Toward a critique of political economy

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” The first five posts (here, here, here, here, and here) will serve as the basis for Chapter 1, Marxian Economics Today. The next six (here, here, here, here, here, and here) are for Chapter 2, Marxian Economics Versus Mainstream Economics. This post (following on four previous ones, here, here, here, and here) is for Chapter 3, Toward a Critique of Political Economy.

The necessary disclosure: these are merely drafts of sections of the book, some rougher or more preliminary than others. I expect them all to be extensively revised and rewritten when I prepare the final book manuscript.

Finally, because of a contractual commitment (which limits the amount of the draft of the book I am allowed to publish on this blog), this will be the last book-related post for a few months.

Toward Marx’s Critique of Political Economy

There is no necessary trajectory to Marx’s writings, no reason his earlier writings had to lead to or culminate in Capital. However, as we look back from the vantage point of his critique of political economy, we can see the ways his thinking changed and how the elements of that critique emerged.

In this section, we take a quick look at some of Marx’s key texts prior to writing Capital: the Economic and Philosophic Manuscripts of 1844, the Theses on Feuerbach, the German Ideology, the Grundrisse, and A Contribution to the Critique of Political Economy. Together, they will give us a sense of how Marx’s ideas developed over time.

We will also see two themes emerge over the course of these texts: the role of critique and a focus on social context. First, Marx doesn’t start (in these texts or, for that matter, in Capital) with a given approach or set of first principles. Instead, his method is to engage with ideas and problems that were “out there,” in the intellectual and social worlds he inhabited, and to formulate a critique, thereby giving rise to new ways of posing issues and answering questions. Second, Marx’s concern is always with social and historical specificity, as against looking for or finding what others would consider to be given and universal. Thus, for example, Marx eschews any notion of a transhistorical or transcultural “human nature.” Instead, in his view, different human natures are both the condition and consequence of particular social and historical circumstances. Much the same holds for his method of engaging economic issues.

Once Marx left Germany and found his way to Paris, he met Engels for the first time (thus initiating, following on their previous correspondence, a life-long collaboration) and also began what he considered to be a “conscientious critical study of political economy,” the mainstream economics of his day. The result was a series of three manuscripts (often referred to as the Economic and Philosophic Manuscripts of 1844 or the Paris Manuscripts, which were written between April and August 1844 but only finally published, to considerable interest, in 1932).* What readers will find in the manuscripts is, having “proceeded from the premises of political economy” (meaning “its language and laws,” the assumption of “private property, the separation of labor, capital and land, and of wages, profit of capital and rent of land,” and so on), Marx arrives at conclusions and formulates new terms that run directly counter to those of Smith, Ricardo, and the other classical political economists. In particular, Marx argues that, under capitalism, as workers become reduced to commodities, what they produce confronts them as “something alien.” Therefore, their labor (using terms borrowed from Feuerbach’s critique of Hegel) becomes “alienated” or “estranged.”

it is clear that the more the worker spends himself, the more powerful becomes the alien world of objects which he creates over and against himself, the poorer he himself – his inner world – becomes, the less belongs to him as his own. It is the same in religion. The more man puts into God, the less he retains in himself. The worker puts his life into the object; but now his life no longer belongs to him but to the object. Hence, the greater this activity, the more the worker lacks objects. Whatever the product of his labor is, he is not.

He then demonstrates that the taken-for-granted assumptions of classical political economy—private property, wages, and so on—are themselves the products of estranged labor. Thus, the distinctions made by the mainstream economists of Marx’s time—between profit and rent, between both and wages, and so on—are rooted not in the nature of things, but in particular social and historical circumstances. They are, in other words, peculiar to capitalism.**

As we saw in a previous section, Marx then (in 1845) developed a critique of Feuerbach. Over the course of his eleven short theses, Marx rejects the idea of a single anthropology (the “essence of man” or human nature) and focuses, instead, on the ensemble of “social relations,” the “historical process,” and “social humanity.” The result is social practice, that is, the goal of not just interpreting the world, but of changing it.

The next year, Marx coauthored with Engels a long set of manuscripts (like the 1844 manuscripts, only published in 1932) in which they challenge the one-sided criticisms of Hegel by Bruno Bauer, other Young Hegelians, and the post-Hegelian philosopher Max Stirner. There, in their attack on German philosophy for having been obsessed with religion (and therefore self-consciousness or the realm of ideas), Marx and Engels announce for the first time what they call the “materialist conception of history,” with an alternative starting-point: “real individuals, their activity and the material conditions under which they live, both those which they find already existing and those produced by their activity.” This focus on social production means Marx and Engels can transform consciousness itself into a “social product,” which develops historically and changes according to particular forms of society or social relationships.***

Later, once Marx had settled in London, he spent much of his time in the British Museum (a national public museum, which contained both natural history objects and a massive library) studying the texts of the classical political economists. The result were a set of notebooks, called the Grundrisse (literally outlines or plans), which are often considered to be first draft of Capital.**** While the topics Marx covered are wide-ranging, from value and labor to precapitalist forms of economic and social organization and the preconditions for communism, what is of interest here is his announcement of where he thinks the critique of political economy should start: with “socially determined individual production.”

Why is this important? Because it represents Marx’s break from the notion of natural production, and therefore from the mainstream economics of his day (as of our own). In classical political economy (as in neoclassical economics), capitalism and other economies are considered to be natural, because they are finally reduced to and can be explained by certain given or exogenous factors, such as population, technology, and resources (to which neoclassical economists add given preferences). Also, they take individuals as their point of departure (the most famous example being Robinson Crusoe, a story that is repeated even today in mainstream economic textbooks).

Marx’s alternative view is that economics should start with social individuals, “individuals producing in society,” not given individuals outside of particular historical and social contexts. Moreover, the focus should be on “social production”—different, socially determined ways of producing goods and services—not on any kind of production in general (which students today will recognize in the technical apparatus of isocost and isoquant curves).

Marx also demonstrates his debt to Hegel, in discussing the relationship among production, distribution, exchange, and consumption. Where the classical political economists posit that the goal of production is consumption, and many of the critics worry about distribution, Marx sees them in terms of a “dialectical unity.” In its most general form,

A definite production thus determines a definite consumption, distribution and exchange as well as definite relations between these different moments. Admittedly, however, in its one-sided form, production is itself determined by the other moments.

It’s a distinction that shows up today in the debate about distribution (through free markets) versusu redistribution (through government programs). What the participants in that debate forget about is the initial distribution related to production (and all that entails for consumption, distribution, and exchange), that is, society produces itself through its initial distribution. It’s that initial distribution that is taken as given in mainstream economics, then as now.

Marx also announces his break from existing ways of carrying out economic analysis, whether starting from abstract first principles (and deducing the rules that govern reality) or from empirical reality (whereby certain “laws” are extracted). Instead, he argues, the method he proposes is a movement from the abstract to the concrete. In other words, economic analysis is itself a process of production—one that starts from relatively abstract notions and, adding more and more determinations or circumstances, arrives at a relatively concrete notion (“the way in which thought appropriates the concrete, [which] reproduces it as the concrete in the mind”). It is not a question of bridging the gap between thought and reality (in terms of some kind of validity criterion) but of producing within thought a particular conception of economic and social reality. The implication, of course, is that different economic theories will lead to different, incommensurable conceptions of capitalism and other economic systems.

Finally, in 1859, Marx published A Contribution to the Critique of Political Economy. There, he designates his break from the philosophies of both Hegel and Feuerbach with what has become one of his most famous expressions:

It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness.

This is Marx’s critique of both Hegel’s notion of the Absolute Spirit and of Feuerbach’s alienated consciousness. It’s not an issue of individual consciousness or virtue within existing social order but the conflict-ridden social order itself. Another way of putting this in terms of contemporary debates is: you can’t just have a semblance of freedom (which often means blaming the victims) but you need real freedom, that is, economic and social change that makes the exercise of freedom possible. It’s the same idea that has motivated many working-class political movements, from the nineteenth century onwards, which have demanded an end to poverty and access to decent housing, healthcare, and so on for the majority of people by identifying and seeking to eliminate the economic obstacles to what they consider to be fundamental human rights.

