Posts Tagged ‘Marx’

rate of profit

Some Marxists put a great deal of stock in inexorable laws of capitalism, such as the tendency of the rate of profit to fall. I don’t. I don’t look at capitalism with the presumption of any kind of laws of motion nor do I look for them as the outcome of an analysis. For me, it’s all conjunctural.

And, in the current conjuncture, the tendency is for the rate of profit to rise. Not inexorably (there are lots of conjunctural causes). And not evenly (precisely because of changing configurations of those conjunctural causes). But, if you look at the data (such as the rate of profit calculated in the graph above*), we can see the capitalist rate of profit—an index of capitalist success if there ever was one—rising. It’s been rising on average (through a series of upturns and downturns) since 1990 or so, and it’s been rising (even more dramatically) since the onset of the Great Recession.

That, in my mind, is what matters. Right now, what we’re witnessing—precisely because of the measures taken to solve the crisis the capitalists themselves made (starting with the bailout of Wall Street and then continuing through various rounds of quantitative easing, high unemployment, the stagnation of wages, and so on)—is a tendency of the rate of profit to rise.


*I understand that “my” rate of profit (based on total corporate profits, flows of investment, and labor compensation) doesn’t exactly correspond to what others calculate as the Marxian rate of profit (which generally includes the stock of capital). I can defend my proxy (for r=s/[c+v]) theoretically. It also tracks other estimates (such as those by Fred Moseley) pretty well.

little people

I’ve written more than a bit over the years about taxes, distribution (including predistribution), and Modern Monetary Theory.

But I’ve mostly treated them as separate issues (except here). Randall Wray [ht: br] has brought those issues together, building on Rick Wolff’s argument against raising taxes as the solution to inequality.

Rick is absolutely correct that when the public begins to see taxes as a payment for services rendered, then they start trying to calculate whether their own payment is “fair”.

That is a primrose path to hell so far as government services are concerned. Since around 1970 that is exactly what has happened to state and local government finances. In the economics literature it is called “devolution”—moving provision of most government services to the state and local government level, and forcing them to pay for it with taxes.

It encouraged the “donut holes” that devastated cities as the more affluent whites ran off to the suburbs.

With new infrastructure and higher income and wealth in the ‘burbs, relatively low tax rates could provide good services. The cities that were left behind had to raise tax rates on an ever-shrinking tax base to try to provide even basic services.

Witness Camden, NJ, which has essentially abandoned large swaths of its jurisdiction to “Escape from New York” dystopia.

This “stakeholder”, “taxes pay for the goodies I get” view has already reduced much of America to third world living standards. No wonder that Regressives pushed the devolution that wiped out cities.

Now the Progressives want to do the same at the Federal level.

The notion that you’ll significantly reduce inequality through taxes on the rich is a pipedream. How high would taxes have to be on the top few tenths of a percent? 50%? 75%? Forget it. They’d still be filthy rich and you’d be poor by comparison.

As I said in the first instalment [sic], we don’t need taxes for revenue. We can justify taxes on the rich not for revenue purposes but as sin taxes. Look at it this way. Let’s raise sin taxes on the rich to reduce the sin of ill-gotten gains.

How high? 100%? Nay, 1000%. Take everything: all their income, all their wealth, the house, the car, the dog. Don’t let crime pay.

Wray and Wolff agree there are far better and more effective ways to solve the problem of inequality in the United States today than to tinker with tax rates.*


*I’m pleased to see a first step toward an alliance between the views of Modern Monetary Theorists and Marxists (which apparently I was accused of back in 2011). But for that theoretical alliance to develop, we’re going to have to convince Marxist economists to give up their view that “taxes pay for government services” and MMTers to consider the significance of the processes whereby the surplus is produced and distributed.


After learning that Joseph Stiglitz had been invited to give a lecture on inequality at the University of Oxford, I asked my friend Stephen Whitefield, Professor of Politics, University Lecturer in Politics, and Rhodes Pelczynski Tutorial Fellow in Politics, Pembroke College, to offer his sense of Stiglitz’s lecture. I am pleased to publish his comments here.

It was a huge pleasure for me and my college (Pembroke) and my Department (Politics and International Relations), with the support of the UK Fulbright Commission, to welcome Joseph Stiglitz back to the University of Oxford to deliver the 4th Annual Fulbright Distinguished Lecture. Stiglitz had been Drummond Professor of Political Economy in Oxford in the 1970s. Of course, he won the Nobel Prize for his work that shows, as I understand it, that when markets don’t function with perfect information—that is to say, almost always–then there is also always room for government intervention to improve welfare outcomes. That was a huge turn in the debate, even if many mainstream economists and their political allies/masters have yet to catch up.

