marx believed workers are exploited by capitalism but they are not aware of it.
• Commodities have two types of value: use-value and exchange-value.
• The rate at which commodities are exchanged against each other depends on the amount of labour that has gone into making them.
• In a capitalist society, money is used as an indirect way of exchanging goods. Not all money is capital. Capital is money to which surplus value accrues.
• Capitalists gain surplus value from their workers by paying them a fixed amount for their labour power regardless of the profit they gain.
• Surplus value can be increased by lengthening the working day or increasing productivity.
• Not all surplus value is profit.
• Division of labour increases profit in the short term.
• Profits fall in the long term due to over-production and increased competition, which leads to increasing investment.
• Marx believed capitalism was in crisis and this would eventually lead to revolution.
• Marx believed that under communism the economy should be managed centrally.
• Not all of Marx’s economic predictions have occurred and not all of his theories are accepted today, although there has been a resurgence of interest in his work since the economic crisis of 2008.
Fact check
1 What English word best describes the documents known as the Grundrisse?
a Economics
b Philosophy
c Elements
d Structure
2 Which short piece of Marx’s writing has a preface summarizing historical materialism?
a The German Ideology
b Das Kapital
c Theories Of Surplus Value
d A Critique Of Political Economy
3 Which revolutionary leader popularized the term dialectical materialism?
a Stalin
b Lenin
c Bakunin
d Proudhon
4 What term did Marx use to describe early hunter-gatherer societies?
a Capitalism
b Feudalism
c Slave Society
d Primitive Communism
5 How did Adam Smith define commodities?
a Articles produced to be sold on the open market
b Stocks and shares
c Wheat and corn
d The labour of servants
6 When did Marx believe the capitalist mode of production had begun?
a The Middle Ages
b The last third of the eighteenth century
c The first quarter of the nineteenth century
d The Dark Ages
7 What is another term for profit?
a Surplus value
b Commodity value
c Stocks and shares
d Exchange value
8 What did Marx believe determined the exchange value of goods?
a The price of fish
b Profits
c Commodities
d Labour
9 What is the socially necessarys labour time?
a How much labour it takes on average to make a product
b The amount of time workers need to rest
c The labour value of a social unit
d The cost of wages in relation to labour
10 What is the division of labour?
a A mass production system that splits process into repetitive tasks
b The division between factory owners and workers
c The division between necessary labour and surplus labour
d A system that allows families to work together
11 What is generalized commodity production?
a A capitalist production system where there is no regulation over who makes what
b A type of production with centralized decision making on product manufacture
c Production of commodities for use by everyone in society
d A production system where groups of manufacturers get together to manufacture commodities
Dig deeper
Thomas Coskeran, Economics: A Complete Introduction, Hodder Education 2012
Terry Eagleton, Why Marx Was Right, Yale University Press 2011
David Harvey, The Limits to Capital, Verso 2007
David Harvey, The Enigma of Capital: And the Crises of Capitalism, Profile Books 2011
David Harvey, Reading Marx’s Capital – Afterthoughts on Piketty’s Capital http://davidharvey.org/2014/05/afterthoughts-pikettys-capital/
Benjamin Kunkel, Utopia Or Bust, Verso 2014
Karl Marx, Capital, Volume 1, Penguin Classics 1990
Thomas Piketty, Capital in the Twenty-First Century, Harvard University Press 2014
5
Economy and society
In this chapter you will learn:
• how Marx believed the economy affected society
• about colonialism and imperialism
• about fetishism, alienation and exploitation
• how realization of these would lead to revolution.
For Marx economics did not exist in a vacuum, as a subject to be studied for its own sake. He was interested in the way that the economic structure of society affected the lives of the people within it. Capitalist society had developed fairly gradually in Europe, but in the second half of the nineteenth century it had started to develop very rapidly along with technological change. Marx saw that this had very definite effects on the lives of both rich and poor. He also saw that the effects of a capitalist economy were starting to be felt around the world and not just in the countries that had developed their means of production.
‘The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonisation of America, trade with the colonies, the increase in the means of exchange and in commodities generally, gave to commerce, to navigation, to industry, an impulse never before known, and thereby, to the revolutionary element in the tottering feudal society, a rapid development.’
Karl Marx and Friedrich Engels, The Communist Manifesto, 1848, Chapter I http://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm#007
Imperialism and colonialism
Marx did not publish any theory of imperialism, although he did make reference to colonialism in the first volume of Das Kapital. Imperialism and colonialism are sometimes used inter-changeably as words to explain the policy of one country extending control or authority over other countries outside its own borders. Colonialism is usually seen as rule over colonies that ‘belong’ in some way to the ruling power, for whatever reason. For example, India was at one time a British colony.
Marxists today use the term imp
erialism in a slightly different way from that used in a historical sense. The generally understood term describes imperialism as a policy of extending authority over foreign countries by acquiring and maintaining empires. Marxists see imperialism as the state of capitalism that takes place when colonialism has taken over the world.
This definition of imperialism comes mainly from Lenin’s work Imperialism: The Highest Stage of Capitalism. Here he states that once all underdeveloped countries have become colonies of more developed ones there will be no new colonies available to be acquired by the major powers, unless they take them from each other. He also claims that capital will be concentrated in the ‘financial oligarchy’; banking and finance will be dominant over industrial capital. It is interesting to note Lenin’s prediction in the light of the world financial crisis, or global meltdown that began in 2007. This was largely attributed to a lack of regulation in the financial sector.
‘Monopolies, oligarchy, the striving for domination and not for freedom, the exploitation of an increasing number of small or weak nations by a handful of the richest or most powerful nations – all these have given birth to those distinctive characteristics of imperialism which compel us to define it as parasitic or decaying capitalism.’
Vladimir Ilyich Lenin, Imperialism, the Highest Stage of Capitalism, 1916 http://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch10.htm
Imperialism is also a term much used by modern Marxists to describe the capitalist system of trade and banking and it is often used as a disparaging term to describe a greater power acting at the expense of a lesser power, regardless of whether or not the greater power has any rule over the lesser power. For example, the United States is sometimes referred to as the ‘American Empire’ because it is the dominant economic and military power in the world, even though it does not possess an actual physical empire.