Marx then appends a quotation from Dante Alighieri’s Divine Comedy, which can also serve as a warning to readers as we embark, starting in the next chapter, on a detailed study of Marx’s critique of political economy:

Qui si convien lasciare ogni sospetto
Ogni vilta convien che qui sia morta.*****

———

*The Economic and Philosophic Manuscripts of 1844 was first published in Germany by the Institute of Marxism-Leninism in Moscow in 1932, in the language of the original. In English, this work first appeared in 1959, published by the Foreign Languages Publishing House in Moscow, translated by Martin Milligan.

**Marx also presents in those manuscripts his critique of “piecemeal social reformers,” including the French socialist Pierre-Joseph Proudhon, “who either want to raise wages and in this way to improve the situation of the working class, or regard equality of wages,” for not going far enough, because they accept the existence of private property and estranged labor. In this sense, they want to improve, but not eliminate and move beyond, capitalism. And, in the third manuscript, Marx credits Hegel with understanding the importance of labor as the source of alienation; but then criticizes Hegelian philosophy for focusing entirely on “abstractly mental labor” (as a question only of “self-consciousness”) and therefore overlooks (just like the classical political economists) economic and political alienation.

***They also announce what, at least at this stage, what they mean by “communism”: “not a state of affairs which is to be established, an ideal to which reality [will] have to adjust itself. We call communism the real movement which abolishes the present state of things. The conditions of this movement result from the premises now in existence.”

****The seven notebooks were written during the winter of 1857–58 but were only published in 1939. The first English-language translation (by Martin Nicolaus) appeared in 1973. The publication of the Grundrisse was important not only for readers of Capital (and much discussion has ensued about the overlaps and differences between the two), but also for other fields, especially for the new field of cultural studies (in the work of, among others, Stuart Hall and the famous Center for Contemporary Cultural Studies at the University of Birmingham).

*****The lines are from Canto III of “Inferno” (as Virgil’s reply to Dante, who has just read the inscription over the Gates of Hell). The translation is: “Here one must leave behind all hesitation; here every cowardice must meet its death.”

Toward a critique of political economy: Hegel

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” The first five posts (here, here, here, here, and here) will serve as the basis for Chapter 1, Marxian Economics Today. The next six (here, here, here, here, here, and here) are for Chapter 2, Marxian Economics Versus Mainstream Economics. This post (following on a previous one) is for Chapter 3, Toward a Critique of Political Economy.

The necessary disclosure: these are merely drafts of sections of the book, some rougher or more preliminary than others. Right now, I’m just trying to get them done in some form. They will all be extensively revised and rewritten in preparing the final book manuscript.

Hegel

It is difficult to fully understand the Marxian critique of political economy without some understanding of Hegel. No less an authority than Lenin wrote that “it is impossible completely to understand Marx’s Capital, and especially its first chapter, without having thoroughly studied and understood the whole of Hegel’s Logic.” Marx himself wrote “I therefore openly avowed myself the pupil of that mighty thinker, and even here and there, in the chapter on the theory of value, coquetted with the modes of expression peculiar to him.”

Those are the two major reasons for keeping Hegel in mind: because Marx, like many young German intellectuals in the 1830s and 1840s, started with Hegel; and because, many years later, Marx’s critique of political economy was still influenced by his theoretical encounter with Hegel.*

But, of course, that makes understanding the movement toward the Marxian critique of political economy a bit difficult for contemporary readers, who generally aren’t familiar with Hegel’s writings. So, in this section, I want to present a brief summary of Hegel’s philosophy. But, I caution readers, this should not be taken to be a presentation of all aspects of Hegel’s thought. We only want to examine Hegel to the extent that it aids our comprehension of Marx’s theoretical journey and his later critique of political economy.

In his twenties, Marx, along with other young German intellectuals (including Ruge, Bruno Bauer, and Ludwig Feuerbach), formed a loose grouping called, variously, the Young Hegelians or the Left Hegelians. In their discussions and debates, these young thinkers sought both to draw on Hegel’s philosophy and to radicalize it, aiming their attacks especially at religion and the German political system.** Later, they turned their radical critique on Hegel’s philosophy itself.

So, what was it in Hegel’s thought that was so influential for Marx and the other Young Hegelians? One area is particularly important: the theory of knowledge and, closely related, the philosophy of history.

On the first point, Hegel’s view was that the two previous traditions—of René Descartes and Immanuel Kant—got it wrong. Descartes argued that it was impossible to know things as they appear to us (phenomena) but only things as they are in themselves (noumena). Experience was deceptive. Hence, his focus on reason, which alone can provide certainty about the world. Kant posited exactly the opposite—that it was possible to know things as they appeared to us but not their essences, things as they are in themselves. Therefore, science was only capable of providing knowledge of the appearances of things, of empirical experiences and observations about nature; morality and religion operated in the unknowable realm of things in themselves.

Hegel’s great contribution was to solve the problem and affirm what both Descartes and Kant denied. For him, history was an unfolding of the mind (Absolute Spirit) coming to know itself as phenomenon, to the point of its full development, when it is aware of itself as it is, as noumenon. In other words, the consciousness of things as they appear to us leads to knowledge of the essence of things. At the end of the process, when the object has been fully “spiritualized” by successive cycles of consciousness’s experience, consciousness will fully know the object and at the same time fully recognize that the object is none other than itself. That is the end of history.

How does this historical process work? How does the mind or Absolute Spirit pass through successive stages until it reaches full awareness? That’s where the dialectic comes in. According to Hegel (especially the Phenomenology of Mind), human understanding passes through a movement that is characterized by an initial thesis (e.g., being) that passes into its opposite (e.g., nothingness), which entails a contradiction that is resolved by a third moment (e.g., becoming), which is the positive result of that opposition. For Hegel, this process of thesis-antithesis-synthesis (or, as it is sometimes referred to, abstract-negative-concrete) is both a logical process (the development of philosophical categories) and a chronological process (the development of society), which leads to greater understanding or universality (in both philosophy and in social institutions such as religion and politics), eventually leading to complete self-understanding—the end of history.

What Marx and the other Young Hegelians took from Hegel was a method and language that allowed them to challenge tradition and the existing order: a focus on history and a stress on flux, change, contradiction, movement, process, and so forth.

But they also turned their critical gaze on the more conservative dimensions of Hegel’s philosophy. For example, Feuerbach (in The Essence of Christianity, published in 1841) argued that Hegel’s Absolute Spirit was nothing more than deceased spirit of theology, that is, it was still an inverted world consciousness. Instead, for Feuerbach, God was the outward projection of people’s inward nature. Men and women were “alienated” from their human essence in and through religion—because they cast all their human powers onto a deity, instead of assuming them as their own. The goal, then, was to change consciousness by becoming aware of that self-alienation, through critique.

Marx, in particular, considered Feuerbach’s critique to be an important step beyond Hegel. Ultimately, however, he rejected the way Feuerbach formulated the problem (as individuals separated from their human essence, outside of society) and settled his account with the eleven “Theses on Feuerbach,” the last of which has become the most famous:

The philosophers have only interpreted the world, in various ways; the point is to change it.

———

*Even though I insist on the idea that a basic understanding of Hegel is necessary for understanding Marx’s theoretical journey, it is also possible to overstate the case. Marx’s method is neither a straightforward application nor a simple reversal of the Hegelian dialectic. But the time he wrote Capital, Marx had criticized and moved far beyond Hegel’s philosophy.

**At the time (beginning in 1840), Germany was governed by a new king, Frederick William IV, who undermined his promise of political reform by curtailing political freedom and religious tolerance. For the Young Hegelians, this was a real step backward in terms of following the rest of Europe (especially Britain and France) in modernizing political institutions and expanding the realm of freedom. And it was key to their eventual break from Hegel, since according to Hegel’s philosophy the Prussian state represented the fulfillment of history. (The contemporary equivalent is Francis Fukuyama’s famous book The End of History and the Last Man (1992), in which he argued that “not just. . .the passing of a particular period of post-war history, but the end of history as such: That is, the end-point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.”