Stiglitz was in Oxford to talk about “The Causes and Consequences of Inequality and What Can Be Done About It,” which topic marks another great turn in the debate about what kind of political economy we want, from thinking that inequality is irrelevant, since all boats are rising, to thinking that inequality matters, because it makes just about everything worse, at least when it is at very high levels. Stiglitz was of course also central to shifting the current of academic opinion on this topic. And he demonstrated in a brilliant talk—which everyone can link to here (as a podcast or video)—that he is not averse to turning that scholarship into powerful and persuasive accessible language. I have also to add that Stiglitz is a great person to talk to. As Ngaire Woods, his old friend, said in her introduction to his lecture, Stiglitz listens to people.

So, I know he will not be at all put out if he reads me to say that, while his dissection of the causes and consequences of inequality was outstanding, his discussion of what can be done about them was rather light. I told him that myself at dinner afterwards, as did others. I am sure that a lot of that would have been sorted out if he had had more time to talk. After all, he is not at all short of policy prescriptions, as are others like Thomas Piketty, who advocates a global wealth tax. But the problem is not that there is a lack of policies to put forward. In my view, the main problem is with the lack of a clear vision about how to build the political alliances that are necessary to enact those prescriptions. Maybe Stiglitz is right that things look better in places like Brazil and that we can learn things from its experience. Becoming Swedish, however, even if we thought that an attractive proposition—and I still have Per Wahloo in mind when thinking about Swedish Social-Democracy—is just not an option. So, how do we create a winning coalition against inequality that looks plausible and appropriate to our national conditions?

Well, I don’t know the answer to that right now. But here is a gesture in that direction. First, an irony—that he gave this talk in Oxford where we are of course constantly seeking the support of the 0.01-percenters, including to fund a chair to commemorate Senator Fulbright in my college and department. There were a number of such people in the lecture theatre. But note next something we all know (or strongly believe since Wilkinson and Pickett), that in highly unequal societies even the richest 1 percent appear to have worse health outcomes compared to their counterparts in more equal societies. Stiglitz did not offer a very convincing explanation as to why this is the case. He put it down to stress, which is possible but not very plausible on the face of it. Susan Kelly, who is a medical sociologist at the University of Exeter, puts a more likely hypothesis to my mind: over-treatment. There is apparently a negative correlation at the top end between numbers of physicians and health outcomes. But, who knows? A good question to research. . .

But, to return to my point about the political coalition to implement a reduction in levels of inequality, what we need to know is this: who are the political actors interested in doing this? This was not addressed in any explicit way by Stiglitz, and it seems to me a characteristic of even progressive policies presented by scholars that the questions of who will implement them and in whose political interests they are enacted are seldom on the table. There is talk—just—in analyses of inequality of class but not much about class interests or class actors. Now, there was an implicit answer in Stiglitz’s talk. Perhaps it is the enlightened rich who will use their massive power to reduce inequality, because they will come to see that it is harmful to their interests. Maybe. I have my doubts. Certainly I would not expect inequality to come down to the levels that I would find economically, socially, or politically appropriate if those were the political forces driving it.

But if not the rich, then who? By the admission of all involved in the analysis of inequality, the period from around 1930 to 1980 was one of declining inequality and of course in the post-WWII period of rapid economic growth as well. A time also, not coincidentally, of strong organised trade unions and a mobilised working class. All that is recognised. Less so is the counterpart in international relations, the existence of the Soviet Union and then the Communist bloc and the international communist movement, which presented an alternative to capitalism that many working-class people found attractive and the rich found terrifying enough to make significant concessions. I suspect it takes a stick as well as a carrot to make the rich see their self-interest differently.

Almost all of that historical moment is gone now, and not all for the bad. As a student of the Soviet system, I only lament it when thinking about the appalling kleptocracy that emerged from its womb, to use Marx’s kind of metaphor—a kleptocracy that aspired to be as rich as our own oligarchs. But we should remember that the creation of unions and left movements was the work of generations of intellectuals—I mean that in the broadest Gramscian terms—to create not just policies but first and foremost social and political actors. Perhaps that is what we now need to concentrate on imagining, not to mention doing.



