Over the past few months there has been a bumper crop of articles in elite publications such as the Financial Times making the case that Karl Marx was right—or mostly right. This is understandable given the perilous times we are living through. The kind of Panglossian message found in Fukuyama’s End of History is ill-suited to a world edged on the precipice of economic ruin, largely beyond the capability of the world bourgeoisie to resolve.
The first to weigh in was Nouriel Roubini who was interviewed by the WSJ on August 11th. Roubini, whose bearishness generally makes him open to Marx’s pessimistic take on the long-term outlook of capitalism, must have shocked the Journal with his nod to their bête noire:
WSJ: So you painted a bleak picture of sub-par economic growth going forward, with an increased risk of another recession in the near future. That sounds awful. What can government and what can businesses do to help get the economy going again or is it just sit and wait and live it out?
Roubini: Businesses are not doing anything. They’re not actually helping. All this risk made them more nervous. There’s a value in waiting. They claim they’re doing cutbacks because there’s excess capacity and not adding workers because there’s not enough final demand, but there’s a paradox, a Catch-22. If you’re not hiring workers, there’s not enough labor income, enough consumer confidence, not enough consumption, not enough final demand. In the last two or three years, we’ve actually had a worsening because we’ve had a massive redistribution of income from labor to capital, from wages to profits, and the inequality of income has increased and the marginal propensity to spend of a household is greater than the marginal propensity of a firm because they have a greater marginal propensity to save, that is firms compared to households. So the redistribution of income and wealth makes the problem of inadequate aggregate demand even worse.
Karl Marx had it right. At some point, Capitalism can self-destroy itself because you cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.
I am not sure how schooled Roubini is in Marxism, but essentially he is laying out an underconsumptionist analysis which is not quite what Marx put forward. I deal at some length with the theory here: https://louisproyect.wordpress.com/2008/02/23/a-laypersons-guide-to-crisis-theory/
I would only say at this point that any argument made for an open assault on the privileges of the rich is most welcome, but that in itself is no guarantee that the economy will revive. Basically, underconsumptionism addresses how the pie is divided but not how it expands. The grim reality facing bourgeois economists is the likelihood that such expansion is precluded on the basis of how the global capitalist system is structured now. The exceptional growth in the American economy from 1945 to 1970 or so was directly related to its commanding position as the major victor in WWII. Those days are over.
The next to weigh in was Samuel Brittain, who penned “Mistaken Marxist Moments” in the August 25th Financial Times (the only way to read the article if you are not subbed to the FT is to google “mistaken Marxist moments” and then click the link that comes up there.) Unlike Roubini, Brittain is a pretty reactionary slug, having studied with Milton Friedman at Cambridge and defending Margaret Thatcher’s policies against 364 leading economists who had written an open letter in the London Times.
Despite his rightwing politics, Brittain allows that some kind of deficit spending might be necessary. You’ll note that he like Roubini accepts some of the precepts of underconsumptionism:
What did Marx mean by the contradictions of capitalism? Basically, that the system produced an ever-expanding flow of goods and services, which an impoverished proletarianised population could not afford to buy. [emphasis added] Some 20 years ago, following the crumbling of the Soviet system, this would have seemed outmoded. But it needs another look, following the increase in the concentration of wealth and income. Indeed, a former chief economist of the International Monetary Fund, Raghuram Rajan, has attributed the recent credit explosion partly to real wage stagnation, which encouraged people to borrow.
But even if the analysis is right, the remedy is wrong. The justification for redistribution is ethical. If the only thing wrong with capitalism is insufficient mass purchasing power then surely the remedy is the helicopter drop of money envisaged by Milton Friedman. For this we need not so much a political as an intellectual revolution, namely the overthrow of the balanced budget fetish.
The fact that a Thatcherite can call for the “overthrow of the balanced budget fetish” shows how deep the crisis is, even if this kind of heresy has not reached the Republican Party in the U.S. which has become more and more like a suicidal cult. With respect to the “helicopter drop”, this is essentially what Bush and Obama have done since 2008, largely to no avail. Perhaps the economy would have been worse off without an injection of liquidity but that’s of little consolation to people who have had their homes foreclosed or lost their jobs. People expect an expanding economy and deficit spending will likely fail to accomplish this.