Ruthless criticism

Cornelia Mittendorfer, Double Alienation (2012)

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” The first five posts (here, here, here, here, and here) will serve as the basis for Chapter 1, Marxian Economics Today. The next six (here, here, here, here, here, and here) are for Chapter 2, Marxian Economics Versus Mainstream Economics. This post is a draft of the first section of Chapter 3, Toward a Critique of Political Economy.

The Marxian Critique of Political Economy

In the first two chapters, we looked at some of the major differences between Marxian economics and mainstream economics, both in Marx’s time and in our own.

But where did Marx’s critique of mainstream economics come from? It certainly did not emerge in one fell swoop, as a ready-made theory of capitalism. And it wasn’t produced in isolation, independently of the society within which it was first produced and then further elaborated.

Quite the opposite: we can trace the development of Marx’s critique through a variety of texts—many of them now quite famous, even if they are rarely mentioned or discussed within economics. There, we can see Marx’s ideas developing and changing, until he began to work on his critique of political economy, finally presented in Capital.

Moreover, Marx’s critical appraisal of both mainstream economic theory and capitalism was, like all theories or discourses, a product of its time—of the economic and social structures as well as of the ideas that were prevalent when he was writing. In turn, once they were produced, Marx’s ideas participated in changing that same intellectual and social environment—as they continue to do, right up to the present.

In this chapter, we will examine some of the influences on Marx’s critique of political economy. These include the larger economic and social environment of capitalism in the middle of the nineteenth century as well as Marx’s intellectual heritage, especially the politics of utopian socialism and the philosophy of G. W. F. Hegel—in addition to classical political economy. Without having a basic sense of those moments, it is impossible to understand where Marx’s critique came from.

The task is even more germane because those influences are so different from those of our own own time, when you are reading this book. Capitalism has changed a great deal in the intervening period, and the ideas we take to be relevant today are quite different from those that influenced Marx’s work. How many of us, for example, know about or read Hegel today? Instead, in recent decades, postmodernism has been much more of an influence on contemporary interpretations of Marxian economics.

Once we have accomplished that goal, we will turn our attention to some of Marx’s most famous writings before Capital. These include such texts as The Economic and Philosophical Manuscripts of 1844 and The German Ideology, as well as the copious notebooks, the Grundrisse, Marx kept as he first started delving into classical political economy.

For a Ruthless Criticism of Everything Existing

So, where to begin? Perhaps the best place is one of the letters Marx wrote to his friend Arnold Ruge.

Marx was 25, just two years beyond completing his Doctor of Philosophy at the University of Jena. He had recently married Jenny von Westphalen—but, seeing that working in his native Germany was becoming increasingly difficult, he was already planning to leave and move to France. Police reprisals had forced Marx to resign from the editorship of Rheinische Zeitung (Renish Newspaper). During that time, Marx corresponded with Ruge, and their eight-letter exchange was eventually published in the Deutsch-Französische Jahrbücher (German-French Annals), which appeared in Paris in 1844.*

The most relevant piece of that correspondence is the letter Marx composed in September 1843, which eventually acquired the title “For a Ruthless Criticism of Everything Existing.”** With those words, Marx announced the task confronting him and other “young Hegelians” at that moment:***

the ruthless criticism of the existing order, ruthless in that it will shrink neither from its own discoveries, nor from conflict with the powers that be.

In one sense, there’s nothing remarkable about Marx’s formulation of their task. It’s part and parcel of modernity, the “tradition of no tradition,” defined by self-criticism, openness to novelty, suspicion of authority, questioning of the existing common sense, and much else. It is, in short, what modern intellectuals (including students) are supposed to do: follow ideas wherever they may go, without being afraid of their consequences or, as we say these days, of “speaking truth to power.”

In another sense, Marx formulated his project of “ruthless criticism” in a novel fashion. He ties it to socialism and communism—and therefore a radical transformation of the world. He was, even at that young age, a radical thinker and acivist.

However,

This does not mean that we shall confront the world with new doctrinaire principles and proclaim: Here is the truth, on your knees before it! It means that we shall develop for the world new principles from the existing principles of the world. We shall not say: Abandon your struggles, they are mere folly; let us provide you with true campaign-slogans. Instead, we shall simply show the world why it is struggling, and consciousness of this is a thing it must acquire whether it wishes or not.

Therefore, Marx explains, he does not believe in nor is he in favor of holding up any kind of “dogmatic banner.”

That, in a nut shell, is how Marx understands his project—a “ruthless criticism of everything existing”—which, as we will see in this chapter, passes through various stages on his way to composing the critique of political economy in Capital.

———

*The aim of this chapter is not to present the details of Marx’s life. The focus here, as in the book as a whole, is on the development of Marx’s ideas as well as their conditions and consequences. For interested readers, the classic biography is Franz Mering’s Karl Marx: The Story of His Life (published in 1918). A recent film directed by Raoul Peck, The Young Karl Marx (2017), is an excellent historical drama about Marx and his relationship to Friedrich Engels. It also emphasizes, perhaps for the first time, the important role played by their respective wives, Jenny von Westphalen and Lizzie Burns.

**Most of Marx’s texts cited in this chapter can be found in the second edition of The Marx-Engels Reader, edited by Robert C. Tucker.

***”Young Hegelians” refers to the influence on Marx of Hegel’s philosophy, which will be discussed in the next section.

Mainstream economics then: classical political economy

James Sanborn, Adam Smith’s Spinning Top (1998)

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” The first five posts (here, here, here, here, and here) will serve as the basis for chapter 1, Marxian Economics Today. The text of this post is for Chapter 2, Marxian Economics Versus Mainstream Economics (following on from the previous posts, here, here, here, here, and here).

Classical Political Economy

Marxian economists have been quite critical of contemporary mainstream economics. As we saw in Chapter 1, and will continue to explore in the remainder of this book, Marxian economists have challenged the general approach as well as all of the major conclusions of both neoclassical and Keynesian economics.

But what about Marx, who wrote his critique of political economy, let’s remember, before neoclassical and Keynesian economics even existed?

Marx, writing in the middle of the nineteenth century, trained his critical eye on the mainstream economic theory of his day. He read Adam Smith’s Wealth of Nations and David Ricardo’s Principles of Political Economy and Taxation, as well as the writings of other classical political economists, such as Thomas Robert Malthus, Jean-Baptiste Say, and John Stuart Mill.

Marx’s critique of political economy can rightly be seen as both an extension of and break from the work of those late-eighteenth-century and early-nineteen-century mainstream economists. So, in order to understand why and how Marx proceeded in the way he did, we need to have a basic understanding of classical political economy.

Before we begin, however, we have to recognize that Marx’s interpretation of the classical economists was very different from the way they are referred to within contemporary mainstream economics. Today, within non-Marxian economics, the classicals are reduced to a few summary ideas. They include the following: a labor theory of value (which mainstream economists reject, in favor of utility), the invisible hand (which, as it turns out, Smith mentioned only three times in his writings, once in the Wealth of Nations), and comparative advantage (but not the rest of Ricardo’s theory, especially his theory of conflict over the distribution of income).

We therefore need a good bit more in order to make sense of Marx’s critique of political economy.

Adam Smith

Let’s start with Adam Smith, the so-called father of modern economics. The author of, first, the Theory of Moral Sentiments and, then, the Wealth of Nations, Smith asserted that people have a natural “propensity to truck, barter, and exchange one thing for another.” In other words, according to Smith, the ability and willingness to participate in markets were natural, and not social and historical, aspects of all humanity.

That’s not unlike contemporary mainstream economists’ insistence on presuming the existence of markets, and thus writing down supply and demand functions (or drawing them on a graph), without any further evidence or argumentation. They’re presumed to be natural.

Smith then proceeds by showing that the division of labor (such as with his most famous example, of the pin factory) has two effects: First, it leads to increases in productivity, and therefore an increase in production. Second, the extension of the division of labor within factories propels a division of labor within capitalism as a whole, as firms specialize in the production of some goods, which they can then trade with other producers in markets. In turn, the expansion of markets leads to more division of labor and higher productivity, thus increasing the wealth of nations.