Right now, almost five years into the U.S. economic “recovery,” there are about 9.7 million workers who are officially (U3) unemployed, 3.5 million of whom have been without a job for 27 weeks or more (according to the Bureau of Labor Statistics).

For most Americans, the plight of the millions of their fellow citizens who have lost their jobs and have had a great deal of difficulty finding another one is a pressing political problem and social disaster—an indictment of current economic arrangements, which simply haven’t been able to provide an adequate number of jobs for those who are willing and able to work. There’s simply not much to debate: current economic institutions and policies have failed to generate the appropriate level of employment or path to employment, especially for the millions of workers who have been rendered superfluous and remain so after months and sometimes years of looking for another job.

But for mainstream economists and policymakers there is a debate to be had: are the long-term unemployed actually part of the labor force, and do they serve to dampen increases in wages and therefore to slow inflation? For Alan Krueger, Judd Cramer, and David Cho, the long-term unemployed are on the margins of the labor market, with diminished job prospects and high labor-force withdrawal rates, and as a result they exert little pressure on wage growth or inflation. Therefore, it is the short-term unemployment rate that is a much stronger predictor of inflation and real-wage growth than the overall unemployment rate in the United States. William C. Dudley, however, sees things differently: the long-term are “simply unlucky,” having been rendered jobless during a particularly difficult time. But, as the short-term unemployed pool becomes depleted, the long-term unemployed will become more relevant to the labor market supply. So, their impact on wages and the labor market will likely increase as the labor market tightens.

As it turns out, what is interesting is not the different conclusions of the participants in this debate but, instead, the shared terms of the debate. First, both sides of the debate presume that the line of causality runs from wages to inflation. Neither side is willing to admit that the profit rate, the return on capital, plays any role in determining the level of prices. It’s as if the only cost of production is the price of labor, and the price of capital is entirely irrelevant. Therefore, if and when wages rise, they expect the overall level of prices to go up. In other words, the presumption is that capital will get its “normal” rate of return, which can only be safeguarded from wage increases by raising the price of output.

But the second shared term of debate is perhaps even more interesting: both sides presume that the number of unemployed workers determines the wage rate. This runs counter to the usual neoclassical model according to which it’s the level of wages that determines the amount of unemployment. The shared presumption of both Krueger et al. and Dudley is that causality runs in the opposite direction: from unemployment to wages. For them, the size of the relative surplus population or reserve army of labor determines the ability of workers to command higher wages. The only remaining point of debate, then, is whether the long-term unemployed will remain unemployed (and therefore exert no influence on the wages of employed workers) or if they will return from the margins, overcome their “unlucky” status, and become part of the active labor force.

What is missing, of course, is an analysis of where the reserve army of labor itself comes from. But, for that, we need to move beyond the discussion of the relationship among unemployment, inflation, and job openings (and therefore of Phillips and Beveridge curves) and conduct an investigation of how the accumulation of capital operates on both sides of the labor market. We would then understand, as that trenchant critic of political economy did almost 150 years ago, that the entire reserve army of labor—including both short-term and long-term unemployed workers—”belongs to capital quite as absolutely as if the latter had bred it at its own cost.”


During the hectic end of semester, I missed the dissenting opinion to the recent Supreme Court decision to uphold the authority of the  Environmental Protection Agency to regulate the smog from coal plants that drifts across state lines:

In a dissent, Justice Antonin Scalia, joined by Justice Clarence Thomas, said the regulation was unwieldy and suggested it was Marxist. As written, the regulation will require upwind polluting states to cut pollution in relation to the amounts of pollution each state produces, but also as a proportion of how affordably a state can make the cuts. In other words, states that are able to more cost-effectively reduce pollution will be required to cut more of it.

“I fully acknowledge that the proportional-reduction approach will demand some complicated computations where one upwind state is linked to multiple downwind states and vice versa,” Justice Scalia wrote.

“I am confident, however, that E.P.A.’s skilled number-crunchers can adhere to the statute’s quantitative (rather than efficiency) mandate by crafting quantitative solutions. Indeed, those calculations can be performed at the desk, whereas the ‘from each according to its ability’ approach requires the unwieldy field examination of many pollution-producing sources with many sorts of equipment,” he said, paraphrasing Karl Marx.

Franck Scurti, “Homo Economicus” at Cabinet

Franck Scurti, “Homo Economicus” at Cabinet

Maybe I should leave them alone, and just get on my with my grading. But there are certain misconceptions that get repeated so often someone has to step in to correct the record.