Three days after Brittain’s article appeared, George Magnus proposed that we “Give Karl Marx a Chance to Save the World Economy” on Bloomberg.com, the voice of NYC’s billionaire mayor. Considering the fact that Magnus is the Senior Economic Adviser to UBS Investment Bank, we’re talking about a major loss of confidence among the elite. Like the two aforementioned experts, Magnus adduces an underconsumptionist message to Marx that is really not there:
Marx also pointed out the paradox of over-production and under-consumption: The more people are relegated to poverty, the less they will be able to consume all the goods and services companies produce. When one company cuts costs to boost earnings, it’s smart, but when they all do, they undermine the income formation and effective demand on which they rely for revenues and profits.
This problem, too, is evident in today’s developed world. We have a substantial capacity to produce, but in the middle- and lower-income cohorts, we find widespread financial insecurity and low consumption rates. The result is visible in the U.S., where new housing construction and automobile sales remain about 75% and 30% below their 2006 peaks, respectively.
As Marx put it in Kapital: “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses.”
Unfortunately Magnus omitted the conclusion of Marx’s sentence, which reads in full: “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit.”
That is something that bourgeois economists can’t seem to get their head around. It is not just that the masses lack consumption power; it is that the “revolutionization” of the means of production continues to replace living labor with dead labor to the point that more and more workers either become unemployed or underemployed. That is a dilemma that no amount of “helicopter drops of money” can solve.
You can get an admission that the problem exists in another mainstream publication, the Atlantic Monthly. In a highly revealing article titled “The Greater Recession: America Suffers from a Crisis of Productivity“, senior editor Derek Thompson states:
Americans have a complicated relationship with productivity. We obsess about our personal efficiency, but we don’t think much about efficiency across broad swaths of the economy. Productivity is the not-so-secret sauce in our GDP. We’re the second-largest manufacturer in the world even though manufacturing jobs have shrunk to less than 10 percent of our economy. We’re the world’s third-largest agricultural nation even though only 2 percent of us farm. The reason we can do so much work with so little is that the U.S. economy is incredibly, and increasingly, efficient at making some things cheaply.
Don’t ask David Allen to explain this. Ask David Autor. He’s the MIT economist who, in last month’s cover story, “Can the Middle Class Be Saved?”, told Don Peck that technology and offshoring is replacing jobs for the middle-educated middle-class. “Almost one of every 12 white-collar jobs in sales, administrative support, and nonmanagerial office work vanished in the first two years of the recession,” Peck writes, and one in six blue-collar jobs disappeared in production, craft, repair, and machine operation.
We know where the jobs are going — to machines, software, and foreign workers. We also know why they’re going away. Global competition gives companies the incentive to be more productive, and technology and foreign labor gives companies the means to be more productive. Automation lets one employee handle the work of three, or three hundred. Off-shoring lets ten Asian workers receive the salary of one. As these corporate Getting-Things-Done strategies make the typical worker increasingly expendable, real wages have stagnated, or declined, to their 1950s levels.
Capitalist apologists have always maintained that breakthroughs in technology such as the automobile create new jobs. Blacksmiths might be eliminated, but jobs at Ford will open up. That, at least, is what they taught us in high school. Like much else that we learned there, it is simplistic. Oddly enough, Derek Thompson seems to have a better handle on what Marx stood for without giving him the credit that the other pundits do.
Moving right along, there’s John Gray who penned “A Point of View: The revolution of capitalism” for the BBC New Magazine on September 3rd. Despite the article’s title, Gray gives his props to Marx as well as acknowledging the inability of the system to “deliver the goods” that bourgeois politicians promise us:
Marx was wrong about communism. Where he was prophetically right was in his grasp of the revolution of capitalism. It’s not just capitalism’s endemic instability that he understood, though in this regard he was far more perceptive than most economists in his day and ours.