Again, the parallel with contemporary mainstream economics is quite evident, which is recognized in the “classical” portion of the name for neoclassical economic theory. Using Gross Domestic Product as their measure of the wealth of nations, contemporary mainstream economists celebrate capitalism because higher productivity results in more output, which is then traded on markets. This is the basis of contemporary mainstream economists’ definition of development as an increase in GDP per capita, that is, more output per person in the population.

However, unlike contemporary mainstream economists, Smith analyzed the value of commodities in terms of the amount of labor it took to produce them. With increasing productivity, more goods and services could be produced and sold in markets, each containing less labor—and therefore available at lower prices to consumers. The nation’s wealth would therefore grow, especially as the number of workers grew.

Still, Smith worried about whether capitalist growth would persist in an uninterrupted fashion. The division of a nation’s production into “natural” rates of wages, profits, and rent to workers, capitalists, and landlords was not sufficient. What if, Smith asked, a large portion of capitalists’ profits was used to hire more “unproductive” labor, that is, the labor of household servants and others that did not contribute to increasing productivity? Purchasing labor involved in what we now call conspicuous consumption represented, for Smith, a slowing of the accumulation of additional capital. Therefore, it created a problem, an obstacle to future capitalist growth.

David Ricardo

David Ricardo picked up where Smith left off. He extended the celebration of capitalist markets to international trade. His argument was that if nations specialized in the production of commodities for which they had a relative advantage, and traded them for goods from other countries (his most famous example was British cloth and Portuguese wine), both countries would benefit. Their wealth would increase.*

That’s the only reason Ricardo’s work is cited by contemporary mainstream economists. However ironically, they ignore the fact that Ricardo made his argument based on the labor theory of value—just as they never mention Ricardo’s concern that conflicts over the distribution of income might slow capitalist growth.

In particular, Ricardo was worried that, as capitalism developed, the profits received by capitalists would be squeezed from two directions: an increase in workers’ wages and a rise in rent payments to landlords. Lower profits would mean less capital accumulation and slower growth—and, in the limit, capitalism would grind to a halt.

We can see how this might happen in the chart above. At a certain point (a level of population P, which is the pool of workers), total output (the red line) would be divided into workers’ wages, capitalists’ profits, and landlords’ rent).

It is easy to see that, at any point in time, if the wage rate paid to workers increased (which would mean an increase in the slope of the blue line), that would cut into profits (the vertical distance between the blue and green lines would decrease). That’s the major reason Ricardo supported free trade (and thus a repeal of the so-called Corn Laws): so that cheaper wheat could be imported from abroad, thus lessening the upward pressure on workers’ wage demands.

Even if the rate paid to workers remained the same over time (and thus the total amount of wages rose at a constant rate, with an increase in population), capitalists’ profits would be squeezed from the other direction, by an increase in the rents paid to the class of landlords (the vertical distance between the green and red lines). Basically, as agricultural production was moved to less and less fertile land, the rents on more productive land would rise, siphoning off a larger and larger portion of profits.

At a certain point (e.g., at a level of population P*), the entire output would be divided between workers’ wages and landlords’ rent, and nothing would be left in the form of capitalists’ profits. As a result, capitalists would be forced to stop investing and capitalist growth would cease.

Other Classicals

The Reverend Thomas Malthus was, if anything, more pessimistic than Ricardo. But he foresaw capitalism’s problems coming from the other direction, from the working masses. In his Essay on the Principle of Population, he argued that population would likely grow faster than the expansion in food production, especially in times of plenty. With such an increase in the supply of workers and a rise in the price of available food, workers’ real wages would inevitably fall and poverty would rise. The only solution was for capitalists and landlords to hire all the additional labor, and for workers’ wages to be restored to their “natural” level.

If Malthus focused on the up-and-down cycles of population and wages, and both Smith and Ricardo the potential limits to capitalist growth, the French classical economist Jean-Baptiste Say emphasized the inherent stability of capitalism. Why? Say’s argument was that the production of commodities causes incomes to be paid to suppliers of the capital, labor, and land used in producing these goods and services. And because the sale price of those commodities was the sum of the payments of wages, rents, and profit, the incomes generated during the production of commodities would be used to purchase all the commodities brought to market. Moreover, entrepreneurs were rewarded for correctly assessing the needs reflected in markets and the means to satisfy those needs. The result is what was later coined as Say’s Law: “supply creates its own demand.”

Finally, it was John Stuart Mill who added utilitarianism to classical political economy. Extending the work of Jeremy Bentham, especially the “greatest-happiness principle” (which holds that one must always act so as to produce the greatest aggregate happiness among all sentient beings), Mill argued that the greatest happiness and the least pain could be achieved on the basis of free markets, competition, and private property—with the proviso that everyone should be afforded an equal opportunity, however unequal the actual results might turn out to be. In particular, Mill defended the profits of capitalists as a just recompense for their savings, risk, and economic supervision.*

Marx’s Critique of Mainstream Economics

That, in a nutshell, is the mainstream economic theory Marx confronted while sitting in the British Museum in the middle of the nineteenth century. Marx both lauded the classical political economists for their efforts—especially Ricardo, who in his view “gave to classical political economy its final shape” (Critique of Political Economy)—and engaged in a “ruthless criticism” of their theory.

In this sense, Marx took the classical political economists quite seriously. Even as he broke from their work in a decisive manner, many of the themes of Marx’s critique of political economy stem directly from the issues the classicals attempted to tackle. That’s why the overview provided in previous sections of this chapter is so crucial to understanding Marxian economics.

Still, the question remains, how does Marx’s critique of the mainstream economics of his day transfer over to contemporary mainstream economists? As we will see, although neoclassical and Keynesian economists reject the labor theory of value and other crucial elements of classical political economy, both the basic assumptions and conclusions of their approach are so similar to those of the classicals as to make it a relatively short step from Marx’s critique of the mainstream economic theory of his day to that of our own.

However, before we look at that theoretical encounter, in the next chapter, we will see how Marx’s critical engagement with classical political economy emerged over the course of his writings before, in the mid-1860s, he sits down to write the three volumes of his most famous book, Capital.

———

*Mill did defend various redistributive tax measures, in order to limit intergenerational inequalities that would otherwise constrain equality of opportunity. Moreover, he argued in a later edition of his Principles of Political Economy in favor of economic democracy: “the association of the labourers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves” (Principles of Political Economy, with some of their Applications to Social Philosophy, IV.7.21).

Marxian economics for the 21st century?

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” This, like the previous four posts (here, here, here, and here), is written to serve as the basis for chapter 1, Marxian Economics Today. The text of this post should pretty much finish up the draft of the first chapter.

Is Marxian Economics Still Relevant?

It’s an obvious question for those of us living now, in the twenty-first century. Is Marxian economics still relevant?

After all, Marx wrote Capital in the middle of the nineteenth century, when both capitalism and mainstream economics were quite different from what they are today.

Back in the mid-1800s, capitalism was a relatively new way of organizing economic and social life; having emerged first in Great Britain, it still encompassed a small part of the world. As Marx looked around him, he saw both the tremendous progress and the horrendous conditions of the Industrial Revolution. The introduction of steam power, gigantic factories, growing cities, and increased production. And thus great wealth, at least on the part of the small group of successful merchants and industrial capitalists at the top of the economic pyramid. But also squalor, malnutrition, low wages, and long working hours for factory workers—men, women, and children.

Radically new ideas both prepared the ground for, and emerged as a result of, the emergence and spread of capitalism. New freedoms, such as the possibility of buying and selling people’s ability to work, and the consequent abolition of slavery, the ownership of human chattel. New forms of political representation, like democracy, which entailed the abolition (or at least the curtailing) of monarchies. And new sciences, including evolutionary biology, first elaborated in Charles Darwin’s On the Origin of Species (or, more completely, On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life).

The world today is, of course, quite different. We take for granted many of the ideas that were once considered radically new. While other ideas, which were barely even imagined at the time, are today considered novel: demands for a guaranteed income, the extension of democracy beyond politics to workplaces, and synthetic biology.

As for capitalism, in some parts of the world, it would be immediately recognizable by nineteenth-century observers. Giant steel mills, workers denied the right to form labor unions, polluted living environments, minds and bodies damaged by demanding and dangerous jobs. Elsewhere, capitalism has changed in many ways, both large and small. Cutting-edge technologies in the twenty-first century include robotics, extended reality, and artificial intelligence. Production of many goods and services is dispersed around the world instead of being concentrated in single factories. And a much larger share of production and of the world’s population—although certainly not all—has become part of capitalism.