Such as the idea that “economists”—without qualification—are “finally taking inequality seriously.” That’s the title of Mark Thoma’s latest essay in which he has the temerity to assert that “Until recently, most questions surrounding the distribution of income were considered out of the realm of serious, scientific analysis.”

Now, that may be true of mainstream economists, who have either ignored the problem of the distribution of income or  attempted to contain the issue by examining it through the lens of marginal productivity theory (according to which, absent market imperfections, everyone gets what they deserve). But it’s certainly not true of generations of nonmainstream, heterodox economists for whom the distribution of income has been central to the dynamics of capitalist economies.

But my more general point is that you should run anytime anyone argues that “economists do this” or “economists say that.” Given the existence of different theories or discourses within the discipline of economics, there is nothing economists in general do or say. There are only neoclassical economists and Keynesian economists and Marxist economists, and so on—and they all do and say different things, about the distribution of income and much else.

The other pet peeve concerns the characterization of Marx as an economic determinist, again without qualification. This canard has returned in Kevin Quinn’s facile attempt to find a symmetry between Marx and the late Gary Becker.

I want to compare them in another respect. Both championed different forms of Rabid Economism. Marx’s economism was holist,  Becker’s individualist, but both forms are equally reductionist and equally  imbecilic. Marx’s materialism reduces the cultural, the political, the ethical to super-structural epiphenomena: all were just distorted reflections of the underlying reality of class struggle. Becker thinks all human agency simply consists of maximizing utility. For neither thinker do human beings have the ability to think and act  “for the sake of the world,” as Hannah Arendt would say. For each, we are deluding ourselves if we think that acting can ever be a matter of  trying to get things right – to do what is called for, to believe what is warranted -independent of what our interests dictate. For both, in other words, the concept of disinterested action – including the disinterested pursuit of truth – is a snare and a delusion.  Finally, in this latter respect, both systems of thought are self-undermining:   neither can make sense of  itself as a disinterested attempt to understand the human condition.

There is no doubt that Becker championed a reductionist conception of individual decisionmaking and therefore of the universe of economic and social interactions—including, famously, the family, suicide, and racial discrimination.* However, where’s the evidence of Marx’s supposed economism? While it’s an oft-repeated assertion, just a little research would have uncovered a nice piece by Peter G. Stillman disputing that myth, as well as an entire tradition associated with the journal Rethinking Marxism that has sought to distance Marx and Marxist theory from that unfortunate characterization.

So, let’s finally put these two shibboleths to rest: there’s no such thing as this is what economists, without qualification, do or say; and Marxism is not economic determinism.


*While we’re on the topic of Becker, permit me one further reflection: while I can’t agree with the praise heaped on him by economists like Justin Wolfers, I will admit to a grudging admiration for someone who was the subject of derision from mainstream economists at places like Harvard and MIT during the 1960s—and yet stuck to his guns and pursued a research strategy that, at least at the time, placed him at the margins of the economics establishment.


I have no idea whether or not Thomas Piketty [ht: ra] ever read Marx’s Capital. He says he didn’t but John B. Judis thinks he’s just pulling our leg.

Fine. I don’t care one way or another. If Piketty hasn’t read Marx’s magnum opus  it wouldn’t make him any different from most other mainstream economists out there (who, to be honest, haven’t read The Wealth of Nations or The General Theory either). But if someone claims to have read Capital, as Judis does, at least let’s get it right.*

What about this tendency of the rate of profit to fall? I have three brief points to make:

First, the tendency (which Marx discusses in chapter 13 of volume 3 of Capital) is based on the idea that, as a result of capitalist competition, in a battle over distributions of the surplus (S), one strategy is for capitalists to deploy more constant capital (C, think plant, equipment, and raw materials) relative to variable capital (V, think wages). Therefore, there is a tendency for the rate of profit (r = S/[C + V]) to fall (provided, of course, the rate of exploitation, S/V, remains the same). That’s it. Pretty straightforward, at least for Marx and for generations of Marxist economists.

Second, Marx didn’t invent the idea of a falling rate of profit. It was actually a concern for the classical political economists, especially David Ricardo. Their fear was that, if the rate of profit continued to fall over time, capitalism might grind to a halt. Marx’s critique of the classical political economists consisted in challenging their view that the problem was external to capitalism, as a result of the declining fertility of land (thus leading to capitalist profits being siphoned off in rents to landlords, which led Ricardo to support repeal of the so-called Corn Laws, thus allowing for the import of cheap food stuffs). Marx’s view was that, if there was a tendency of the rate of profit to fall, it was because of capitalism’s own internal dynamic, that is, it was an endogenous tendency created by capitalist competition.