More profoundly, Marx understood how capitalism destroys its own social base – the middle-class way of life. The Marxist terminology of bourgeois and proletarian has an archaic ring.
But when he argued that capitalism would plunge the middle classes into something like the precarious existence of the hard-pressed workers of his time, Marx anticipated a change in the way we live that we’re only now struggling to cope with…
Fulfilling careers will no longer be the prerogative of a few. No more will people struggle from month to month to live on an insecure wage. Protected by savings, a house they own and a decent pension, they will be able to plan their lives without fear. With the growth of democracy and the spread of wealth, no-one need be shut out from the bourgeois life. Everybody can be middle class.
In fact, in Britain, the US and many other developed countries over the past 20 or 30 years, the opposite has been happening. Job security doesn’t exist, the trades and professions of the past have largely gone and life-long careers are barely memories.
Unlike those who see a light at the end of the tunnel, Gray only sees an oncoming train. A deeply pessimistic thinker, he rejects Marx’s socialism as a solution to the world’s problems and instead adopts a kind of Millenarian gloom but without the theological underpinnings. Throughout his writings, there is a rejection of the idea of progress, either one based on the Fukuyaman appropriation of Hegel or anything that Marx ever wrote. More recently he has become a partisan of James Lovelock’s Gaia hypothesis and accepts with an alarming degree of equanimity that the human race faces extinction. This is not exactly the kind of person we need defending Karl Marx, to say the least.
Finally, we come to the Harvard Business Review, ostensibly the last bastion of capitalist ideology. There we find Umair Haque, the Director of the Havas Media Lab and author of The New Capitalist Manifesto: Building a Disruptively Better Business, asking the question “Was Marx Right?” After presenting in a somewhat oversimplified but fairly accurate manner some of Marx’s major concepts (alienation, commodity fetishism, false consciousness), Haque states:
Marx’s critiques seem, today, more resonant than we might have guessed. Now, here’s what I’m not suggesting: that Marx’s prescriptions (you know the score: overthrow, communalize, high-five, live happily ever after) for what to do about the maladies above were desirable, good, or just. History, I’d argue, suggests they were anything but. Yet nothing’s black or white — and while Marx’s prescriptions were poor, perhaps, if we’re prepared to think subtly, it’s worthwhile separating his diagnoses from them.
Because the truth might just be that the global economy is in historic, generational trouble, plagued by problems the orthodoxy didn’t expect, didn’t see coming, and doesn’t quite know what to do with. Hence, it might just be that if we’re going to turn this crisis upside down, we’re going to have to think outside the big-box store, the McMansion, the dead-end McJob, the bailout, the super-bonus, and the share price.
The future of plenitude probably won’t be Marxian — but it won’t look like the present. And if we’re going to trace the beginnings of better, more enduring, more authentic, more meaningful, fundamentally more humane paradigm for prosperity, perhaps it’s worthwhile exploring — even when we don’t agree with them — the critiques and prophecies of those who already challenged yesterday’s.
I doubt that Haque has read any recent Marxist literature but the idea that there is a spirit of “overthrow, communalize, high-five, live happily ever after” anywhere except perhaps the Spartacist League is pretty laughable. Marxism, ever since its inception, has been a philosophy that seeks to relentlessly criticize everything that exists. For those who equate the USSR with Marxism, that might come as a surprise. At any rate, it is of some interest that kudos for Karl Marx can be found in the enemy camp even if they are misguided. We are apparently reaching a point in history that Karl Marx described in “The Communist Manifesto”:
Finally, in times when the class struggle nears the decisive hour, the progress of dissolution going on within the ruling class, in fact within the whole range of old society, assumes such a violent, glaring character, that a small section of the ruling class cuts itself adrift, and joins the revolutionary class, the class that holds the future in its hands. Just as, therefore, at an earlier period, a section of the nobility went over to the bourgeoisie, so now a portion of the bourgeoisie goes over to the proletariat, and in particular, a portion of the bourgeois ideologists, who have raised themselves to the level of comprehending theoretically the historical movement as a whole.