And yet. . .The gap between a small group at the top and everyone else is increasing. Workers still labor much longer, even utilizing much more productive technologies, than many had predicted. Squalor, hunger, and poverty are still the condition of many in the world today—to which we need to add the dangers created by the looming climate crisis.

Throughout this book, we will therefore have to ask, is the kind of critique of capitalism that Marx pioneered more than 150 years ago relevant, at least in broad outlines, to contemporary economies? And, following on that, in what ways have Marxian economists changed and extended their theory to account for the many changes the world has undergone since the mid-1800s?

Much the same question holds for the Marxian critique of mainstream economics. In what ways might Marx’s original critique of classical political economy be relevant to contemporary mainstream—neoclassical and Keynesian—economics?

As will see in the next chapter, Smith and the other classical political economists made five major claims about capitalism, which Marx in his own writings then criticized. They are, in no particular order, the following:

1. Capitalism produces more wealth, and thus higher levels of economic development.
2. Capitalism is characterized by stable growth.
3. Everybody gets what they deserve within capitalism.
4. Capitalists are heroes.
5. Capitalism represents the end of history.

We’ve already touched on the first three in previous sections of this chapter, and we will return to them in some detail in the remainder of the book. For example, capitalism produces more wealth but, Marx argues, it only does so on the basis of class exploitation. Capitalism is inherently unstable because of the private appropriation and distribution of the surplus. And, even if commodities are bought and sold at their values, capitalism is based on a fundamental class injustice, whereby the producers of the surplus are excluded from participating in decisions about that surplus.

What about the other two claims? Capitalists are celebrated but only if they accumulate more capital and thus create the conditions for more wealth and more employment. If they don’t, and that is often the case, then there’s nothing heroic about their activities. As for capitalism representing the end of history—the problem is, it still rests on class exploitation, not unlike feudalism, slavery, and other societies in which workers produce, but do not participate in appropriating, the surplus. That still leaves the possibility of creating an economy without that class injustice.

Those, in short, are Marx’s main criticisms of classical political economy.

Contemporary mainstream economists, as is turns out, make all five of those claims. They don’t do so in exactly the same manner as the classicals but they make them nonetheless.

1. Capitalism produces more wealth, and thus higher levels of economic development—and it’s now measured in terms of Gross Domestic Product and GDP per capita.
2. Capitalism is characterized by stable growth—and the possibility of crises is not even included in contemporary mainstream models.
3. Everybody gets what they deserve within capitalism—especially when, in the modern view, all “factors of production” receive their marginal contributions to production.
4. Capitalists are heroes—to which modern mainstream economists add that everyone is a capitalist, since they have to decide how to rationally utilize their human capital.
5. Capitalism is fundamentally different from previous ways of organizing economic and social life, such as feudalism and slavery—although in one crucial dimension it’s exactly the same: capitalists are just like feudal lords and slaveowners in appropriating the surplus produced by others.

So, while the language and methods of mainstream economics have changed since Marx’s time, many of Marx’s criticisms do seem to carry over to contemporary mainstream economics.

We will see, in the remainder of the book, just exactly how that works.

This Book

The other eight chapters of this book are designed to flesh out and explore in much more detail the issues raised in previous sections of this chapter.

Chapter 2, Marxian Economics Versus Mainstream Economics

The aim of this chapter is to explain how the Marxian critique of political economy has, from the very beginning, been a two-fold critique: a critique of mainstream economic theory and of capitalism, the economic system celebrated by mainstream economists. We will discuss the key differences between Marxian and mainstream approaches to economic analysis, both then and now.

Chapter 3, Toward a Critique of Political Economy

I do not presume that readers will have any background in Marxian economic and social theory. In this chapter, we discover where Marx’s critique of political economy came from—in British political economy, French socialism, and German philosophy—and how his ideas changed and developed in some of the key texts of the “early” Marxian tradition prior to writing Capital.

Chapter 4, Commodities and Money

In this chapter, I will present the material contained in the first three chapters of volume 1 of Capital, perhaps the most difficult and misinterpreted section of that book. Marx begins with the commodity, proceeds to discuss such topics as use-value, exchange-value, and value, presents the problem of “commodity fetishism,” and then introduces money.

Chapter 5, Surplus-Value and Exploitation

The goal of this chapter is to explain how Marx, starting with the presumption of equal exchange, ends up showing how capitalism is based on surplus-value and class exploitation.

Chapter 6, Distributions of Surplus-Value

According to Marx, once surplus-value is extracted from workers, it is then distributed to others for various uses: the “accumulation of capital,” the salaries of corporate executives, the financial sector, and so on. Herein are the origins of the theory of economic growth and the treatment of the role of instability and crises within capitalist economies, as well as the Marxian understanding of the distribution of income.

Chapter 7, Applications of Marxian Economics

How have Marxist concepts been applied to major trends, debates, and events in recent decades? In this chapter, we examine the ways Marxist thinkers, especially younger scholars and activists, have opened up and applied Marxian economics to the theory of the firm, imperialism and globalization, development in the Global South, the role of finance, systemic racism, gendered hierarchies, and the relationship between capitalist and noncapitalist economies in contemporary societies.

Chapter 8, Debates in and around Marxian Economics

Marxian economic theory has, of course, been discussed and debated from the very beginning—by both Marxian and mainstream economists. In this chapter, I present some of the key criticisms of Marxian economics by mainstream economists, focusing in particular on their rejection of the labor theory of value. I also explain some of the key debates among different schools of thought within the Marxian tradition and present their contributions to contemporary Marxian economics.

Chapter 9, Transitions to and from Capitalism

Much to the surprise of many students, Marx (and his frequent collaborator Engels) never presented a blueprint of socialism or communism, either in Capital or anywhere else. However, Marxian economics is based on a clear understanding that capitalism has both a historical beginning and a possible end. In this concluding chapter, I discuss how Marx and later generations of Marxian economists have analyzed both the transition to capitalism (e.g., from feudalism in Western Europe) and the transition to noncapitalism (in the contemporary world).

Before We Dive In

As I wrote above, this book is not written with a presumption that readers have any kind of background in Marxian economic and social theory. Much the same holds for mainstream economic theory. Perhaps some readers will have learned some Marx or mainstream economics in the course of their studies but, if not, everything they need to understand Marxian economics is presented in this book.

Here are some other issues I’d like readers to keep in mind as you work your way through this book.

As is often the case in theoretical debates, the same words often have different meanings. So, for example, the way Marx defines and uses such concepts as markets, value, labor, capital are quite different from what they mean in mainstream economics. To help you make sense of those differences, I have included a brief glossary of terms at the beginning of the book. You should feel free to turn back to it on a regular basis as you work your way through the remaining chapters. In Part 2 of the book (Chapters 4, 5, and 6), all concepts will be carefully defined, while using as little technical jargon as possible. I have also added a couple of technical appendices for readers who want to follow up on the discussion in the main text.

Since we’re dealing with economics, some technical language and illustrations are indispensable. I have kept them to a minimum but readers should be prepared for some statistical charts, a few equations, and a bit of algebra. I’ll pass on the best piece of advice I received as a student: when something doesn’t make sense immediately, be prepared to work it out with paper and pencil.

The context for Marx’s critique of political economy, written in the middle of the nineteenth century, is unfamiliar to many of us in the twenty-first century. How many of us today have read Hegel, after all? The necessary background will be covered later, in Chapters 2 and 3.

While Marx’s name has long been linked with socialism and communism, readers won’t find any kind of blueprint or detailed plan for either idea in Marx’s writings. Nor does any general—valid for all times and places—economic policy or political program follow from his work. That’s a topic we will return to in Chapter 9.

This book is prepared as a stand-alone introduction to Marxian economics. No other texts are necessary to understand the material in this book. However, I have added references (to specific works and chapters) in the event readers want to use this book as a companion text, as they read Capital and other writings by Marx.