Finally, if we’re going to attribute to Marx the idea of the falling rate of profit (whether as credit or blame), then we should at least also make it clear that the chapter in which the “law as such” is presented is immediately followed by another, chapter 14, in which Marx discusses the “counteracting influences,” such as an increase in the rate of exploitation, depressing wages below the value of labor power, the cheapening of the elements of constant capital, and so on. The result is a tendency for the rate of profit to fall—and a tendency for the rate of profit not to fall. No iron law there!

Piketty may or may not have been pulling our leg but it seems he and the other participants in the current debate need a little Marx for beginners.


*You can blame my attempt to correct Judis on my current mood, since I’m in the midst of reading and grading my students’ final projects.


Back in 2009, in the midst of the Great Crash (and therefore at the start of the Second Great Depression), a colleague and friend asked me whether I expected the teaching of economics to change. His view was that, since mainstream economics had so miserably failed in both predicting the crash and providing a guide as to what to do once the crash occurred, it was obvious the economics being taught to students had to fundamentally change. My answer was that, while the need for a change was obvious, I didn’t see it happening—and it probably wouldn’t happen (thinking back to the emergence of the Union of Radical Political Economics in the late-1960s) unless and until students of economics demanded a different approach.

Well, in various places (starting almost a decade before the current crises, with the eruption of the Post-Autistic Economics movement in June 2000), students have been demanding a fundamental change in the way economics is being taught. The latest effort to move that project along is a report from the University of Manchester Post-Crash Economics Society. Here are some of their key findings, which refer to how economics is taught at Manchester but clearly have much wider relevance, in and beyond the United Kingdom:

  • Economics education at Manchester has elevated one economic paradigm, often called neoclassical economics, to the sole object of study. Other schools of thought such as institutional, evolutionary, Austrian, post-Keynesian, Marxist, feminist and ecological economics are almost completely absent.
  • The consequence of the above is to preclude the development of meaningful critical thinking and evaluation. In the absence of fundamental disagreement over methodology, assumptions, objectives and definitions, the practice of being critical is reduced to technical and predictive disagreements. A discipline with a broader knowledge of alternative perspectives will be more internally self-critical and aware of the limits of its knowledge. Universities cannot justify this monopoly of one economic paradigm.
  • The ethics of being an economist and the ethical consequences of economic policies are almost completely absent from the syllabus.
  • History of economic thought is an optional third year module which students are put off taking due to it requiring essay writing skills that have not been extensively developed elsewhere in the degree. Very little economic history is taught. Students finish an economics degree without any knowledge of momentous economic events from the Great Depression to the break-up of the Bretton Woods Monetary System.
  • When taken together, these points mean that economics students are taught the economic theory of one perspective as if it represented universally established truth or law.


The New York Times certainly doesn’t feature Karl Marx. And, for the most part, it wouldn’t know Marx if he showed up at the editorial office without his sunglasses.

But today is a bit different, with not one but two discussions of Marx.

First, there’s Steven Erlanger’s discussion of Thomas Piketty’s new book, in which he claims that the French economist is returning to a tradition of analysis shared by both Adam Smith and Marx (forgetting, of course, that Marx’s critique of political economy represented a fundamental break from mainstream political economy, authored by Smith and many others). It seems we have sunk so low intellectually that to focus attention on capital and inequality and to worry that grotesque levels of inequality might imperil democracy necessarily puts someone somewhere in the Marxian tradition.

Then, we have the spectacle of Ross Douhat worrying that “Karl Marx is back from the dead” and, because “Marxist ideas are having an intellectual moment, . . .attention must be paid” (to which, like Erlanger, he subsumes the self-identified non-Marxist Piketty). In end, Douhat demonstrates the sorry state of contemporary conservative thinking, failing to note the traditional conservative critique of bourgeois society’s economization of social life and then expressing his admiration for such movements as the Tea Party, Britain’s UKIP, and France’s National Front, which in his view incorporate “some Piketty-esque arguments”—although his conveniently overlooks their racism (or simply hides it under the rubric of “cultural anxieties”).

In the end, then, there may be a lot of Marx on the minds of contributors to the New York Times but they certainly don’t have a clue what they’re talking about.


Off to give a talk (on capitalism and climate change) and a guest lecture (on Marxian class analysis). So, no posts until I return. . .