Finally, while the book is aimed at students in economics (both undergraduate and post-graduate), it will also be relevant for and accessible to students in other disciplines—such as sociology, geography, history, and cultural studies. My fervent hope is it will also be useful to interested individuals who are not currently college and university students, because a clear and concise introduction to Marxian economics is relevant to their work and lives.

Why Marxian economics?

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” This, like the previous three posts (here, here, and here), is written to serve as the basis for chapter 1, Marxian Economics Today.

Why study Marxian economics?

One of the best reasons for studying Marxian economics is to understand all those criticisms—the criticisms of mainstream economic theory and the criticisms of capitalism.

Students of economics (and, really, all citizens in the world today) need to have an understanding of where those criticisms came from and what implications they have.

Marx certainly took those criticisms seriously. As he carried out his in-depth study of both the mainstream economic theory and of the capitalist system of his day, his work was influenced by the criticisms that had been developed before he even turned his attention to economics. And then, in turn, Marx’s critique of political economy has influenced generations of economists, students, and activists. While certainly not the only critical theory that can be found within the discipline of economics, Marxian economics has served as a touchstone for many of those theories, not to mention public debates about both economics and capitalism around the world.

Understanding both the broad outlines and the specific steps of Marxian economics is therefore crucial to making sense of all those debates.

Consider a contemporary example. On 26 February 2019, Alexandiria Ocasio-Cortez responded to Ivanka Trump’s attack on her idea of a living wage by explaining that “A living wage isn’t a gift, it’s a right. Workers are often paid far less than the value they create.”

While there’s no evidence that Ocasio-Cortez ever studied Marxian economics (or, for that matter, considers herself a Marxist), certainly the idea that within capitalism workers are often paid less than the value they produce resonates with Marxian criticisms of both mainstream economic theory and capitalism.

Mainstream economists, as any student of contemporary mainstream microeconomics is aware, generally presume that workers’ wages are equal to their marginal contributions to production. The same is true of capitalists’ profits and landlords’ rents. Everyone within a market system, mainstream economists argue (after a great deal of theoretical work, involving lots of equations and graphs), gets what they deserve. Therefore, since capitalism delivers “just deserts,” it should be considered fair.

Not so quick, says Ocasio-Cortez, just like Marx decades before her. If workers are paid less than the value they create, then they are “exploited”—that is, they produce a surplus that goes not to them, but to their employers. And while Marxian economists argue a living wage wouldn’t by itself eliminate that exploitation, it would certainly lessen it and improve workers’ standard of living.

Much the same holds for alternatives to capitalism. They often take their name from some version of socialism (and sometimes communism). That’s why Ocasio-Cortez calls herself a “democratic socialist.” It’s also why so many people these days, especially young people, have positive views of socialism—even more so than capitalism. That represents a big break both from mainstream economists and from their parents and grandparents.

Moreover, many ideas and policies that were once labeled (and then quickly dismissed) as “Marxist” or “socialist” are now accepted parts of the contemporary economic and social landscape. Progressive income taxes, a social security system for retirees, public healthcare and health insurance, minimum wages, labor unions for workers in private industry and public services—all were at one time derided, and now they form part of the common sense of how we think about economic and social policy. Much the same kind of change may now be taking place—for example, with the Green New Deal and the links between contemporary capitalism and the history of slavery.

Marxian Economics Today

So, it’s a fascinating time to be studying Marxian economics. It’s a way of learning some of the main criticisms of mainstream economic theory and of capitalism, now as in the past. It also serves to lift the taboos and learn that there are in fact alternatives to how economics is often taught and used to celebrate the status quo and deny the possibility of other ways of organizing economic and social life.

In the most general sense, studying Marxian economics is a path to learn what it means to be an intellectual. Within modernity, intellectuals are necessarily critical thinkers. Whether professors in colleges and universities or people who work in research units of enterprises or government offices, or really anyone who has to think and make decisions on or off the job, as intellectuals, they have to follow ideas wherever they might go. That means not being afraid of the conclusions they reach or of conflict with the powers that be.

That tradition of critical thinking is in fact what animated the work of Marx (along with Engels). He didn’t have a predetermined path. Instead, he worked his way through existing economic theory, carefully and critically engaging the process whereby mainstream economists produced their extreme conclusions. He then started from the same general premises they did—in a sense, offering mainstream economists their strongest possible case—and showed how it was simply impossible for capitalism to fulfill its stated promises.

For example, capitalism holds up “just deserts” as an ideal—everybody gets what they deserve—but it actually means that most people are forced to surrender the surplus they create to their employers, who are allowed to either keep it (and do with it what they want) or distribute it to still others (the tiny group at the top that manages the way those enterprises operate). Capitalism also pledges stable growth and full employment but then, precisely because of that private control over the surplus, regularly delivers boom-and-bust cycles and throws millions out of work.

So, Marx, following his critical procedure, arrived at quite different conclusions—conclusions that were at odds both with those of mainstream economics and of capitalism itself. And then he kept going—with more reading and more thinking and more political activity. He established some initial ideas, threads that were then picked up and extended by other Marxian economists, right on down to the present.

The implication, of course, is Marx didn’t provide a settled theory, to be simplistically or dogmatically applied, but instead a tradition of critical thinking and action.

And, as we will see over the course of this book, the effects of his work have been felt not just in economics, but in many other academic disciplines, from sociology and anthropology through political science and cultural studies to philosophy and biology. In fact, one of the most famous and influential historians of the nineteenth century, whose books are read by thousands of college and university students around the world every year, is the British Marxist Eric Hobsbawm.

Tale of two capitalisms

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” This, like the previous post, is for chapter 1, Marxian Economics Today.

A Tale of Two Capitalisms

Marxian economists recognize, just like mainstream economists, that capitalism has radically transformed the world in recent decades, continuing and in some cases accelerating long-term trends. For example, the world has seen spectacular growth in the amount and kinds of goods and services available to consumers. Everything, it seems, can be purchased either in retail shops, big-box stores, or online. And, every year, more of those goods and services are being produced and sold in markets.

That means the wealth of nations has expanded. Thus, technically, Gross Domestic Product per capita has risen since 1970 in countries as diverse as the United States (where it has more than doubled), Japan (more than tripled), China (almost ten times), and Botswana (where it has increased by a factor of more than 22).

International trade has also soared during the same period. Goods and services that are produced in once-remote corners of the world find their way to customers in other regions. Both physical commodities— such as smart phones, automobiles, and fruits and vegetables—and services—like banking, insurance, and communications—are being traded on an increasing basis between residents and non-residents of national economies. To put some numbers on it, merchandise trade grew from $318.2 billion dollars in 1970 to $19.48 trillion in 2018. And exports of services have become a larger and larger share of total exports—for the world as a whole (now 23.5 percent, up from 15 percent) and especially for certain countries (such as the United Kingdom, where services account for about 45 percent of all exports, and the Bahamas, where almost all exports are services).

The world’s cities are the hubs of all that commerce and transportation. It should come as no surprise that the urbanization of the global population has also expanded rapidly in recent decades, from about one third to now over half. In 2018, 1.7 billion people—23 per cent of the world’s population— lived in a city with at least 1 million inhabitants. And while only a small minority currently reside in cities with more than 10 million inhabitants, by 2030 a projected 752 million people will live in so-called megacities, many of them located in the Global South.

We’re all aware that, during recent decades, many new technologies have been invented—in producing goods and services as all well as in consuming them. Think of robotics, artificial intelligence, and digital media. And, with them, new industries and giant firms have emerged and taken off. Consider the so-called Big Four technology companies: Amazon, Google, Apple, and Facebook. They were only founded in the last few decades but, as they’ve continued to grow, they’ve become intertwined with the lives of millions of companies and billions of people around the world.

The owners of those tech companies are, to no one’s amazement, all billionaires. When the first Forbes World Billionaires List was published in 1987, it included only 140 billionaires. Today, they number 2825 and their combined wealth is about $9.4 trillion. That works out to be about $3,300,000,000 per billionaire. Their wealth certainly represents one of the great success stories of capitalism in recent decades.

Finally, capitalism has grown in more countries and expanded into more parts of more countries’ economies over the course of the past 40 years. Both large countries and small (from Russia, India, and China to El Salvador, Algeria, and Vietnam) are more capitalist than ever before. As we look around the world, we can see that the economies of rural areas have been increasingly transformed by and connected to capitalist ways of producing and exchanging goods and services. Global value chains have incorporated and fundamentally altered the lives of millions and millions of workers around the world. Meanwhile, areas of the economy that had been formerly outside of capitalism—for example, goods and services provided by households and government—can now be bought and sold on markets and are the source of profits for a growing number of companies.

But, unlike mainstream economists, Marxists recognize that capitalism’s extraordinary successes in recent decades have also come with tremendous economic and social costs.

All that new wealth of nations? Well, it’s been produced by workers that receive in wages and salaries only a portion of the total value they’ve created. The rest, the surplus, has gone to those at the top of the economic pyramid. So, the distribution of income has become increasingly unequal over time—both within countries and for the world economy as a whole.

According to the the latest World Inequality Report, income inequality has increased in nearly all countries, especially in the United States, China, India, and Russia. In other countries (for example, in the Middle East, sub-Saharan Africa, and Brazil), income inequality has remained relatively stable but at extremely high levels.

At a global level, inequality has also worsened. Thus, for example, the top 1 percent richest individuals in the world captured more than twice as much of the growth in income as the bottom 50 percent since 1980. Basically, the share of income going to the bottom half has mostly stagnated (at around 9 percent), while the share captured by the top 1 percent has risen dramatically (from around 16 percent to more than 20 percent).

And it’s no accident. Inequality has increased because the surplus labor performed by workers, in both rich and poor countries, has not been kept by them but has gone to a small group at the top of the national and world economies.

So, we really are talking about a tale of two capitalisms: one that is celebrated by mainstream economists (but only benefits those in the top 1 percent) and another that is recognized by Marxian economists (who emphasize the idea that the growing wealth of nations and increasing inequality are characteristics of the same economic system).

But that’s not the end of the story. All that capitalist growth has been anything but steady. The two most severe economic downturns since the Great Depression of the 1930s have happened in the new millennium: the Second Great Depression (after the crash of 2007-08) and the Pandemic Depression (with the outbreak and spread of the novel coronavirus). In both cases, hundreds of millions of workers around the world were laid off or had their pay cut. Many of them were already struggling to get by, with stagnant wages and precarious jobs, even before economic conditions took a turn for the worse.

And then those same workers had to look up and see one part of the economy recovering—for example, the profits of their employers and shares in the stock market that fueled the wealth of the billionaires—while the one in which they earned their livelihoods barely budged.

Meanwhile, those stunning global cities and urban centers, the likes of which the world has never seen, also include vast slums and informal settlements—parking lots for the working poor. According to the United Nations, over 1 billion people now live in dense neighborhoods with unreliable and often shared access to basic services like water, sanitation and electricity. Many don’t have bank accounts, basic employment contracts, or insurance. Their incomes and workplaces are not on any government agency’s radar.

They’re not so much left behind but, just like their counterparts in the poor neighborhoods of rich countries, incorporated into capitalism on a profoundly unequal basis. They’re forced to compete with one another for substandard housing and low-paying jobs while suffering from much higher rates of crime and environmental pollution than those who live in the wealthy urban neighborhoods. In countries like the United States and the United Kingdom, a disproportionate number are ethnic and racial minorities and recent immigrants.

The working poor in both urban and rural areas are also the ones most affected by the climate crisis. A product of capitalism’s growth, not only in recent decades, but since its inception, global warming has created a world that is crossing temperature barriers which, within a decade, threaten ecosystem collapse, ocean acidification, mass desertification, and coastal areas being flooded into inhabitability.

Meanwhile, the democratic principles and institutions that people have often relied on to make their voices heard are being challenged by political elites and movements that are fueled by and taking advantage of the resentments created by decades of capitalist growth. The irony, of course, is many of these political parties were elected through democratic means and call for more, not less, unbridled capitalism as the way forward.

Clearly, the other side of the coin of capitalism’s tremendous successes have been spectacular failures.

So, it should come as no surprise that there’s more interest these days in both criticisms of and alternatives to capitalism. And Marxian economics is one of the key sources for both: for ways of analyzing capitalism that point to these and other failures not as accidents, but as intrinsic to the way capitalism operates as a system; and for ideas about how to imagine and create other institutions, fundamentally different ways of organizing economic and social life.

Young people, especially, have become interested in the tradition of Marxian economics. They’re trying to pay for their schooling, find decent jobs, and start rewarding careers but they’re increasingly dissatisfied with the effects of the economic system they’re inheriting. Mainstream economics seems to offer less and less to them, especially since it has mostly celebrated and offered policies to strengthen that same economic system. Or, within more liberal parts of mainstream economics, offer only minor changes to keep the system going.

Marxian economics offers a real alternative—in terms of criticizing capitalism and the possibility of creating an economic system that actually delivers longstanding promises of fairness and justice.

Contemporary relevance of Marxian economics

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I’ve just signed a contract with Polity Press to write a new book, “Marxian Economics: An Introduction.” The idea is to publish it in late 2021 or early 2022.

My goal is to write a textbook that can fulfill two purposes: first, a stand-alone book for courses that are focused on Marxian economics or survey courses that have a section devoted to Marxian economics; second, it will also be useful as a companion text in a course that is based on reading all of or major selections from Karl Marx’s Capital. While the book will be aimed at college and university students (both undergraduate and graduate) in economics, it will also be relevant for and accessible to students and professors in other disciplines—such as sociology, geography, history, and cultural studies—as well as to interested individuals outside the academy.

Here then is the proposed outline of chapters:

Part 1, INTRODUCTION TO MARXIAN ECONOMICS

Chapter 1, Marxian Economics Today

Chapter 2, Marxian Economics Versus Mainstream Economics

Chapter 3, Toward a Critique of Political Economy

PART 2, MARXIAN VALUE THEORY

Chapter 4, Commodities and Money

Chapter 5, Surplus-Value and Exploitation

Chapter 6, Distributions of Surplus-Value

PART 3, EXTENSIONS AND DEBATES

Chapter 7, Applications of Marxian Economics

Chapter 8, Debates in and around Marxian Economics

PART 4, CONCLUSION

Chapter 9, Transitions to and from Capitalism

The content of much of the manuscript is in my lecture notes, since I taught Marxian economic theory for almost four decades. But some of it is not, and will require exploring a few new areas and topics. My plan is to use this blog to compose the new sections, in 1000-1500-word posts—much as I have been doing for my other book, “Utopia and Critique” (see here). I welcome feedback to any and all of the book-related posts that will appear in the coming months.

When the book is done and accepted, I will post the link for interested readers.

And the necessary disclaimer: these are not sections of the final manuscript. Far from it! They are merely first drafts of some of the material that I will edit later on for the book.

OK, let’s get started. . .

Marxian Economics Today

As you open this textbook, you may be wondering, why should I study Marxian economics?

In the United States and in many other countries, Marxian theory, including Marxian economics, is a controversial topic. That’s certainly been true for the past few decades, when the topic was all but taboo. But beginning with the crash of 2007-08—the Great Recession or what some have called the Second Great Depression—the climate has dramatically changed. More and more people, especially young people, have become interested both in Marxian criticisms of mainstream economics and in possible alternatives to capitalism.

Here’s Nouriel Roubini, professor of economics at New York University’s Stern School of Business and the chairperson of Roubini Global Economics, an economic consultancy firm: “So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct.”

And then, from the other side of the Atlantic, there’s George Magnus, Senior Economic Adviser to the UBS Investment Bank: “Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.”

Many of us were surprised, including those of us who have spent decades studying and teaching Marxian economics. I did so at the University of Notre Dame for almost 4 decades.

Living and working in the United States, we’d just been through a 30-year period in which Marx and Marxian ideas had been marginalized, in the discipline of economics and in the wider society. Marx was declared either dangerous or irrelevant (or, often, both).

Capitalism was humming along (with, of course, the usual ups and downs) until. . .the Crash of 2008, when the world economy was brought to the brink of disaster. And Marx, almost in a blink of an eye, was relevant again.

To be honest, it wasn’t that Marxists could take all, or even much of, the credit (or blame). It was actually the spectacular failure of mainstream economics that led to this dramatic change.

Mainstream economists failed to predict the crash.

Even more, they didn’t even consider a crash even a remote possibility. The chance of a crisis starting with the housing and banking sectors didn’t even exist in their theoretical framework.

And, once the crash happened, they didn’t really have much to offer. The policy that went along with their models suggested letting the banks sort out the problems on their own. Until, of course, the panic that set in with the failure of Lehman Brothers, which brought first the American economy and then the world economy to the brink of collapse.

The kinds of problems building up for decades simply didn’t figure prominently in mainstream economic theoretical models and empirical analyses. Problems such as:

• The deregulation of banks and the growth of the financial sector within the U.S. and world economies
• The housing bubble that was supported by bank loans, and then sliced and diced into collateralized debt obligations and other derivatives
• The outsourcing of jobs and the decline of labor unions, which if they paid attention at all were seen as freeing up markets

The result of these and other changes in the U.S. economy created, for the first time in U.S. history, a growing gap between steadily growing productivity and stagnant real wages.

And, of course, an increasingly unequal distribution of income, reminiscent of the period just before the first Great Depression, when the share of income received by the richest 10 percent of Americans approached 50 percent of total income, and that of the bottom half of the population hovered in the low teens.

Mainstream economics—neoclassical and Keynesian economists, both microeconomists and macroeconomists—either ignored these issues or explained them away as a matter of efficient markets and good for growth.

The financial sector needed no oversight or regulation, because of the idea of efficient markets (which meant that all risk was calculated into prices, and all participants had all the relevant information)

And inequality was either good for growth or, if seen as a problem, just the inevitable result of technology and globalization, which could be handled by workers acquiring better skills and more education.

Not to mention the fact that both economic history and the history of economic thought—the history of capitalism and the history of thinking about capitalism—had disappeared as relevant areas of training for mainstream economists. As a result, not only had they never read Marx; they’d never read Adam Smith, John Maynard Keynes, or Hyman Minsky.

Then things changed, especially as the problems cited above never really disappeared, even as stock markets entered another boom period. Marxian criticisms of both capitalism and mainstream economic theory became appropriate topics of discussion and debate again.

Reading Marx

While references to Marxian economics have increased in recent years, there’s no indication commentators have actually read the works of Karl Marx. Perhaps they remember reading the Communist Manifesto at some point in their education but not Marx’s magnum opus Capital. And they certainly haven’t read the scholarly work on Marx.

Perhaps they were afraid to or didn’t know how to, or were just too lazy. But the fact remains the time is ripe for a new reading of Marx’s Capital.

If they did such a reading, what would they find?

They would encounter something quite different from what they—and perhaps you, reading this book—expect. For example, you won’t discover a blueprint for socialism or communism. Nor will you find a set of predictions about how the crises of capitalism would lead to socialism or communism. Or much else that is regularly attributed to Marx and Marxian economics.

What readers would find is a critique of political economy, in two senses: a critique of mainstream economic theory; and a critique of capitalism, the economic system celebrated by mainstream economists. That’s what Marx came up with after spending all those hours reading the classical political economists and the factory reports in the British Museum. And what generations of Marxian economists have been discussing and developing ever since.

Marxian economics is organized around five key ideas: critique, history, society, theories, and class. These are ideas you’ll encounter many times over the course of this book.

Critique: Capital (and the many other economic texts Marx wrote) are less a fully worked-out theory of capitalism than a critique of the ideas—the concepts and models—that are central to mainstream economics. In other words, Marx carefully studied the works of the famous classical economists, such as Adam Smith and David Ricardo. He used them as his starting-point but then ended up in a very different place, challenging much of what is taken as the “common sense” within economics. You may find yourself questioning some of the key ideas within contemporary mainstream economics during the course of reading this book.

History: Much of mainstream economics is based on models that never really change. Marxian economics is different; it is focused on history—both the history of economic systems and the history of economics ideas—that change over time. Thus, for example, within Marxian economics, capitalism has a history: it didn’t always exist; once it came into existence, it has continued to change; and, at least in principle, capitalism can come to an end, replaced by a fundamentally different way of organizing economic and social life.

Society: Marx’s approach was always about an economy within society, both affecting and being affected by everything else—social rules, political power, cultural norms, and much else. Therefore, different societies (and, for that matter, different parts of society) have different ways of managing economic life, now as in the past. So, they have radically different ways of allocating labor, organizing production, exchanging goods and services, and so on.

Theories: Not only are there different economies and societies; there are also different economic theories. Marxian economics is one, mainstream economics is another. (And there are many others you may have read or heard about: radical, Post Keynesian, feminist, postcolonial, green, and the list goes on.) And economic theories are different from economic systems. So, for example, Marxian and mainstream economists have different theories—they tell different stories, they arrive at different conclusions—about the same economic system. So, as you will see over the course of this book, the Marxian theory of capitalism is very different from the mainstream theory of capitalism.

Class: One of the particular interests of Marx and Marxian economists is class, the particular way workers (for example, wage-laborers under capitalism or serfs within feudalism) perform more labor than they receive to sustain their lives. The rest, the extra or surplus labor, is appropriated and controlled by another, much smaller group (for example, the class or capitalists or feudal lords). Marx created a special name for this: class exploitation.

So, according to Marxian economics, different societies have different class structures, which have changed historically. And Marx was critical of both the mainstream economic theories that deny the existence of exploitation as well as the economic systems in which the class of workers who perform the surplus labor are excluded from making decisions about the surplus.

You can therefore see how there would be, from the very beginning, an animated debate between the advocates of mainstream and Marxian economic theories.

Back to the future

Ah, the things we end up doing during the lockdown. . .

I stumbled upon this video while searching for something else on my computer yesterday. It’s a talk I gave, “The New Reading of Marx’s Capital,” at the Lattelecom International Conference on New Strategies in the New World Order in Riga on 13 October 2011. So, because it may have some contemporary relevance, I decided to upload it and share it with readers.

Anyone who is interested can download the Powerpoint presentation I used by clicking on this link.

That I know of, there are only five other Youtube videos in which I appear (from 2000, 2003, 2012, 2016, and 2019).

Dark times

Motto

In the dark times, will there also be singing?
Yes, there will be singing.
About the dark times.

— Bertolt Brecht

( trans. John Willett, from the Svendborg Poems)

I’ve been on a bit of a hiatus for the past two months (the last real post, aside from daily cartoons, was back in January). But readers have encouraged me to get back in the game and resume my “occasional” commentary on economics, culture, and society.

Right now, in these dark times—as the number of confirmed cases of and deaths from the novel coronavirus pandemic, in the United States and around the world, continues to soar—we’re focused on immediate measures, individually and socially, to stay safe. And, of course, capitalist economies are in meltdown, not only in stock markets, but with massive unemployment (which the Trump administration wants states to hide from view) and increasing precarity for millions and millions of already precarious workers.

The provision of much-needed medical supplies, school closures and other measures that encourage social distancing (or, my preference, distant socializing), “stay at home” orders, lots more testing—all are desperately required. As well as are funds and policies that protect workers who have few protections against unhealthy and unsafe working conditions and, through no fault of their own, are losing their jobs and being forced to find ways of surviving in the midst of the current chaos.

Immediate measures, then, to keep people safe and financially secure.

But we also need to be thinking about what all this means, for ourselves and for our economy and society going forward. We need to discuss and debate not only the immediate measures being proposed and adopted, but also what this portends for our collective future.

As for myself, I am particularly interested in the way the existing common sense may be shifting—in darker directions, to be sure, but also in opening up new possibilities. As a friend wrote to me just yesterday, maybe there’s some hope in the fact that “at least some governments feel compelled to feed, house, and save people, [which] may be a great lesson in the reality that stands behind property and the ‘laws of economics’: social labour that we can socially allocate.”

That, it seems to me, is our challenge in the days, weeks, and months ahead—to think seriously and critically, perhaps against all odds, about our current situation and to be ruthless in that criticism “both in the sense of not being afraid of the results it arrives at and in the sense of being just as little afraid of conflict with the powers that be.”